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HomeUncategorizedCongestion, fuel subsidy slowing logistics sector – Report

Congestion, fuel subsidy slowing logistics sector – Report

Congestion and the removal of fuel subsidy is negatively impacting Nigeria’s logistics sector, GSMA has disclosed.

Congestion, which is rampant in major cities across the country, has been the major cause of delivery challenges in the main cities impacting delivery costs and causing delays. This has now been exacerbated by the removal of fuel subsidy that has made deliveries more expensive, the association noted.

The association in its ‘E-commerce in Africa: Unleashing the opportunity for MSMEs,’ report revealed. It said, “In Nigeria, congestion has been the major cause of delivery challenges in the main cities, impacting delivery costs and causing delays.

“Nigeria also removed fuel subsidies in May 2023, making deliveries more expensive. Poor road quality, especially for delivery to the last mile, has not only impacted the time deliveries take but also raised vehicle maintenance costs.”

Following the removal of fuel subsidy in May, The PUNCH reported in June that many businesses in the logistics sector were increasing delivery prices for operations’ sake.

One of the operators who spoke The PUNCH, the General Manager of Paralex Logistics, Zainab Sadiku, said, “The most important part of our business is fuel, without it, we cannot move. With the increase in fuel price, there is an automatic increase in logistics prices; the amount customers will pay for delivery.”

GSMA highlighted that while two-wheel ride-hailing companies have been launched to tackle congestion challenges in the places like Lagos, local transit regulations, ostensibly to improve transport safety, have continued to inhibit their progress.

According to the global association for telcos, the ability to deliver goods on time, in full, and without damage remains a challenge and an expensive ask in most African markets due to poor road networks and vast distances between cities and urban and rural communities.

To overcome some of these challenges, many buyers pick-up their online purchases from the seller directly although Nigerians still prefer to have their products delivered to their doorstep. It said, “MSMEs in Ghana, Kenya, and South Africa reported this as their primary method for order fulfilment, while in Egypt, Ethiopia, and Nigeria, more MSMEs reported delivering products to the buyer.

Across Africa, only about $5bn is invested in road infrastructure currently, while between $18-25bn is required. GSMA added, “With insufficient public sector investments available for road infrastructure, public private partnerships for financing are increasing, as is foreign investment in infrastructure in the region, which should help reduce delivery costs and increase e-commerce beyond major cities.”

Despite its many challenges, e-commerce adoption in Africa continues to grow, with the market predicted to grow to 600 million online shoppers in the region by 2027. Presently, there are under 400 million online shoppers on the continent, GSMA noted.

The association’s study showed that many Nigerian businesses are relying on social commerce for sales. 56 per cent of surveyed businesses in the country reported relying exclusively on social media platforms as their e-commerce channel.

Many Nigerian small businesses continue to operate without websites. It highlighted, “To put these capital constraints in context, most informal Nigerian MSMEs had a start-up funding of approximately $120 in 2020, putting the construction, launch and maintenance of a website out of reach.”

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