Transportation Nigeria Market Intelligence

Industry Outlook & Drivers

Regional Market outlook on Transportation

Truck Operating Cost Structure and Major Cost Drivers

•  Fuel cost (diesel) is the major component contributing ~30 percent to the total freight rate
• Nigeria, being an oil producing nation, still relies on imported petroleum products for the servicing of the economy. Such petroleum products are petrol, diesel and kerosene
• Nigeria's spend on importation of diesel has been on the higher end and its weightage in the cost structure is touted to be on the larger chunk for businesses involving its pedigree
• Cost components depreciation on trucks, and tire and maintenance contributes ~40 percent to the total freight rate
• Though these components are quite common for any commercial truck, the condition of Nigerian roads is in a ruffled state, the weightage on these two cost  factors are coupled to count on the regular attention to heed for both the trucks and tires
• The above cost factors are bound to ascend in the case of used trucks that are imported

Engagement strategies for FMCG companies

• Independent operator and pay and go models are the most preferred commercial engagement models by the Nigerian manufacturers
• The precise selection of a particular model depends on the nature of industry that the manufacturer is deployed with
• FMCG companies in particular has vivid discretion to opt for the pay and go model. The inclining measures of the model are in line with the shipper having an undue advantage as the volume of shipment handled is pivotal
• FMCG companies prefer to pile on a larger tableau of trucking companies and then pick a handful from the lot based on agreed business terms and engagements that the concerned firms settle for

Nigeria – Logistics Infrastructure Overview

Nigeria ranks low on LPI, especially on infrastructure and customs clearances. The government has taken action plans for developing new roadways and expanding existing ones since Nigeria wanted an excellent improvement in LPI  by 2020.

Transport infrastructure plays a major role in Nigerian GDP growth. Although, road moves a good volume, there is not much investment, whereas in airports and sea ports there had been considerable investment over the past few years.

• Nigeria has four international hubs (Lagos, Abuja, Kano, Enugu and Port Harcourt) and 20 domestic airports that are owned and operated by the Federal Airports Authority of Nigeria (FAAN)
• The road network in Nigeria is currently estimated to be 197,000 kms, about 18 percent of it were paved. 90 percent of the internal and cross-border freight movement are transported over road
• Nigeria has a costal line about 900 kms and 3800 kms navigable waterways which covers 12 inland rivers. Niger and Benue rivers are main waterways  which links  Apapa, Tin Can, Warri, Port Harcourt, Onne, Calabar and Delta seaports
• The rail network is about 4,400 track kms and a Cape Gauge route of 3500 kms. There are about 4,900 freight wagons but about only ~45 percent of these are in servable condition 

 Logistics Performance Index Nigeria 2016

• Nigeria's poverty-stricken infrastructure has challenged the developments in the logistics industry. Time delays, poor tracking and quality of service bottlenecks the logistics and transportation activities in Nigeria
• Nigeria ranked poorly on the Logistics Performance Index, especially on infrastructure and customs clearances
• Nigeria has comparably developed infrastructure which covers almost the entire nation while considering other Western African countries
• Transport infrastructure plays a major role in Nigerian GDP growth. Although, road moves a good volume, there is not much investment happened recently whereas in airports and sea ports there had been considerable investment over past few years    

The country is driven by industries such as agriculture, telecommunications, real estate, manufacturing, construction and entertainment which holds Nigeria's GDP at 6.1 percent, despite under performance from oil and mining industries.

The Nigerian economy is driven by oil industry and  it is the GDP-backbone for the country. In the transportation market, roadways cover F&B, FMCG, and consumer goods.

Transportation Market Overview

• The country is driven by industries such as agriculture, telecommunications, real estate, manufacturing, construction and entertainment which holds Nigeria's GDP at 6.1 percent despite under performance from the oil and mining industries
• Any change in GDP will have a direct impact on the logistics market as the country is highly dependent on import and export of commodities
• In Nigeria, 90 percent of the cargo transported is moved through road. The rail infrastructure in Nigeria has very poor connectivity with only about 4,400 kms of narrow gauge railway lines in place. This is highly inadequate to handle the demands of large freight movement
• Of all commodity movements to and from the sea-ports, at least two-third are now handled by road transport and hence, the number of commercial motor vehicle registration has grown at a CAGR of 17.5 percent during 2005-2015

Trucking Market Overview

The road transportation sector is highly fragmented, unorganized and unregulated with very high number of small and medium scale players dominating the market.

Road is the dominated mode of transportation in the country and most of the trucks are imported from European countries  in a second hand condition. Poor infrastructure and high maintenance costs are the main huddles for the trucking industry.

Trucking Market – Nigeria

• The total road network in Nigeria is about 200,000 kms and road is by far the most widely used mode of transport in the country
• Despite a wide road network, lack of proper infrastructure leads to high maintenance and repair costs and hence more damage of goods
• The road transportation sector is highly unorganized and unregulated with very high number of small players and also lack of proper regulation resulted in sharp fluctuation in fuel price
• The trucking market in Nigeria may be considered inadvertently differentiated because of the inherent difference in quality of new trucks and used trucks
• The NAIDP implicitly tries to address this by harmonizing standards through encouraging local production or importation of brand new units and discouraging purchasing of second hand trucks through tariff barriers
• Importing of trucks is expected to gradually reduce due to the implementation of new import policies and high import duties. Also, multi-million dollar assembly plants are expected to be set up at Nigeria in the near future
• A new plant was set up recently for about $100 million and in the near future, China is also planning to invest in assembly units in Nigeria which will positively reduce import thereby increasing the sales of Nigerian-made trucks