The Nigerian economy revolves around Lagos ports
For years, the standard sequence of many Nigerian movies involved a protagonist seeking an opportunity in the big city of Lagos and returning to his village after a couple of years, success symbolised by a Mercedes Benz and provisions for the family.
Lagos, to many, is the Nigerian dream. Anyone trying to do anything interesting is here.
Indeed, most commerce is here too. Lagos’ output was $137 billion in 2017, more than a third of Nigeria’s gross domestic product (GDP). As a country, it would be one of the ten largest economies in Africa—bigger than Kenya. Moreover, 75% of Nigeria’s imports passed through Lagos ports in 2017, and 99% of Nigeria’s trade is by sea.
Apart from shipping activity, the state is also home to the nation’s primary financial district, technology hub, and entertainment industry. The state also generates more revenues than the lowest 30 states combined, allowing it to upgrade its infrastructure to some degree.
However, Lagos’ dominance is partly a function of Nigeria’s failure to create opportunities or develop critical infrastructure outside the former capital. There is no better example of this than shipping ports.
Nigeria’s port problem
Nigeria has six ports in total, so why is there a dependency on Lagos? Traders have complained about the clearing process and other issues at the other ports in the country. In response, those living around the ports have claimed that senior political figures intentionally sabotage activities at their ports in an effort to maintain Lagos’ dominance.
So far, these conspiracy theories have not been accompanied by meaningful evidence. However, it is unusual that insecurity is an oft-repeated reason for the inactivity at the other Southern ports in the country given that the piracy that plagues the Gulf of Guinea should affect Lagos too. Furthermore, the Onne port in Rivers State shows the issue can be easily addressed. The Onne port is the primary channel for Nigeria’s oil & gas exports and is one of the heaviest guarded ports in the country.
That being said, Lagos is a primary consumption market area for a fair share of the cargo that is imported. Structurally, factors that determine the choice of ports, such as draft, do not favour most other ports than those of Lagos and Port Harcourt. They also provide an easy access way to the ocean.
The cost of Nigeria’s port problem
The status quo makes it expensive to ship to Nigeria. The cost of shipping to Apapa, Lagos from New York is about twice that to South Africa, despite Nigeria’s close proximity. It costs approximately $5,000 and $7,400 to ship household goods from New York to Apapa in 20ft and 40ft containers, compared to $2,600 and $3,800 to Cape Town, South Africa.
There are also broader economic implications of this port dependency. One paper which analysed the impact of Apapa port operations on the Nigerian economy found that cargo throughput, ship traffic volume, and gross registered tonnage are all port operation indicators that affected Nigeria’s GDP. Specifically, an increase in the number of ships docked and cargo cleared at the Apapa port corresponded with a notable rise in GDP.
It should not surprise us that port activity is a precursor to economic growth. A cursory look at the impact of the port of Shanghai, the world’s busiest port, on the Chinese economy, gives a clear indication of the opportunity cost of Nigeria’s moribund ports.
Moreover, logistics performance has a high impact on seaborne trade in developing countries, and it has been observed that a decrease in cargo cleared daily has a negative spillover effect on the economy of the region. Lagos’ port complex average efficiency rating is at 76%, 4th in West Africa, behind Tema, Abidjan and Lome at 91%, 90, and 89% respectively. These inefficiencies cost Nigerian business entities about ₦2.5 trillion in lost revenue annually.
No near-term solutions to Nigeria’s port problem
The Lagos port congestion problem has seemingly been addressed by the Lekki port—a $1.5 billion multi-purpose deep-sea port project in the heart of the Lagos Free Trade Zone, scheduled for completion in 2020. However, this raises its own set of issues. While the new Lekki port will likely address cargo throughput issues, logistical performance may still be hampered due to Lagos’ planning and infrastructure deficit. As Lagosians are quick to point out: Lagos is a model until it rains.
Furthermore, while the Lekki port aims to be a regional hub for West Africa, a bulk of Nigeria’s shipping activity primarily serves the Nigerian hinterland, and outlying regions of Niger, Cameroon and Benin. Thus, in the long run, Tema, Abidjan and Dakar, which are better placed geographically to landlocked neighbours and do not require their national hinterlands to thrive, will eventually rise to become the regional hubs.
The capital invested in the Lekki’s deep-sea port may have been put to better use upgrading the capacity of the other ports in the country and fixing logistical challenges, e.g. trucking. Lagos stands to gain a bulk of the 170,000 jobs created by the port, but in the best case that will result in more people moving to the already crowded city, which is alarmingly unprepared to handle the daily influx of 2000 people, and have become a “lady wearing a dress five sizes too small”.
As this article puts it, Lagos is already an agglomeration of slow-moving catastrophes that no one seems willing or able to solve. Yet it is poised to lead the post-oil economy. The mistake of centralising Nigeria’s economy around oil may be doomed to repeat itself with Lagos.
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