CONNECTING APAPA PORT TO LAGOS-IBADAN RAILWAY: What it means for businesses, investors

February 3, 2021
Business

Operational cost incurred by companies on Apapa road is about to hit a new low as the connection of Lagos-Ibadan Railway to the Apapa port is a lifesaver for Nigerian companies that spend a arm and a leg to have their cargoes transit on the road.

For years, poor rail transport system had forced 90 percent of cargo to move by road, eating into the revenue of companies. That number is expected to drop due to the completion of the Apapa port Break Bulk Line which connects the Lagos-Ibadan Railway.

The link between the Apapa Port Break Bulk and the Lagos-Ibadan Railway, which cost the Federal Government $1.58 billion, is a plus to Nigeria’s ease of doing business, indicating the seriousness of the government to make Nigeria a suitable environment for operation.

Nigeria’s deplorable transportation system has been an hindrance to business growth as most companies, both foreign and domestic, depend heavily on Apapa road network for logistics.

Already, Nigeria ranks as the most expensive place in Africa to ship goods to from Europe, as Apapa Port cost more than triple what is charged in Durban Harbour (South Afeica) and Tema Port (Ghana), this is according to SBM Intelligence.

Yet, companies still have to deal with the dire state of Nigeria’s transport system and road congestion, which causes inflation in transport cost, with companies paying about $4,000 to transport their goods to Lagos warehouse. This is aside the terminal or storage charges in the port, according to Financial Times.

Aside from the cost of trucking their goods, companies also have to deal with bribery and road robbery. The financial cost and threat to goods have compelled businesses to seek ports in Lome (Togo), Ghana, Cameroon, Cote d’Ivoire and Congo-Brazzaville as alternative to their cargo heading to Nigeria.

The completion of Apapa Port Break Bulk, and its connection to the Lagos-Ibadan Railway will reduce the cost of transporting goods and reduce the period spent on the road, as well as reduce robbery attacks witnessed by containers on transit.

The railway link will have a huge positive impact on companies’ books and the Nigerian economy. It will also reduce the cost passed by companies to their customers. Increase in price of goods in Nigerian market are often driven by the financial challenges experienced by companies at Apapa port. The railway link is expected to drag cost of goods and cost of doing business down.

It will be an instrument used to appeal to investors confidence. In 2019, Nigeria moved to 131 from 146th position on World Bank’s ease of doing business index out of 190 countries – the Apapa Port Break Bulk Line will improve the country’s score.

The government through Vice President Yemi Osinbajo and Presidential Enabling Business Environment Council (PEBEC), have been pushing to reassure foreign investors of Nigeria’s ease of doing business, this will give them a new card to play.

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