Logistics and supply chain management play a big role in any economy and is a critical contributor to the competitiveness of a country. The demand for products can only be satisfied through the proper and cost-effective delivery of goods and services. Nigeria’s main economic activities are Oil and Gas and Agriculture and logistics costs impact heavily on these key industries. In addition, most of the freight in the country are transported by road. Furthermore for Nigeria to grow its market share of various products in the global market, Logistics needs to be world-class to ensure the effective delivery of goods. These and other aspects of the logistics environment affect logistics costs in the end.
Logistics has become one of the foremost spheres that affect economic growth. In its reports, the World Bank analyzes the effectiveness of the logistics performance index of the world and states that the logistics sector plays an important role in the competitiveness of many countries. Logistics also supports the movement and flow of
many economic transactions; it is an important activity in facilitating the sale of virtually all goods and services. At present, logistics plays a huge role in the economy of the majority of developing countries, influencing various areas, such as transport networks, storage systems, information and communication devices, packaging services, supply
chain management, industry and products, exports, and imports of services and so on.
Hayaloglu (2015) interpreted that logistics is now becoming an important element of trade, taking an active role in this development. Accordingly, development in the logistics sector plays a significant role, providing advantages in terms of growth and development; logistical investments change the functioning of a company and countries
As a significant component, logistics affects the rate of inflation, interest, productivity, energy costs and availability, and other aspects of the economy. Improvements in a nation’s productivity have positive effects on the prices paid for goods and services, the balance of national payments, currency valuation, the ability to compete effectively in global markets, industry profits, the availability of investment capital, and economic growth leading to a higher level of employment.
As Nigeria strives for greater economic growth, a strong and expanding logistics sector is key, as this will reduce the cost of doing business, increase integration with regional and global value chains and support competitiveness and international trade.
Nigeria’s logistics sector is highly fragmented, underdeveloped, and informal. Its fragmented nature comes from the disjointed relationship between supply, trucks and transporters, and demand, cargo, which results from a chaotic marketplace. This calls for a national logistics policy to properly focus on the nation’s efforts towards a vibrant
economy. By investing in the development of its logistics sector, Nigeria can reclaim her natural position as the logistics hub of West and Central Africa serving the landlocked countries as well as powering the ECOWAS trade engine. The existing transport infrastructure in Nigeria for obvious reasons is affecting economic performance and
the organization’s competitiveness. The transport infrastructure in Nigeria is in a huge deficit in all aspects and statistics shows that the bulk of cargo transported around Nigeria goes by the road system.
Typical examples are the terrible state of the roads and the untold hardship and attendant risk and cost implications that come from it. The Rail sector has been a work in process for donkey years without any private sector participation, which has denied the nation of a very low cost and reliable means of transporting people and cargo.
We have not been able to utilize the abundant waterways and our ports have been in dire stress occasioned by dead infrastructure.
The consequences of all these include the high cost of doing business resulting in an economy that cannot compete in the global market. The end-users of products bear the brunt of high prices. Manufacturing and agriculture are not spared. In the last couple of years, so many manufacturing companies have shut down operations in Nigeria and
relocated while some have resorted to trading. The level of agricultural products that perish every season cannot be quantified because of the inability to transport them to areas of need. The absence of a good cold chain system has affected both the agriculture sector as well as the health logistics sector adversely. If we do not invest heavily in logistics infrastructure, the gap between us and the serious countries will be widening. Just look at the World Bank Logistics Performance index and you will see the reality.