One of Nigeria’s weakest links on its development is lack of logistics. Without efficient logistics, the largest component of the nation’s GDP (agriculture) will continue to struggle. As nations transmute into the digital space, with ecommerce displacing and distorting old empires (superstores, mega stores), the promise of ecommerce in Nigeria remains distant and unlockable. Amazon directly and indirectly have knocked out many physical stores (Sears, BBB, Radioshack, etc) as commerce moves online.
Yet, without the United States Postal Service (USPS), the ascension of Amazon will not have happened. The USPS is the operating system which enables it to serve rural America. Yes, it picks those packages and then drops them in the nearest local USPS, for nothing, which must now do the loss-making deliveries to the rural homes.
America wants it that way as it wants rural and urban America to operate on the same frequency. Any major change, rural America may not afford those online goodies because of high distribution and delivery costs. So, Amazon and other ecommerce firms rely on that “discount” to scale.
Tekedia Mini-MBA edition 16 (Feb 10 – May 3, 2025) opens registrations; register today for early bird discounts.
Tekedia AI in Business Masterclass opens registrations here.
Join Tekedia Capital Syndicate and invest in Africa’s finest startups here.
In Nigeria, we have not picked up that message that supply chain is commerce, and without that postal service, many sectors fade. The question is this: if NIPOST (Nigerian postal service) has failed, can regional economies come together and cement postal delivery partnerships since only intra-state may not be viable. Yes, build Southeast POST which covers the five states in the country, and enable the awakening of the comatose sectors! Northeast, Southwest, etc can do the same and later, they can integrate.
What do you think since NIPOST seems irredeemable?
NIPOST’s problem is not recording losses, but the fact that it is not working. Most postal systems around the world these days are strategic loss-makers. Yes, “the United States Postal Service (USPS) announced an annual loss of $8.8 billion for fiscal year 2019, more than double its annual loss for FY18. This loss, the largest on record, marks the 13th consecutive year the USPS has finished in the red.” Yet, if you examine the period when the USPS lost this amount of money, businesses actually expanded in the core domains it served. Largely, USPS losing money was not necessarily a bad thing as its functions were critical for most of those companies to thrive.
Possibly, for every $10 billion lost by the U.S. Post, it could be adding excess new $200 billion of value in the economy. For the United States, in general, that is a net positive. The USPS saw marginally revenue increase despite the match to global digitization, implying that it was powering core elements of that new redesign. Simply, Nigeria needs to decide the role NIPOST will play in our economy and that means reforming it. What we have now does not make sense.
Remember: NIPOST was not out-competed by anyone and changes in communication – indeed email – was not the fatal blow. NIPOST simply gave up because Nigeria failed to reform its systems. That one company is a regulator and an operator, taxing its competitors, makes no sense in a modern market system. Operators are expected to contribute 2% of their annual revenue to NIPOST via the postal fund which does nothing of value to Nigerians. Which company can survive in a tight margin business like courier and logistics?
Comment on Feed
Comment 1: Thanks Prof for highlighting this point.
The critical role supply chain play in driving all sectors of the economy is often neglected because it works smoothly at the background to make things happen hence often taken for granted.
Probably when the inputs and/or margins created through supply chain efficiency (and effectiveness) are always quantified in commercial terms (gains or lossed, whethe actual or projected), it will enable Governments and CEOs understand the value of compounding these Supply chain values.
Imagine trucks driving from Kano to Port Harcourt filled with agricultural products but return empty or half empty with people at the back. With appropriate planning that truck can deliver multiple values across towns via making minor stops to deliver and pick up goods for the next town.
With NIPOST now alomst comatose, the Government should look for avenues to outsource the use of NIPOST infrastructure to private sector actors that will add more value to the economy in the interest of the people and economy.
Thanks again for highlighting this point.
---
Register for Tekedia Mini-MBA (Feb 10 - May 3, 2025), and join Prof Ndubuisi Ekekwe and our global faculty; click here.
Innoson Vehicle Manufacturing (IVM) is already on the ground, it can be tasked with manufacturing all the vehicles needed, the trucks and smaller vehicles for last mile delivery; I didn’t say some of the vehicles, but rather all the vehicles! This will create the scale and incentive needed for the value chain, the exchange centres and rural roads can be integrated, a state like Anambra has almost its communities connected by decent roads already, you just need to fix the bad portions.
Well, the scale is sizable, what needs to be figured out is the structure and framework, the latter would account for ‘loss distribution’ mechanism, so that volume can trump premium charges.
Nothing says it cannot be done, Southsouth is a stone throw from there, so the expansion can easily cover it, and Innoson will continue to supply the machines that power logistics…
It is not angels that build viable economies, humans do!