Nigeria’s Productivity Paralyses In Logistics and Petroleum Industry Bill

Nigeria’s Productivity Paralyses In Logistics and Petroleum Industry Bill

This is simply why productivity is dropping in Nigeria: “The cost of transporting a container from Apapa port to Ikeja, Lagos, has increased from N300,000 as of 2018 to N1.6 million or more in 2021. This represents an increase of 500% at the minimum. On the other hand, the cost of trucking the same container from Ikeja to Kano has only hovered around N600,000 within the period under review. This was disclosed by Oluwemimo Joseph, Strategy & Projects Head and Chief Financial Officer of JET Motor Company, during an exclusive interview with Nairametrics on Tuesday.”

“The cost of trucking a container from Apapa to Ikeja is twice the cost of taking the same container to Kano or Kaduna. The cost has increased from N300,000 in 2018 to N1.6 million by January 2021.

The major cause of this is because the truck owners will tell you that such task, which should have taken them two days will end up taking 6 or more days due to congestion at the port,” Joseph said.

With a broken supply chain system, Nigeria has a real challenge in the economy. We need to fix it and make sure that our processes and systems can run efficiently. And the nation seems to have a playbook with the selection of four asset managers to run the $37 billion fund for Infrastructure Corporation of Nigeria Limited (Infra-Co) which is set up to deepen investment in roads, railways, power projects, and other sectors in Nigeria. The companies selected include Netherlands-based Sanlam Infraworks; AIIM, a unit of South Africa’s Old Mutual Group; Lagos-based Chapel Hill Denham; and Tripple A, a consortium comprising AfricaPlus Partners and Arc Asset Management as well as Afrinvest West Africa, a Nigerian investment bank.

The company is expected to begin operations in Q3 2021 according to the governor of the Central Bank of Nigeria.

Work has indeed attained an advanced stage and we have received the approval of the Chairman of the Steering Committee, the Vice President, Prof. Yemi Osinbajo, for the approval of the appointment of KPMG as the transaction advisers and only recently we also obtained approval for the appointment of asset managers.

So, following conclusions of these arrangements and further activities, I like to assure all of us that the Infrastructure Corporation of Nigeria is expected to begin full operation by the third quarter of 2021.

We believe that through a partnership with the private sector, Infraco will be able to leverage close to N15 trillion over the coming years to close the country’s infrastructure gap.

I’m happy to acknowledge that the establishment of the Infrastructure Corporation of Nigeria has generated a lot of interest from both local and international private fund managers who are keen to work with the promoters in deploying private sector capital to support investment in key infrastructure in Nigeria.’’

Meanwhile, the Petroleum Industry Bill is causing a problem with this line: “Section 317(8) in the Senate’s version of the Bill states that licence to import any product shortfalls shall be assigned only to companies with active local refining licences.” Expectedly industry players are concerned that refiners like Dangote Refinery will simply take over the market if this has to stay.

Any provision that does not guarantee a free and open market will give room to price inefficiencies and eventually kill off small businesses in the downstream sector.

“This provision will stifle price competition and leave pricing to be solely dictated by a few local refiners. If Nigerians are to pay higher international prices at the pump, we should also benefit when prices go down internationally,” they stated

They argued that this was not guaranteed unless there was healthy competition.

“Prices must be kept competitive at the pump for the benefit of the average Nigerian whose income is constantly being eroded by inflation.

“Allowing imports by major players across the supply chain will protect consumers by ensuring that local pump prices are not higher than regional and international prices.

“MOMAN and DAPPMAN remain committed to the sustainability and institutionalisation of a viable downstream petroleum industry for the social and economic growth of Nigeria,” they stressed.

I pointed this out many months ago: “So, the problem is not just refiners importing, the problem is that some could become exporters. Yes, they get the local crude oil and they simply export it! The Petroleum Industry Bill  must fix these loopholes with criminal penalties”

If you are in the business of importing crude refined products, there is a disintermediation on the way. Yes, Dangote Refinery is pushing that “license to import any product shortfalls should be assigned only to companies with active refining licenses. Import volume to be allocated between participants based on their respective production in the preceding quarter. ’’

Punch had reported that Dangote Group has desired  for inclusion in the Petroleum Industry Bill a requirement that the license to import petroleum products should be given only to companies with active refining licenses. The company does think that by having that requirement, companies will invest in local refining business.

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One thought on “Nigeria’s Productivity Paralyses In Logistics and Petroleum Industry Bill

  1. True in 2020, I was scared off when I heard that the base price to move things from Lagos down to Kano was #1.2 million.

    My client wanted to pay #1 million and the deal was lost

    Reply

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