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The transport sector plays a key role in the economic development of a country as the mobility of people and goods creates economic opportunities. There is a relationship between investments in transport technology and economic growth. Adequate transport infrastructure and highly connected networks are commonly associated with high levels of development. Effective transport systems are essential for the profitability of businesses. Logistics, such as transport and storage, account for about 10–15% of the final cost of
production of many Nigerian companies and the quality of transport services also has a major impact on people’s quality of life.
The transport and storage sector in Nigeria directly employs c.10 million people and accounts for about 1.48% of the country’s gross domestic product (GDP). Despite its importance, numerous challenges have stunted the growth of the sector in recent times. For road transport, insecurity happens to be a major factor challenging the growth of the sub sector. The incessant attacks on major highways and rail networks continue to hamper growth by discouraging road transport. The poor road infrastructure also makes road travel unsafe. According to a World Bank report, 87% of Nigeria’s rural road network of about 200,000km are in a deplorable state.
For air travel, airline operators have in recent times complained about the scarcity and rising cost of aviation fuel (which accounts for c.40% of their operational costs), with the attendant impact on cost of operations and conditions of service. Beyond the high cost of aviation fuel, the current acute shortage of FX is also a big problem for airline operators. For domestic airlines, carrying out operational activities such as servicing their aircrafts, has become almost impossible amidst the acute scarcity of forex and foreign airlines threatened to pull out last year over the inability to repatriate accumulated funds from tickets sold in naira, forcing the Central Bank of Nigeria to release FX to settle ticket sales owed. In our view, resolving the current issues facing the sector is essential for sustainable growth of many other sectors and the economy.
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CSL Research
