OPS’s Quest for Competitive Freight Rates

Members of the organised private sector and government agencies are in agreement that time has come to address freight rates, writes Dike Onwuamaeze

The efficiency of ports operation in Nigeria is currently at the front burner of public events between March 3 and April 9 this year. One of the events was organised in Lagos by the Federal Ministry of Industry, Trade and Investment (FMITI) on March 3 with the theme “Charting a Course for Competitive Freight Rates: Policy, Infrastructure and Private Sector Led Solutions.”

The other two were organised by the Nigeria British Chamber of Commerce (NBCC) on March 5 and the Lagos Chamber of Commerce (LCCI) on April 9. There themes were “Improving the Competitiveness of the Nigerian Ports in an Era of Regional Integration” and “Improving Trade Facilitation Through Port Efficiency and Cost Effectiveness” respectively.

The verdict, in each of these forums, is that Nigeria operates the least efficient and most expensive ports in West Africa. According to the National President of Association of Nigeria Licensed Customs Agent (ANCLA), Mr. Emenike Nwokeoji, “our ports are not yet competitive even at West African regional level.”  

Emenike’s claim is supported by a World Bank’s report that was released in 2023, which scored Nigeria 2.6 and ranked the country 88 out of 139 countries that were covered by its Logistics Performance Index (LPI). It ascribed Nigeria’s low performance in the LPI to the inefficiencies in customs’ processes, poor infrastructure and timeliness of shipments.

In addition, the World Trade Organisation’s (WTO) report 2023 that compared the freight costs per container in dollar terms showed that freight cost in Nigeria was $3.750 per 20 feet container even though it cost $2250 and$2100 in Ghana and Kenya respectively.

In his presentation on, “Nigeria’s Export Dilemma- Challenges in Freight Logistics,” a Professor of Environment Economics, Kaduna State University, Professor Ibrahim Gerrah Umaru, said that the reality is that Nigerian exporters face significantly higher freight cost as they pay an estimated 30 to 40 per cent more.  

According to Umaru, Nigerian ports impose some of the highest charges in Africa, which are higher than what is obtainable in Ghana and Kenya. He attributed the inflated costs to high terminal handling charges, excessive levies and administrative inefficiencies.

He said that port users are also faced with excessive demurrage fees occasioned by bureaucratic delays in the clearing of goods and inefficiencies in ort handling and processing.

In his analysis of freight charges in Nigeria between 2016 and 2023, Umaru estimated that the average freight cost ranged between $3,000 and $4,500 per 20-foot container. He ascribed the cost to poor road networks, port inefficiencies, customs’ delay and high charges from terminal operators.

Comparatively, Umaru said that average freight cost in Ghana was $2,500-$3,500 and $2,000-$3000 in Kenya that has increased rail freight usage, reduced customs’ clearance time and improved cargo handling.

He said: “Nigeria’s high freight charges stemmed from infrastructure deficit, bureaucratic inefficiencies and lack of competition in the shipping sector.”

He added: “Freight costs in Nigeria are disproportionately high when compared to other developing economies.

“The broader economic implications are loss of revenue and foreign exchange (FX) earnings, reduced competitiveness in key global markets and hindered economic diversification efforts.”

Umaru recommended implementation of port reforms that would reduce unnecessary levies and enhance efficiency as well as investments in transport infrastructure that would expand rail networks and inland waterways.

He further recommended the implementation of digital clearance system to reduce delays and enhance optimization of customs’ process.

The President of NBCC, Mr. Ray Attely, said that the efficiency and competitiveness of Nigerian ports would play a defining role in Nigeria’s economic growth and regional leadership, especially in this era of the African Continental Free Trade Area (AfCFTA).

Attely called for urgent port reform. He said: “If we are to enhance our competitiveness, we must embrace reforms that drive efficiency, reduce turnaround times, and create an enabling environment for businesses to thrive.

“Our collective goal is to build a modern, technology-driven port system that meets international standards, attracts investment, and facilitates seamless trade across the region.”

Also, the Registrar/CEO of the Council for the Regulation of Freight Forwarding in Nigeria (CRFFN), Mr. Kingsley Igwe, said that enhancing the competitiveness of Nigerian ports is essential to attracting regional and global shipping traffic. 

According to Igwe, modern infrastructure, including deep-water berths, automated cargo handling systems, and digitalised operations, would reduce delays and enhance efficiency. 

He said: “Competitive and transparent customs procedures, coupled with reduced port charges, can lower the cost of doing business. Simplified documentation and faster clearance processes improve port attractiveness, encouraging traders to choose Nigerian ports over competitors.”   

Speaking in the same vein, the Chairman of Manufacturers Association of Nigeria (MAN) Export Group, Mrs. Odiri Erewa-Meggison, said that port operation is one of the most pressing challenges facing Nigeria non-oil export sector.

According to Erewa-Meggison, “affordable and efficient freight system remains critical to Nigerian economy as it directly impact on the ability of our exporters to compete in regional and global markets.”

She observed that the “reality today is that high freight charges continue to erode the competitiveness of Nigerian made goods. It has made it more expensive to do business and inhibits the growth of our non-oil sector.”

Speaking on the subject matter, the Director General of Nigerian Chamber of Commerce, Industry, Mines and Agriculture (NACCIMA), Mr. Olusola Obadimu, said that freight rates play pivotal role in shaping Nigeria’s trade competitiveness, ease of doing business, and determining the profitability of Nigerian enterprises and their exports products.

Obadimu said: “In Nigeria, logistics and transport costs account for 20 to 30 per cent of total business expenditures, compared to 8.0 to 10 per cent in more advanced economies.

“These high costs place Nigerian businesses, particularly Micro, Small, and Medium Enterprises (MSMEs) at a disadvantage, limiting their ability to compete effectively within the African Continental Free Trade Area (AfCFTA) and other international markets.”

He added that “achieving competitive freight rates requires a holistic approach, integrating sound policy frameworks, efficient infrastructure, and proactive private sector participation.”

The Chairman of Nigerian Ports Consultative Council (NPCC), Mr. Bolaji Sunmola, said that outdated infrastructure and inefficiencies have sometimes led to diversion of cargoes coming to Nigeria to neighboring countries.  

Sunmola, therefore, advocated for policy reforms and enhancement of Public–Private Partnerships to “mobilise investments for infrastructure upgrades and digitalisation, while policy reforms must simplify regulations, streamline customs processes, and attract foreign direct investment (FDI).

The Managing Director/Chief Executive Officer of Nigeria Port Authority (NPA), Dr. Abubakar Dantsoho, who was represented by General Manager for Corporate and Strategic Planning, NPA, Mr. Seyi Iyawe Akinyemi in both the NBCC and LCCI forums, said that it is now a matter of categorical imperative that Nigerian ports must be competitive and efficient in order for the country to optimise the benefits accruable from AFCFTA.

Dantsoho said: “Efficiency, which is always work in progress, is not negotiable for the authority (NPA). We will continue to work hard at it to make our ports competitive, not only in the sub region but within the continent in line with our vision.”

He described a port’s competitiveness as its capacity to provide efficient port service at the right price, adding that this could be determined by the port’s strategic positioning, charges, terminal efficiency, quality of its services and hinterland connectivity. 

Dantsoho explained that NPA’s efforts toward improving competitiveness of Nigerian ports included implementation of port modernisation projects, port community system/National Single Window, automation of port’s operational processes, development of deep sea ports, export processing terminals and truck e-call up system.

He also identified imbalance in trade, especially due to low volume of export goods, as one of the major factors responsible for high operational cost in Nigerian ports.

Dantsoho said: “A major contributor to port cost is the imbalance in trade. In shipping, operational cost constitute the bulk of operating a vessel.

“When the entire cost of voyage is spread only on import, the cost will definitely be higher compared to being spread also on commensurate volume of export.”

Dantsoho said that the NPA has licensed five Export Processing Terminals (EPTs) in the Lagos area in its bid to improve cargo export through the Nigerian ports.

He added that the establishment of the EPTs has seen export grow overtime.

According to him, the NPA is re-engineering its work processes for improvement in productivity in order to optimise time and cost.

“The sea port is the gateway through which international trade enters the nation’s economy. As a result of this, efficiency in operating our ports is significant in order to reduce port costs. Efficiency and cost reduction will enhance our competitiveness within the African Sub-Region.”

The Executive Secretary/Chief Executive Officer of Nigerian Shippers’ Council (NSC), Dr. Akutah Pius Ukeyima, said that port efficiency goes beyond moving cargoes to ensuring that every step in the supply chain runs smoothly, predictably and at a cost-effective rate. 

Ukeyima, who was represented at the LCCI’s stakeholders’ forum by the Director of Regulatory Services, NSC, Mrs. Margaret Ogbonna, said that Nigeria’s ports are currently plagued by inefficiencies that affect trade facilitation.

He said: “While the country handles over 85 per cent of its trade through the ports, cargo dwell times in Nigerian ports remain exceedingly high—averaging 18-20 days, which is far beyond the global benchmark of 3-5 days. This inefficiency results in longer lead times, higher costs, and an overall negative impact on trade flows.”

He disclosed that the NSC is actively working to implement measures like “the development of a Port Pricing Index, which will help monitor the fairness of tariffs, detect and prevent overcharging, and provide benchmarks for cost-effectiveness and efficiency.”  

Similarly, the President of LCCI, Mr. Gabriel Idahosa, said that ports are critical determinant of a nation’s trade competitiveness and economic prosperity as it serves as the lifeblood of international trade by acting as the conduit through which goods flow seamlessly across borders.

Idahosa said that “efficient port operations are synonymous with reduced transaction costs, expedited cargo handling, and enhanced global competitiveness. Conversely, inefficiencies manifest as bottlenecks, escalating costs, and diminished trade volumes, ultimately impeding economic growth.”

He added that “one of the most pressing challenges is the persistent congestion and delays, particularly at the Apapa and Tin Can Island ports in Lagos.

“These facilities are frequently overwhelmed, resulting in extended cargo dwell times and high demurrage charges, which ultimately raise the cost of goods and undermine the competitiveness of Nigerian exports.”  

There is hope that a reform is on the way. The Permanent Secretary, FMITI, Ambassador Nura Abba Rimi, said that  a framework that would provide a roadmap for the implementation of key interventions that could reduce freight costs and promote a more competitive and efficient logistics industry in underway.

“Ultimately, the goal is to foster a logistic environment that is both cost-effective and sustainable, contributing to economic growth, job creation and improved balances,” he said.