The Effect Of Logistics Industry On The Economic Growth In Nigeria (A Case Study Of The Maritime Industry)

The Effect Of Logistics Industry On The Economic Growth In Nigeria (A Case Study Of The Maritime Industry)

Abstract

The most significant elements that enable us to understand economic growth and development levels of nations are economic indicators of the country of interest. As much as these indicators have positive and high values, they affect the economic, social, psychological and cultural texture of the nation positively. These effects increase the culture, living and welfare levels of the individuals in the society. Logistics is one of the tools that play an important role in the change and improvement of economic indicators. Logistics industry provides significant macro contributions to national economy by creating employment, and creating national income and foreign investment influx. On the micro scale, logistics industry is a key industry in increasing the competitive power of corporations. Furthermore, the logistics industry has an important mission in revitalizing and improvement of the competitiveness of other industries. Today, all industries are dependent on logistics sector. The present study aimed to investigate how the logistics variables of transportation and communication affected economic growth in Nigeria. The effect of both transportation industry variables and communication industry variables that form the logistics industry on the increase in per capita income

Chapter One

Introduction

1.1 Background of the Study

It is expedient to note that, over 90 percent of International Trade is done by sea or carried by ships. It is believed that on daily basis, these ships move millions of tons of cargoes comprising goods and commodities, fuel, crude oil, raw materials, machinery and equipment, foodstuffs, medicaments, around the world. The situation is not different in Nigeria, being a member of international community. It is estimated that well over 90 percent of her visible international trade is sea borne. The maritime industry, if effectively harnessed, has the capacity to be a big factor in the national economy; with revenue at maximum potentials, capable of competing with oil and gas revenue. Maritime revenue can be a major contributor to the Gross Domestic Product (GDP) of a nation. Gross domestic product (GDP) estimates are commonly used to measure the economic performance of a whole country, but can also measure the relative contribution of an industry or sector. The economic growth of a nation depends on how efficient and cost effective, the port is operated and managed. Just as the economic growth of a nation demands for port facilities, also the port facilities must be run or operated efficiently to enable further economic growth or expansion (Emeaghara, 2008). The World Bank’s logistics Performance Index (LPI) and United Nation Conference on trade and Development (UNCTAD’s) Logistics and Supply Chain Index( LSCI) are targeted at espousing information about countries trade competitiveness in the area of transport and logistics (Jean-Francois and Lauri, 2014).
Due to the trend of nationalization and globalization in recent decades, the importance of logistics management has been growing in various areas. For industries, logistics helps to optimize the existing production and distribution processes based on the same resources through management techniques for promoting the efficiency and competitiveness of enterprises. The key element in a logistics chain is the transportation system, which connects the separated activities. Transportation occupies one-third of the amount in the logistics costs and transportation systems influence the performance of logistics system hugely (Tseng, Yue and Taylor, 2005). Transportation is required in the whole production procedures, from manufacturing to delivery to the final consumers and returns. Only a good coordination between each component would bring the benefits to a maximum.
Maritime industry plays an important role in international freight; it can provides a cheap and high carrying capacity conveyance for consumers. Therefore, it has a vital position in the transportation of particular goods, such as crude oil and grains. Its disadvantage is that it needs longer transport time and its schedule is strongly affected by the weather factors. To save costs and enhance competitiveness, current maritime logistics firms tend to use large scaled ships that incorporate operation techniques. Moreover, current maritime customers care about service quality more than the delivery price. Thus, it is necessary to build new logistics concepts in order to increase service satisfaction, for example real-time information, accurate time windows and goods tracking systems. The operation of maritime transport industry can be divided into three main types: (1) Liner Shipping: The business is based on the same ships, routes, price, and regular voyages. (2) Tramp Shipping: The characters of this kind of shipping are irregular transport price, unsteady transport routes, and schedule. It usually delivers particular goods, such as Dry Bulk Cargo and crude oil. (3) Industry Shipping: The main purpose of industry shipping is to ensure the supply of raw materials. This sometimes needs specialized containers, such as the high-pressure containers for natural gas (Tseng et al, 2005).

It is important to note that economic growth partly depends upon moving goods efficiently and safely through the transportation chain. Since the current scenario of world trade goes to cellular vessels, thus the demand for transportation of goods via sea increases tremendously. In view of this, more and more terminals are expanding in order to cater for available demand (Olayinka and Ogundele, 2015). In other words, improved supply chain and logistics (seaport development) will guarantee trade expansion and larger foreign direct investment. This means that transportation and logistics improvements are critical to trade flows and the competitiveness of an economy’s exports and imports.

Logistics management is very critical for the performance of maritime industry in Nigeria because of its complex nature. Logistics management is needed more than ever before in order to facilitate movement of cargoes from one location to another in efficient and effective manner. Tilanus (1997) uses ‘five important key terms’, which are logistics, inbound logistics, materials management, physical distribution, and supply-chain management, to interpret the concept of logistics. Logistics is the entire process of materials and products moving into, through, and out of firm. Inbound logistics is the movement of material received from suppliers.

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:

1. Waiting time or queuing time
2. 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 effect of Logistic industry on Performance of Nigerian economy with focus on Maritime Industry.

The specific objectives were to:

1. Determine the extent to which material handling affects service quality
2. Ascertain the extent of the relationship between customer ordering processing and customer satisfaction
3. Determine the effect of warehousing on revenue of Nigerian ports
4. Ascertain the nature of relationship between container traffic and GDP maritime sector contribution.
5. 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.

1. To what extent does material handling affect service quality?
2. What is the extent of the relationship between customer ordering processing and customer satisfaction?
3. What is the effect of warehousing on revenue of Nigerian ports?
4. What is the nature of the relationship between container traffic and GDP maritime industry contribution?
5. 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

Chapter Five

Summary Of Findings, Conclusion And Recommendations

5.1 Summary Of Findings

This study evaluated the Effects of Logistics Management on Performance of Nigerian Maritime Industry. Seven sea ports and Nigeria Maritime Administration and Safety Agency(NIMASA) were studied.

We started the study by first of all setting objectives which were pursued vigorously from chapters 1 to 4 and accordingly we summarized the study in this chapter, drew conclusions and offered necessary recommendations.

Accordingly, the major findings established in this study are:

1. Material handling significantly promoted service quality (r = 0.707; F= 249.946; t = 15.810; p <0.05).
2. There was a significant positive relationship between customer ordering processing and customer satisfaction (r =. 838, P<.05).
3. Warehousing had a positive effect on revenue of Nigerian ports (r = 0.689; F= 266.060; t = 16.311; p < 0.05)
4. There was a significant positive relationship between container traffic and GDP maritime industry contribution (r =.583, P<.05).
5. Transportation significantly enhanced cargo throughput of Nigerian ports(r = 0.593; F= 249.946; t = 16.509; p< 0.05).

5.3 Conclusion

Logistic management is very crucial for effective performance of maritime industry and putting an effective transportation system is a critical factor in logistics that drive this performance. The growing importance of logistics arose from companies becoming globalized towards gaining access to new markets, realize improved service delivery by tapping into new technological advancement in movement of cargoes from one country to another. In recent times logistics has become more prominent and it is recognized as a critical factor in giving maritime firms competitive advantage. Logistic management increases awareness of logistics management implications in maritime industry performance and there is growing awareness of the benefits of leveraging logistics to increase customer value. Hence, measuring of performance of logistics had become a high priority. Based on the data analysis and the findings established we conclude as follows: That material handling promotes serice quality. Customer ordering process is positively related to customer satisfaction. Container traffic has positive relationship with GDP maritime industry contribution .This means that as container traffic increases GDP maritime industry contribution will also increase. Warehousing has a positive effect on revenue of Nigerian ports. Transportation enhances cargo throughput of Nigerian ports.

5.4 Recommendations

Based on the conclusions drawn we offered the following recommendations are made

1. Cargoes should be handled in most efficient manner in Nigerian ports so as to ensure quick deliveries to their owners.
2. Effective internal processes should be put in place by all maritime firms in Nigeria in other to satisfy the customers/clients and go beyond their expectations.
3. There should be proper monitoring and control of inflows and outflows of containers
   at the ports so as to reduce bottlenecks and improve efficiency of operations.
4. Effective warehousing infrastructure should be put in place in Nigerian ports so as to increase revenue accruable to government and other stakeholders..
5. There is need to put in place effective transportation system which is a critical component of logistic management
6. Nigerian ports should be operated on cost effective and efficient manner through putting in place effective logistics measures so that they will continuously contribute to nation’s GDP and revenue growth .
7. Nigerian maritime organizations need to build new logistics concepts in order to improve their services by using such tools as real-time information, accurate time windows and goods tracking systems.
8. There is need for policy consistency through formulation and implementation effective policies that will bring about the smooth running of ports’ operations.
9. Such factors that have been identified like inadequate power supply and incessant removal of management of government agencies in the nation’s maritime industry which impede the efficient running of the Nigerian ports should be addressed.
10. Other hitches like the arbitrary arrest of vessels at berth and attendant consequences, 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 should be tackled without delay.
11. All Nigerian ports should key into the use of modern equipment in cargo handling so as to reduce logistics problems to the barest minimum.
12. Warehousing facilities should be improved upon in all the ports so as to enhance easy flow of goods and services with a view to attracting more revenue to both the government and terminal owners.
13. The full implementation of the nation’s Cabotage Act 2003 should be initiated so as to facilitate the growth and development of the Nigerian Maritime industry.
14. There is need for government to fully implement the international port state control policy to discourage the visit to the Nigerian ports by aged vessels with archaichandling facilities.

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