The Managing Director of Mainstream Cargo, Seyi Adewale, has stated that inefficiency in Nigeria's cargo value chain costs the government between 30 and 40 percent of potential revenue. In an interview with OLUSEGUN KOIKI, he discussed infrastructure challenges, foreign exchange volatility, multiple agencies, and why Nigeria has yet to become a major cargo hub in West Africa.
Major Challenges Affecting Cargo Movement
On the air cargo side, infrastructure improvements have been significant, but ICT remains a major concern. Downtime on customs clearance platforms directly impacts cargo clearance timelines and increases the cost of imported goods. Importers are given a limited number of demurrage-free days, and when customs platforms experience downtime, shipments are delayed, creating additional costs and straining relationships between importers and clearing agents. There are also concerns about periodic increases in charges by agencies such as the Federal Airports Authority of Nigeria (FAAN) and the Nigeria Civil Aviation Authority (NCAA).
Another critical issue is the capacity of cargo handling companies to manage sensitive and temperature-controlled cargo. Efficient communication between handling companies, airlines, customs, and regulatory agencies such as the National Agency for Food and Drug Administration and Control (NAFDAC) and the Standards Organisation of Nigeria (SON) is essential for seamless cargo operations. Within cargo terminals, service delivery must improve. Facilities should be able to quickly locate shipments, prevent cargo damage, and maintain infrastructure standards. Most of these challenges are linked to technology and operational efficiency.
At the seaports, space management and cargo location remain significant problems. Importers often struggle to locate their consignments, while congestion and inefficiencies make it difficult to clear cargo within the free storage period. Shipping companies have also reduced free storage periods. In some cases, importers are given as little as four days to clear cargo, making demurrage charges almost unavoidable. Even when delays are caused by customs system failures or infrastructure deficiencies, the importer bears the cost.
Assessment of the Current Cargo and Logistics Market
The cargo industry largely reflects the state of the economy. When economic activity grows, cargo volumes increase. When the economy slows, trade and cargo movements are affected. Several factors influence the sector. One of the most significant is the cost of air freight. Some industries, such as aviation, must continue importing critical spare parts regardless of cost. Others, particularly exporters of perishables, may reduce shipments when freight costs become prohibitive. Government policies also play a major role. Tariffs, levies, Value Added Tax (VAT), and restrictions on certain imports affect trade volumes. Additionally, regulatory requirements from agencies such as Customs, NAFDAC, SON, and the National Drug Law Enforcement Agency (NDLEA) influence the ease and cost of doing business.
Are Nigerian Airlines Equipped for Modern Cargo Operations?
Airlines are not licensed to handle cargo directly; that responsibility belongs primarily to ground handling companies. This arrangement helps prevent operational chaos at airports. However, there are gaps, particularly in the handling of dangerous goods on domestic routes. Many airlines decline such cargo because they lack the necessary systems and expertise. This means they are missing out on a potentially profitable segment of the market. Most domestic airlines operate aircraft with sufficient belly-hold capacity to transport such shipments, but operational limitations prevent them from fully utilising that opportunity.
Why Nigeria Struggles to Become a Cargo Hub in West Africa
Nigeria's challenge is partly geographical and economic. Many neighbouring countries have relatively small economies and limited industrial output. As a result, there is insufficient regional trade to support the scale of cargo operations required for a major hub. In contrast, North African countries such as Morocco, Egypt, and Algeria have stronger manufacturing, tourism, and trade sectors, which support extensive cargo networks. For Nigeria to become a true regional hub, there must be stronger regional trade integration and increased economic activity across West Africa.
View on Multiple Government Agencies at Ports
The issue requires a balanced assessment. In many cases, delays occur because importers or agents fail to obtain the necessary approvals before shipments arrive. For instance, products requiring NAFDAC certification should have the relevant documentation completed beforehand. Failure to do so naturally leads to delays. The same applies to exports that require phytosanitary certificates or cargo requiring NDLEA clearance. However, there are also instances where inexperienced importers and agents are exploited by officials. While I do not believe there are too many agencies at the ports, inefficiencies in procedures and lack of compliance often create the perception that the system is overcrowded with regulators.
Impact of Foreign Exchange Volatility
Foreign exchange fluctuations have had a major impact on air cargo costs. Airlines charge freight rates in dollars, and recent geopolitical developments have led to additional surcharges. Since these costs are converted to naira, exchange-rate volatility significantly affects importers and exporters. In many export transactions, air freight accounts for more than 80 percent of total logistics costs. Exchange-rate fluctuations can dramatically increase the final cost of shipping. Although many international airlines accept payment in naira, importers and freight forwarders have little control over the exchange rates applied by the carriers.
Revenue Loss to Inefficiencies
It is difficult to provide an exact figure, but the government may be losing between 30 and 40 percent of potential revenue because of inefficiencies in the cargo value chain. Revenue leakages, operational bottlenecks, and weak enforcement mechanisms all contribute to these losses. Improving efficiency would not only reduce business costs but also increase government revenue.
Position on States' Airport Projects
Airports facilitate trade, tourism, and economic development. Therefore, there is nothing inherently wrong with states building airports. However, airport projects must be based on sound economic justification. A state that is not a major producer of agricultural products should think carefully before investing in a cargo airport. Where tourism is the objective, governments should develop supporting infrastructure such as hotels, tourist attractions, and commercial facilities around the airport. An airport should be viewed as part of an economic development strategy, rather than an end in itself. Success depends on how effectively it supports trade, investment, tourism, and business activities.
Thoughts on State-Owned Airlines
The growth of air passenger traffic is closely linked to the strength of the middle class. While the upper class will always travel by air, that segment of the market is relatively stable and less elastic. The real driver of growth in passenger numbers is the middle class. When you look at the current passenger traffic figures, despite the emergence of new airlines, growth appears stagnant because the middle class is under economic pressure. However, as the economy stabilises and the middle class expands, passenger traffic will rise significantly. What we are doing now is laying the foundation by expanding connectivity and creating the capacity for future growth.
Many governments are establishing airlines because they have seen successful models elsewhere. For instance, if the Lagos State Government eventually builds its own airport, it may also establish an airline to support operations and improve connectivity. States can partner with one another to create new routes and open up underserved markets. State governments also have substantial travel requirements for their workforce and officials. These travel needs can be channelled through state-backed airlines, creating a ready market for such carriers. However, concerns arise when governments attempt to directly run airlines. Operating an airline requires specialised expertise, and governments generally do not possess the experience needed to manage airlines efficiently.
Take Ibom Air as an example. Although it is owned by the Akwa Ibom State Government, it is run as an independent commercial enterprise. Professionals such as George Uriesi and other industry experts manage the airline, even though they are not from the state. They are given performance targets, and if they fail to meet them, they can be replaced. That is the reason the airline has remained successful. The same applies to other emerging state-backed airlines such as Pioneer Air. The key is ensuring that professionals, rather than politicians, are in charge of operations. In addition, these airlines can attract private investors from within and outside their respective states, thereby further strengthening their business model.
Leveraging Fiscal Incentives for Cargo Investment
There is a direct relationship between economic growth and trade. Cargo transportation is a critical component of that relationship. As people's purchasing power improves and businesses expand, cargo volumes naturally increase. The government's priority should be to grow the economy by promoting trade liberalisation, encouraging a free-market environment, and ensuring transparency in business operations. When economic activities expand, demand for cargo services will grow alongside them. The government should also avoid unnecessary restrictions or policies that create monopolies or favour a select group of operators. A competitive and open market environment encourages investment and stimulates growth. Ultimately, cargo businesses thrive when there is strong demand for goods. If importers and exporters see opportunities in the market, cargo volumes will increase. As the economy grows and consumers' purchasing power improves, financial institutions will also be better positioned to provide funding and support for businesses, including those operating within the cargo sector.
