Logistics performance and Nigeria’s economic competitiveness

The recent publication of the Logistics Performance Index (LPI) for 2023 by the World Bank has brought to bear some of the concise reforms that are required by the incoming administration in Nigeria, to quickly improve the business environment and economic competitiveness of Africa’s most populous country. The required reforms are occasioned by the challenging economic situation in the country, occasioned by high unemployment, high inflation, increased poverty and declining investment. The parameters from the LPI publication can however provide some dynamic and low-cost policy framework for enhancing Nigeria’s economic competitiveness.

The LPI is a trade performance assessment framework, which measures the efficiency and effectiveness of trade logistics in a country, to ascertain the ease of moving goods across borders in a speedy and reliable manner on a maximum scale of 5.0 percent. The LPI is therefore a framework that helps in understanding the condition and ease of a country’s business environment. With the private sector playing a key role in job creation and economic development, the ranking on the LPI therefore becomes a veritable tool for economic assessment. In the report titled “Connecting to Compete 2023: Trade Logistics in an Uncertain Global Economy,” Nigeria ranked 88th out of 139 countries assessed, with South Africa emerging continental tops at 19th on 3.4 per cent, Egypt at 57th with 3.1 per cent, Botswana at 57th with 3.1 per cent, Namibia 66th, Benin Republic at 66th, Djibouti 79th and Rwanda 73rd and Benin Republic at 66th, being the other major African countries that ranked higher than Nigeria. The Democratic Republic of Congo, Guinea Bissau and Mali, are the other African countries that shared the 88th position on the Index with Nigeria, with 2.6 per cent performance score. And countries that rank positively on the LPI, also rank positively on the Human Development Index of the United Nations Development Programme.

The necessity for policy reforms by the incoming administration in Nigeria is underscored by the economic outcomes of the outgoing administration. Compared to 2015 when it assumed office, unemployment has risen from 9.9 per cent to about 41 per cent, inflation from nine per cent to 22.2 per cent, number of poor people from 40 million to 130 million in multidimensional poverty and value of the Naira from 185 to the US 1 dollar to 750 to the US 1 dollar. While public debt has risen from $10.32 billion to $103.11 billion, debt service now consumes 105 percent of national revenue!

That public debt has significantly increased, and the country now spends more than it earns to service its debt, underscores the tight space for economic manoeuver, and therefore the prioritization of policies that have minimal financial implications.

With an understanding of the LPI as a framework for improving economic competitiveness, and considering the government’s financial constraints, it becomes imperative to ask- what are the lowcost policy measures that can be adopted to improve Nigeria’s economic competitiveness and ease business operations?

First, is to review the methodology and dimensions of LPI, for better comprehension. The methodology for the LPI rests on six major dimensions, which are efficiency of the clearance process i.e., speed, simplicity and predictability of formalities by border control agencies, including customs; quality of trade and transport related infrastructure such as ports, railroads, roads, information technology; ease of arranging competitively priced shipments; competence and quality of logistics services such as transport operators, customs brokers; ability to track and trace consignments; and timeliness of shipments in reaching destination within the scheduled or expected delivery time.

For a total score of 5, Nigeria scored 2.6 per cent on customs; 2.4 per cent on logistics infrastructure, 2.5 per cent on international shipments, 2.3 per cent on logistics competence and quality, 3.1 per cent on timeliness and 2.7 per cent on tracking and tracing.

As will be seen, not all six dimensions of the LPI framework require government financial expenditure. A lot can be done through policy and policy implementation.

The first dimension on efficiency of port clearance processes has the Nigeria Customs Service (NCS), supervised by the Federal Ministry of Finance, as the primary agency of government in this area. Nigeria is a signatory to the 2017 Trade Facilitation Agreement (TFA) of the World Trade Organisation (WTO), which commits countries to implementing measures that enhance the flow and ease of trade across borders. One of the main policy options required here is the appointment of a Comptroller General of NCS, with an established track record and training in Trade Facilitation, either from World Customs Organisation, WTO training institutes or other recognised trade facilitation training institutes. This makes it easier for TFA to be implemented in Nigeria. A suitable candidate does not necessarily have to be an official of the NCS, as there is a precedence to appointing CG NCS from outside NCS personnel, though some have expressed concern about its effect on the morale of NCS officials. The example of Prof Dora Akunyili with National Agency for Food and Drug Administration and Control (NAFDAC), AIG Nuhu Ribadu with the Economic and Financial Crimes Commission (EFCC) and Dr Akinwumi Adesina with the Federal Ministry of Agriculture, are examples of the impact that individuals can make on institutions. Same is required at NCS.

The LPI is a trade performance assessment framework, which measures the efficiency and effectiveness of trade logistics in a country, to ascertain the ease of moving goods across borders in a speedy and reliable manner on a maximum scale of 5.0 percent