THE IMPACT OF THE LOGISTICS INDUSTRY ON NIGERIA'S ECONOMIC GROWTH - A CASE STUDY OF THE MARITIME INDUSTRY

CHAPTER ONE

INTRODUCTION

Background of the Study: It is useful to keep in mind that more than ninety percent of international trade takes place on the sea or is transported by ships. It is thought that these ships transport millions of tonnes of cargoes around the world each and every day. These cargoes include goods and commodities, fuel, crude oil, raw materials, machinery and equipment, groceries, and medicines (Arnold, & Furmans, 2022). As a member of the international community, Nigeria is experiencing the same thing as the rest of the world. According to some estimates, much over 90 percent of her apparent international trade takes place on the sea (Bagboy, 2022). If the potential of the marine industry is fully realised, it has the potential to become a significant driver of the national economy, and its revenue, at its fullest potential, is capable of competing with that of the oil and gas industries. A nation's Gross Domestic Product (GDP) can receive a significant boost from the revenues generated by its maritime industry (Barnard, 2022). Estimates of a country's gross domestic product (GDP) are the most popular tool for gauging that nation's overall economic performance. However, GDP may also be used to evaluate the relative importance of a particular industry or sector (Arnold, & Furmans, 2022). A nation's ability to manage and run its ports in an efficient and cost-effective manner is directly proportional to that nation's rate of economic expansion. In the same way that the expansion of a nation's economy requires the existence of port facilities, those port facilities themselves need to be properly handled or operated in order to make room for additional economic expansion (Bagboy, 2022). Both the Logistics Performance Index (LPI) of the World Bank and the Logistics and Supply Chain Index (LSCI) of the United Nations Conference on Trade and Development (UNCTAD) are designed to disseminate information regarding a country's trade competitiveness in the area of transport and logistics (Jean-Francois and Lauri, 2014).

In the most recent decades, there has been a trend toward both nationalisation and globalisation, which has resulted in an increase in the relevance of logistics management in a variety of fields. When it comes to industries, logistics helps to optimise the production and distribution processes that are already in place based on the same resources by utilising management strategies that promote the efficiency and competitiveness of businesses. The transportation system is the most important component of a logistics chain because it is responsible for connecting the various activities (Bagboy, 2022). Transportation accounts for one-third of the total amount that is spent on logistics, and the systems that govern transportation have a significant impact on how well the logistics system functions (Tseng, Yue and Taylor, 2005). Transportation is a necessary component of the whole production process, beginning with the manufacturing stage and continuing through final delivery and any necessary returns. The benefits could only be maximised by effective collaboration between all of the different components (Barnard, 2022).

The maritime industry plays a significant role in international freight and can supply consumers with a mode of transportation that is both affordable and has a large carrying capacity. As a consequence of this, it plays an extremely important role in the transportation of certain commodities, such as crude oil and cereals (Arnold, & Furmans, 2022). The fact that it must be transported for a longer period of time and that its schedule is very susceptible to the influence of the elements constitutes one of its major drawbacks. The majority of today's maritime transportation companies utilise large-scale ships that are equipped with various operation techniques in order to reduce costs and improve their competitiveness (Bagboy, 2022). In addition, the quality of the service is prioritised higher than the cost of delivery among maritime clients today. Therefore, in order to boost service satisfaction, it is required to develop innovative logistics concepts. Some examples of such concepts include real-time information, correct time windows, and goods tracking systems (Barnard, 2022). The activities associated with the maritime transport business can be broken down into three primary categories: (1) Liner Shipping: The company maintains consistent shipments across all fronts, including pricing, routes, and itineraries. (2) Tramp Shipping: This type of shipping is characterised by inconsistent transport prices, shaky transport routes, and unpredictable schedules. It typically transports certain items, such as dry bulk cargo and crude oil, among other things. (3) Shipping for Industry: The most important function of shipping for industry is to provide a constant supply of raw materials. Occasionally, this calls for the use of specialist containers, such as high-pressure containers when dealing with natural gas (Arnold, & Furmans, 2022).

It is essential to keep in mind that the speedy and secure movement of commodities through the various stages of the transportation chain is a necessary condition for the expansion of the economy. The current state of affairs in world trade involves the utilisation of cellular vessels; consequently, the demand for the transportation of commodities over sea has significantly increased. As a result of this, an increasing number of terminals are undertaking expansion projects in order to satisfy the existing demand (Olayinka and Ogundele, 2015). In other words, an enhanced supply chain and logistics, which can be achieved through the development of seaports, will ensure an increase in the volume of foreign direct investment. This indicates that improvements in transportation and logistics are extremely important to both the flow of trade within an economy and the competitiveness of its exports and imports (Arnold, & Furmans, 2022).

Due to the intricate nature of the marine industry in Nigeria, effective logistics management is of the utmost importance to its overall performance. More than ever before, logistics management is required in order to ease the transfer of cargoes from one site to another in an efficient and effective manner (Bagboy, 2022). To interpret the idea of logistics, Tilanus (1997) employs what he calls "five important key concepts," which are logistics, inbound logistics, materials management, physical distribution, and supply-chain management. The entire process of transferring supplies and products into, within, and out of an organisation is referred to as logistics. The process of moving goods once they have been obtained from various vendors is known as inbound logistics (Bagboy, 2022). 

1.2 Statement of the Problem

Policy inconsistency has been one of the problems encountered in maritime sector in Nigeria, the issue of inadequate policy formulation and implementation; hence the contribution of the maritime sector to economic growth has been a subject of debate. Concessionaires in Nigeria’s seaports situated at Warri, Port Harcourt, Lagos, Calabar, Onne, and Sapele have recently listed obstacles to efficient operation. Inadequate power supply and incessant removal of management of government agencies in the nation’s maritime industry are some of the factors impeding the efficient running of the ports. The concessionaires, who spoke under the aegis of the Seaport Terminal Operators Association of Nigeria (STOAN) in commemoration of eight years of port reforms, cited the aforementioned glitches to be affecting the effective and efficient running of the nation’s seaport. Other hitches are the arbitrary arrest of vessels at berth and attendant consequences, poor power generating system, friction among maritime statutory agencies due to overlapping functions and lack of national carrier capacity for the United Nation Conference on Trade and Development (UNCTAD) 40:40:20 carriage rights. The concessionaires that spoke through the, stressed that since they took over the running of the ports nearly a decade ago, they have been contending with these constraints.The poor implementation of the nation’s Cabotage Act 2003 was one of the factors militating against the growth and development of the Nigerian Maritime sector. It combines with poor implementation of the international port state control policy to encourage the visit to the Nigerian port by aged vessels with archaic handling facilities. In addition, the concessionaires condemned the proliferation of tank farms around the port locations, especially in Lagos, saying that they are constituting security risk to the ports and their users.

In other words, when a ship operator chooses a port of destination, he does not only think of reaching the port in time but also the reliability of leaving the port in time.

A higher utilization of the vessel will only be achieved if time in port is improved which will signify that fixed cost by the operator will be spread over increased number of voyage. This will consequently lead to reduced cost of ship operation. Traditionally; the turnaround time of a ship in port is a function of two variables namely:

(i) Waiting time or queuing time

(ii) Service time

The time of a vessel in port is high when either of the two is high compared to normal or the combination of the two.

Waiting time is always high when the demand for berths is higher than the supply. Here the major task of a port planner is to serve the annual vessels efficiently often referred to as the design capacity.In traditional maritime nations such as United Kingdom, USA, the Scandinavians, other European Countries among others, the factors of time, proper planning, co-ordination and implementation of clear-cut policies through government intervention largely account for the enviable levels of efficiency, sophistication and monumental success in their maritime activities especially in respect of its contribution to economic growth. The reverse appears to be the case in Nigeria as the fortunes of the industry have continued to suffer progressive catastrophe over the years.  A very near example is the fact that the Nigerian National Shipping Line (NNSL) which took delivery of 19 (nineteen) brand new tonnages from European shipyards in 1979 and 1980, has not only lost all her vessels but has been liquidated altogether. This is complicated by the inability of governments of different types to float an indigenous national carrier up till date.

If delay in clearing goods at country is poor will make cost of good to go up and the country product will not be competitive in the market. Lack of online checking will make physical checking tortious and time consuming adding to delay in clearing of goods and will lead to the payment of additional fees at the port.

1.3 Objectives of the Study

The main objective of this study is to ascertain the impact of the logistics industry on Nigeria's economic growth. with focus on Maritime Industry. The specific objectives were to:

i.  Determine the extent to which material handling  affects  service quality

ii.  Ascertain the extent of the relationship between customer ordering processing and customer satisfaction

iii.  Determine the effect of warehousing  on revenue of Nigerian ports

iv.  Ascertain the nature of relationship between container traffic and GDP maritime sector contribution.

v.  Evaluate the extent to which transportation influences cargo throughput of Nigerian ports.

1.4  Research Questions

With the above objectives in focus, the study seeks to find answers to the following questions.

i. To what extent does material handling affect service quality?

ii. What is the extent of the relationship between customer ordering processing and customer satisfaction?

iii. What is the effect of warehousing on revenue of  Nigerian ports?

iv. What is the nature of the relationship between container traffic  and GDP maritime industry contribution?

v. To what extent does transportation influences the cargo throughput of Nigerian ports?

1.5 Significance of the Study

The study has a good number of components that would be beneficial to the operators of Nigeria maritime industry, scholars, students, corporate organizations and individuals. Logistics which is the main concept this study dwells on is needed by every organization to effectively facilitate its operations. Logistics management is critical to Nigerian ports because of number of activities that would be executed before importers receive their consignments. The key driver of logistics management is transportation which helps to create value along the supply chain.

The findings that will be established in the study will make important information available to the operators of maritime industry in Nigeria as well as other stakeholders.

Nigerian ports are crucial to Nigerian economy because maritime industry is one of the sectors that contributes greatly to internally generated revenue (IGR) of the country. Apart from oil and gas sector, maritime sector is one of the main focuses of the government. Hence, a work in this sector would be welcome by the government, the operators of maritime sector and other stakeholders.

1.6 Scope of the Study

The study was focused on impact of Logistics Management on the Performance of the Maritime Industry in Nigeria. Related studies on logistics, logistics management and performance with reference to Maritime industry in Nigeria and abroad were examined.

The study  evaluated logistics management in Nigerian ports through such variables as containerized cargo through put, bulk cargo throughput, dry cargo through put and liquid cargo throughput as well as container traffic. NPA and NIMASA websites visited in the course of this research for relevant information and data that may be useful in this study.

A review of theoretical and conceptual framework, methodology and empirical study relevant to this research was made. The study spanned  a period of 2007 to 2014 based on the period expected for data availability. Six ports in Nigeria that ie Lagos port complex, Tin Can Island port, Calabar port, Delta port, Rivers port/Port Harcourt and Onne port were considered in this study

1.7 Limitations of the Study

The limitation of the study were:

Attitude of the Respondents

Some of the respondents showed negative attitude towards the study because there was  no financial benefit attached ,Some refused to supply the necessary information required for fear of  leaking   the secret of their organization. The researcher was able to overcome this limitation through the help of the Managing Directors who sensitized and educated them on proper purpose of research as an academic exercise