Cargo Freight Rate In Liner Shipping And It’s Correlation To High Prices Of Imported Goods In Nigeria

Project and Seminar Material for Transport Management Technology

Cargo Freight Rate In Liner Shipping And It’s Correlation To High Prices Of Imported Goods In Nigeria


Chapter One


Introduction

1.1 Background to the Study

According to Ndikom (2006), The Word freight rate connotes the reward usually payable to the carrier for the carriage and arrival of the goods in a mercantile condition ready to be delivered to the merchant. Maritime z shipping services are usually priced conjunction with land mode of transport and are dependent on the forces of demand and supply. Moreover, the demand and supply of International sea-transport services are basically derived the demand and supply of commodities (Goods) carried by sea and 15 therefore affected by the elasticity (changes in prices and demand cum supply) for those commodities. Basically normal times, an important factor affecting the exact elasticity of demand for shipping service, is the cost of transport in relation to the market prices of the goods carried.

Although, it may be small, the cost of sea transport is often a significant element of components in the final market prices of many important commodities. Ekwerina (2003) posits that in developing countries, particularly those of the sub-saharan African region, transport cost(Freight rate) consist about Fifteen (15%) to twenty (20%) percent of the costs of imported and exported commodities. Thus, a commodity that may have attracted a low price to purchase in the international market tends to cost 150/0, to 200/0 higher than the actual cost of purchase after it must have entered the sub-saharan African

market. The impact of this is that inflation tends to be the order of the day for imported commodities in Nigeria causing a continuous high rise in the prices of imported goods. Experts thus assert that there exist a direct correlation between market prices of imported goods and the shipping (transport cost) freight rate such that a positive change (upward increase) in liner freight rate brings about an upward increase in the costs of imported goods while a negative change (downward decrease) in liner freight rate brings about a downward (decrease) change in prices of imported products in Nigeria. Over the years however, the frequency of positive changes (increases) in liner freight rate with attendant Increase in market prices of imported products has been so high that it becomes customary for prices of imported products to continue to go high without room for decline in market prices.

Ndikom (2006) posit that the continued increase in liner freight rate in sub-saharan African countries can be traced to n umber of factors among which are: high port tariffs and dues charged to ship owners by Government Agencies and terminal operators in ports, high ship turn-round time (STRT) in sub- African ports necessitating the payment of demurrage by ships; delay in cargo clearing processes b::V customs and other government agencies in ports, lack of national shipping lines to carry the countries share of water-borne trade and insecurity in the waters of the region causing panic to ship- owners that trade in the sub-saharan sea-routes. The effect of this is that, even in the face of port reforms that sort to address majority of the problems of the shipping industry, freight rate in Nigeria has continued to be negatively affected as a result of high cost of doing business in Nigeria ports which has invariably impacted negatively the market prices of imported goods in Nigeria and turning the economy into an
inflation ridden economy,

In the View of Okon (2006), freight rate, insurance, import duty and handling costs constitutes an important element in the determination of the value of many export and import commodities and also influence the demand for such commodities in the import market. This in essence means that shipping freight rate is an element that increases the cost of products, and thus, the prices of export and import goods in the market as well as exportation and importation is the main vector of our commercial exchange, since the largest percentage of Nigerian international trade is carried by sea Hampton,1989). The research will however seek to evaluate the correlation between liner freight rate and market prices of imported products in Nigeria.


1.2 Problem of Statement

Most market products and commodities in use In public places, private homes and industrial places in Nigeria today are virtually imported. Okon (2006) stated clearly that Nigeria is an import dependent economy (IDE) with 900/0 of its imports carried by sea. It is however a common knowledge that the ability of a nation to sustain its populace with an average living standard depends to a great extent on the market prices of commodities, products and services and its affordability by majority of the citizens. World Bank record on poverty among countries of the world list Nigeria as one of the countries whose seventy percent (70%) of its citizens lives on less than two Dollars ($2), that is, about three hundred and twenty naira (N320) per day. This is directly connected to the high prices of market products and services in Nigeria making it an inflation ridden economy where citizen no longer afford to pay at ease the cost of running their living in an economy where virtually all household items are imported by sea.

Since the argument persist that the major reason for the high cost of market product in Nigeria is the high freight rate paid by importers in importing them. The research identified the following problems which it seeks solution to:

  1. There is the problem of higher liner freight rates involved in bringing goods to Nigeria compared to other neighboring African countries.
  2. There is the problem of inefficiency of stevedoring companies occasioned by the use of aging cargo handling equipment and poor handling skills which has led to increase in the time of vessel stay at berth and increase in ship-turn-round time which the ship owners in turn use as excuse to increase freight rate on goods coming to Nigeria.
  3. High port tariffs, dues and charges cum demurrage cost occasioned by port congestions also increase freight rates charged by liners in bringing goods into Nigeria.
  4. There is the problem of high time of doing business with the ports due to delay in cargo clearing processes with customs and other government agencies responsible for clearing of goods.
  5. Lack of a national shipping line responsible for carriage of Nigerian seaborne trade constitute a part of the reason why liner freight rate has continued to go high Nigeria.
  6. There is the problem of galloping prices for imported goods and services in Nigeria.

These are the problems which the research attempts to find solution to.


1.3 Objective of the Research

The researcher identified some goals and objectives which the research aims to actualize. Some of these objectives are tied to the problems statement in 1.2 above and the realization of the research objectives will mean that, solutions has been identified for the numerous problems mentioned in 1.2 above. The general objective of the research is to assess the correlation between liner freight rate and the high prices of imported market commodities in Nigeria.

Some specific objectives of the research include the following:

  1. To determine how much time it takes on the average to do business (clear goods) in Nigeria ports and the relationship between this time and linear sea freight rate.
  2. To determine the time it takes to handle a ship in Nigeria port terminals on the average and determine the relationship between the ship- turn round time and freight rates charged by liners.
  3. To determine the effects of high port dues rates and charges as well as port congestion on shipping freight rates and market prices of imported products.
  4. To assess the effects of lack of a national shipping line of Nigeria in the carriage of Nigeria sea born trade on liner freight rate charged by foreign ships involved in the carriage of Nigerian imports
  5. To determine the effects of galloping prices of imported market commodities on the economy Nigeria and its citizens.
  6. To proffer recommendations on the basis of the research findings.

1.4 Hypothesis

As a guide to the realization of the research objective, the researcher proposed a null hypothesis.

The acceptance and or rejection of the null hypothesis will help the research to develop a valid opinion about the research objectives.

Hypothesis Ho: There is no direct correlation between liner freight rates and the market prices of imported goods in Nigeria


1.5 Justification of the Study

The study will be great importance to the Nigerian shipping industry operators and Government Agencies as well as the general public and importers.

To start with, understanding the nature of relationship existing between liner freight rates and market prices of imported products in Nigeria will ignite efforts aimed at achieving lower freight rates in order to achieve a reduction in market prices of imported commodities.

Secondly, Since the ability of a nation to better the living standard of its citizenry depends on the stability of its economy which in turn depends of how inflation -free (stability in the prices of goods), the economy is. A research on the correlation between shipping freight rate and market prices of imported goods will provide avenues to create all inflation free economy where the living standard of the citizenry can be bettered.

Moreover, the study highlights Areas where corruption of customs officials, government agencies in the ports and general maritime fraud contributes in the increasing of shipping freight rates which is later transferred to the market prices of such imported goods by importers in Nigeria. With the above points, the research is timely, significant and justified.


1.6 Scope of the Study

The scope of the study is limited to assessing the correlation between linear freight rates and market prices of imported goods in Nigeria. The study is limited to ascertaining the level of freight rate charged in the Nigeria shipping industry without extension to other sub-saharan African countries and the impacts of this freight rate to market prices of imported commodities in Nigeria.


Chapter Five


5.0 Summary of Findings, Conclusions and Recommendation

5.1 Summary of Findings

From the previous analysis in chapter four and the review of literature in chapter two, it has been found that there exist a direct relationship between liner/shipping freight rates and the market prices of import goods and services such that the higher the freight rates, the higher the inflation rate on market prices of imported goods and the lower the freight rates the lower the market prices/inflation rates for import commodities and services. Moreover, it has been discovered that several components constitutes the cargo freight rate to the importer for which a particular consignment can be imported. Example, clearing charge (duty) insurance premium, handling charges, container rental services, port charges, actual transport cost, etc constitutes the components that makes up the shipping freight rate, thus a hike in any of the above component will result to a hike in liner/shipping freight rate which invariably will affect positively or negatively the market prices of the imported goods.

Also, the analysis of the responses indicate that there exists above 205.70 (degrees) of positive correlation between liner freight rates and market prices of imported goods while a percentage of respondents remained neutral to the questions posed. Liner / shipping freight rate is therefore believed to have a direct impact to the prices of import commodities thus there is need for a continuous professional regulation of liner freight rates charged by carriers to ensure that at each moment in time, the prevailing freight rates for different routes and trades does not pose inflationary effects on the economy.


5.2 Conclusion

In this study, we have been able to analyze the relationship between shipping freight rates and the market prices of imported goods. Having realized the objectives and goals of the research, it is therefore quite interesting to observe that the Federal Government of Nigeria understood the implication of this when it set-up the Nigeria shippers council (NSC) and charged it with the responsibility of regulation freight rate in Nigeria to ensure that shippers are protected from uncompetitive rates charged by carriers. Concerted attention should therefore be paid to the activities of the NSC to ensure that it achieves the objectives for which it was set-up and help in stabilizing galloping prices of imported commodities which is usually attributable to high liner/shipping freight rates in Nigeria.


5.3 Recommendation

The economic development of any society or nation is usually a complex process which depends mostly on several
interacting socio-economic and political forces. Thus, today in Nigeria, there is wide spread concern for transport, particularly shipping in the desire to promote rapid economic development and curb freight induced inflation. To enhance the contribution of the shipping sub-sector to socio-economic development of Nigeria, and a reduction on prices and inflection rates on imported products, there is need for a continuous monitoring of the fraud of liner/shipping freight rates m Nigeria. In line to this, the following recommendations are given:

  1. Government through terminal operators should ensure adequate finance and funding of port operations especially in the area of port infrastructure to reduce drastically, the long time it takes to load and discharge vessels due to lack/bad infrastructure.
  2. Immediate Replacement of Obsolete Plants and equipments.
  3. Corruption fraud and high-handedness of government agencies in the ports over the years has led to high port cost due to decline in level of services
    quality and severe congestions. Government should address this by carrying out reforms on the operation systems of these agencies.
  4. There is need for a reduction m the number of Government Agencies Operating in the ports, the Proliferation of the agencies constitutes bettle-neck to cargo cleaning and freight forwarding activities in the ports.
  5. The Nigeria Shippers Council (NSC) should be reformed and empowered to punish carriers who are proved to engage in unnecessary hike of shipping freight rates along routes to cause foreign-induced inflation in the All these will help to cushion the negative impact of high shipping freight rate to prices of imported goods and services in Nigeria economy.

All these will help to cushion the negative impact of high shipping freight rate to prices of imported goods and services in Nigeria.


Cargo Freight Rate In Liner Shipping And It’s Correlation To High Prices Of Imported Goods In Nigeria


Project Material Download

3,000 Naira


The complete material will be sent to you in just 2 steps.

Quick & Simple…


Step One Purchase

Make payment of ₦3,000: through USSD Transfer, Bank Mobile App, ATM Transfer, or POS Transfer to:

Access Bank PlcAccount No.: 0811003731
Name: Samphina Academy
Account Type: Current

Or Click Here to pay with Debit Card

FOR CLIENTS OUTSIDE NIGERIA:
Click Here to pay with Debit Card ($15)
GHANA – Make Payment of 60 GHS to MTN MoMo, 0553978005, Douglas Osabutey 

  PAY WITH CRYPTOCURRENCY


Step Two Purchase

Send the following details through Text Message or WhatsApp Messenger | +234-8143831497

  • Payment Details 
  • Email Address 
  • Cargo Freight Rate In Liner Shipping And It’s Correlation To High Prices Of Imported Goods In Nigeria

The complete material will be sent to your email address after receiving your payment information | T & C Apply


  Contact Our Help Desk


You may also like:

⚠️ Need a different topic? Perform a quick search



Get A Complete Business Plan For Any Business In Nigeria

Business Plan for Businesses in Nigeria

  Business Plans in Nigeria


Disclaimer


This research material “Cargo Freight Rate In Liner Shipping And It’s Correlation To High Prices Of Imported Goods In Nigeria” is for research purposes and should be used as a guide in developing your research project / seminar work. For no reason should you copy word for word (verbatim) as samphina.com.ng will not be liable for any who copied the material.

The aim of providing this material is to reduce the stress of moving from one school library to another all in the name of searching for research materials. This service is legal because, all institutions permit their students to read previous projects, books, articles or papers while developing their own works. According to Austin Kleon “All creative work builds on what came before”.

samphina.com.ng is only providing this material “Cargo Freight Rate In Liner Shipping And It’s Correlation To High Prices Of Imported Goods In Nigeria” as a reference for your research. The paper should be used as a guide or framework for your own paper. The contents of this paper should be able to help you in generating new ideas and thoughts for your own research. Use it as a guidance purpose only.


Frequently Asked Questions


What are the factors affecting the rate fixing in liner shipping?

Two basic factors affect rate fixing in liner shipping- port and distance related factors and cargo related factors. For general cargo, liner tariff rates are assessed on either cargo weight, measurement or value.

What are the two most important parameters of cargo freight rates?

Two most important parameters of cargo are weight and measurement. Break bulk or LCL cargo freight rates are quoted in revenue ton basis i.e. weight ton or measurement ton whichever is higher. FCL rates are quoted based on the size and type of the container.

What are the main features of liner freight tariffs?

If goods are of very high value, they are charged irrespective of weight and measurement on an ad valorem basis. Under liner freight tariffs, carrier assumes responsibility for loading and discharging expenses, as well as the carriage of the goods by sea.

What is the major factor in the shipping industry today?

The major factor in shipping industry today is the competition. Shipping conferences were introduced to stabilize freight rates, and to reduce the possibility of under-cutting of rates by an over supply of operators. 

Samphina Academy

Samphina Academy is an Online Educational Resource Center that is aimed at providing students with quality information and materials to aid them in succeeding in their academic pursuit.