Nigeria Freight Transport Report 2007

Nigeria remains one of Africa's economies that have the greatest future potential - and some of the worst present-day problems. The maritime freight sector could in principle take off, if trade grows and a series of current initiatives, such as the government's increased reliance on private operators to bring greater efficiency and cost effectiveness to the port sector, begin to pay off. Paradoxically, security and infrastructure problems besetting the oil industry are creating some short-term positives for shipping. At the end of 2006, Nigeria was importing all of its refined fuel because its oil refineries and some of its pipelines were not working, even though US$1bn has been spent on them in seven years, according to the head of the Nigerian National Petroleum Corporation. In our latest Nigeria Freight Transport report, BMI concludes that maritime freight traffic will grow by an average annual rate of 6.7% in the 2007- 2011 period.

Various factors, both positive and negative, support this prediction. Among the positives are the introduction of private operators into the ports sector, as well as the continuing if patchy effects of the oilexport boom, which should help boost both international trade and domestic economic growth. Predicted average annual GDP growth across the next five years will be 4.8%. In our view, however, the economy remains prisoner to short-term oil-price related volatility and domestic risk factors. Among the negatives are the weakness of the Nigerian-flagged merchant fleet, continuing port congestion, corruption, and poor security. Risk factors are likely to remain high as the April 2007 presidential elections approach. Oil shipments are particularly at risk.

Elsewhere in the freight sector, we continue to expect road haulage to lag behind GDP growth due to the disastrous state of the road network, although there will be some recovery as privately run toll roads are introduced. Rail freight will also lag behind due to the investment slump in this sector - the government's announcement of a recovery programme will not boost traffic until after 2011. We factored in a downturn for airfreight, following the catastrophic accidents of late 2005. However, there are signs of a turn-around following Virgin Nigeria's relatively successful first year. We have also further cut back our projections for pipeline throughput, given the range of attacks on pipeline infrastructure in 2006, which led to significant cuts in Nigerian crude oil exports. Combining all these factors, our conclusion is that total freight volume across the different modes, measured in million tonnes-km, will rise by an annual average of 5.0% in the 2007-2011 forecast period, a little ahead of GDP.

According to our latest estimates, the total value of transport and communications GDP will rise to US$6.34bn in nominal terms by 2011, representing 3.5% of Nigeria's GDP (a low proportion compared to the Africa region).