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The Economic Consequences of Informality in the Transport Sector
By Timi Olubiyi, PhD
The new year is here, it is my prayer that 2022 will be a profitable year for all individuals, businesses, and households. Our new year resolutions at every level must include enhancing productivity and improving performance.
Without a doubt, transportation is central to this and can be an effective indicator of performance in any economy, business, and quality of life. Simple things like getting to work, school, meetings, appointments, trade facilitation, transacting, moving cargoes, travels, and even delivery of social services such as rescues during emergencies can become extremely difficult with poor transportation.
In fact, business decision-making and access to everything for economic progress hinge strongly on effective transportation I must say.
Certainly, every nation regardless of its population size, level of development, and industrial capacity can benefit from an efficient transportation network be it road, waterways, rail, or air transport. But on the contrary transport poverty exist where inefficiency in all transportation modes is prevalent within an economy. Such is the case in many African countries and cities, including, Benin, Ethiopia, Nigeria, Uganda, Tanzania and Lusaka, Zambia, and a host of others.
In many of the developed countries, transportation plays a significant role in the ease of doing business and the government plays an integral role in the implementation and administration. A recent visit to the United Kingdom (UK) and the United Arab Emirates (UAE) strongly indicated that, where there is efficient transportation and fewer traffic congestions, the economy and businesses are positively impacted.
From my observation in the two countries, public transportation which includes buses, taxis, water ferries, trains, trams, and the metros are regulated adequately by the government and it is not completely private-sector driven, making it so efficient and reliable. Apparently as noted, where private companies are involved in the operations, it is usually on an agreed model such as the Public-Private Partnership (PPP) model.
Ironically, across many African cities particularly in my country Nigeria, the unreliability of the transport system has continued to limit access to services, business, trade facilitation, the attraction of foreign direct investments, and also in the revenue drive of the government.
The pilot region of observation is Lagos State the economic centre of Nigeria, where transport operation is largely run informally by private individuals. This makes the services undesirable because of the inefficiencies that exist due to under-regulations.
For instance, car reliance keeps compounding in the State because of poor demand responsiveness of public transports, commuters then tend to avoid the long queues and waiting hours at bus stops, and the associated risk of using public minibuses called Danfo. But the result is usually wastage of productive hours by many commuters in traffic congestions.
Sometimes, bike taxis which are usually referred to as Okada are considered for mobility. Though this trend depicts transport poverty, it is largely heightened by the informality of the public transport sector, widespread unemployment, lack of worthiness of the available transportations, lack of adequate maintenance system, giving rise to the high traffic congestion on the roads and expensive transport fares.
Basically, the over-reliance on one mode- road transport and over-exposure to informality are the issues that are mainly slowing down growths in the sector. As widely noted, private participation, with little or no government entry barrier promotes informality. Such as the operations of the non-conventional ferry on the waterways, motorized tricycles, and the Okadas and Danfos within the hinterlands. Sadly, these are the only affordable services to the poor despite the widespread insecurity and risks.
In the UK particularly in London, a mobile application (app) offers most of the information about the public transport system, and regulations in the city including fares, routes, and time of arrivals and departures. That means if you must operate government has to know, this procedure reduces informality. In both UK and UAE, the logistics and business supply chains are effective because they rely on the transportation infrastructures and strict regulations available and that reduces the cost of business operations.
For most public transportation closed-circuit television (CCTV) is installed for safety and security businesses. Transport cards are also used on most of these public transports for ease of payment, this offers a hassle-free environment for the populace, visitors, and tourists. Strict regulations also avail the government the opportunity to monitor many of these services, ensure accountability on the part of the operators, and for government to monitor service trends.
For instance, in UAE just in a year, there were around 600 million rides on public transport (in a city of 3 million population). This is an indication of the rate of conversion to the public system by visitors and residents in a region that used to be primarily private vehicle driven.
This is an indication that individuals move with ease and travel on public transportation because they are timely, affordable, and adequately available. With such a system in place, businesses can make projections and enjoy a reliable supply chain, with no uncontrollable logistic issues. With this experience, I have a strong conviction that there is a direct relationship, between the development of the transport system and the ease of doing business in any country.
In fact, without a doubt, it is easy to conclude that transportation can be a useful criterion for measuring development in a country. Because if transportation is made efficient it must impact positively on the economic development of a country and also improve the performance of the businesses in that country. It is no brainer or magic such a system can happen in Nigeria, with improved regulation, reduction of informality with sufficient investments in the sector.
Even though in Nigeria it has been a situation of hectic traffic congestion even at the ports, poorly maintained roads, overstressed railways, underutilization of the waterways, long hours of waiting to have access, inadequate infrastructure, there should be a concerted effort to raise the percentage of public transportation, expand the modes, and offer stricter regulatory regime.
For safety and security reasons, the ease of entry into the sector by informal transport operators needs to be reviewed because it appears that is majorly the issue. Government entry barriers are obstacles that can make it difficult for an individual or business to operate in the sector, such as what is available in the aviation industry.
It is important to improve policies and regulations in transport services, expand transportation networks to achieve large-scale economic growth, and modernization. Though it can be argued, effective transportation can alleviate the level of poverty in the country. Because the current chaotic congestions on the roads and in the ports are essentially aiding market failures and hindering the ease of doing business in the country which are enablers of business closures and impoverishment.
Hence, when transportation is effective and efficient, businesses will be able to make adequate projections, improve production, produce faster, reach consumers faster, attend business meetings promptly and all these stimulate the economy, create jobs, and can reduce poverty.
Truthfully, the transportation sector can offer the needed diversification of the revenue generation drive of the government. I am aware that the current public debt of the country is around N38 trillion, according to figures released by the Debt Management Office (DMO) and this is mainly due to revenue challenges. In my opinion, an effectively regulated and efficient transportation system can be revenue-yielding for the government.
In conclusion, it is also important to note that an improved transportation mode- air, rail, water networks and the expansion of road networks can increase economic productivity, cut the cost of production, and enhance the ease of doing business in the country. For thinkers, the issues mentioned above can adequately present mind-blowing opportunities, particularly for investors and businesses. To this end, businesses and individuals can have better mobility, access and livelihood. Good luck!
How may you obtain advice or further information on the article?
Dr Timi Olubiyi, an Entrepreneurship & Business Management expert with a PhD in Business Administration from Babcock University Nigeria, is a prolific investment coach, seasoned scholar, Chartered Member of the Chartered Institute for Securities & Investment (CISI), and Securities & Exchange Commission (SEC) registered capital market operator. He can be reached on the Twitter handle @drtimiolubiyi and via email: [email protected], for any questions, reactions, and comments.
By Adedapo Adesanya
The Lagos State Government has said it is ready to integrate mini and midi buses, popularly known as Korope and Danfo, into the state’s Bus Reform Initiative.
The Special Adviser to Governor Babajide Sanwo-Olu on Transportation, Mr Sola Giwa, made this known in a statement on Thursday in Lagos.
In the statement signed by the Director of Public Affairs of the ministry, Mrs Bolanle Ogunlola, the governor’s aide said the project was in the planning phase.
“The documentation process for bus operators interested in the scheme is ongoing, with 10 operators having submitted letters of intent to the state Ministry of Transportation, of which six have already been confirmed.
“All participating buses will undergo physical verification by the Vehicle Inspection Service and Motor Vehicle Administration Agency to ensure their roadworthiness and proper documentation.
“Once verified, the buses will be branded in the Lagos Metropolitan Area Transport Authority colours and will be equipped with validators,” he said.
Mr Giwa also said that a framework was being developed to integrate union dues deductions into an e- ticketing system, while addressing activities of hoodlums extorting money from transporters.
He said that the initiative would be test-run for three months before full implementation.
He said that full implementation of the reform would prevent mini buses from operating on the Lekki-Ajah Expressway.
Mr Giwa said that the buses would be deployed to inner routes and communities.
By Adedapo Adesanya
China Development Bank (CDB) has recently granted the first tranche of a loan worth €245 million ($255 million) to support the Kaduna-Kano railway in Nigeria.
This will provide crucial financial backing to ensure the smooth construction of the transportation initiative, the CDB said on Tuesday.
The railway is on the list of practical cooperation deliverables released during the third Belt and Road Forum for International Cooperation in 2023.
The project has been making steady progress so far, the CDB said, adding that going forward, it will closely coordinate with Nigerian partners to ensure the smooth disbursement of subsequent loans and effective post-loan management.
The Kaduna-Kano railway, spanning 203 kilometres in total, is set to provide a direct rail connection between Kano, an important northern city in Nigeria, and the country’s capital Abuja upon its completion, according to the CDB.
In July 2024, the Senate Committee Chairman on Land Transport, Mr Adamu Aliero reaffirmed the commitment of the National Assembly in ensuring that funds are made available for timely completion of the project.
Mr Aliero, while speaking to the press on the sidelines of the inspection at Maikarfi, Kaduna State, explained that the joint committee of both the House and also the Senate were on site to inspect the construction of a rail line between Kaduna to Kano.
“We have just taken a ride from Kano to Maikarfi. So far, we are impressed with what we have seen. We have seen a lot of dedication by the ministry and also by the contractor trying to deliver the project in time, I think 2025, they said.
“We understand that the deadline given to them is 2025 or 2026. But we are hoping that by 2025 if they sustain the tempo, they will be able to deliver. We will lobby our colleagues in the National Assembly to ensure that this project does not suffer from inadequate funding.
“There are other challenges connected with the project, particularly the funding arrangement, which we intend to discuss with the Minister of Finance, the Attorney General of the Federation, and also the Minister of Transportation,” he added.
By Timi Olubiyi, PhD
The year 2025 comes with a lot of hope and many aspirations, one of such is the increased benefits and possibilities around electric vehicles (EVs).
Even though, it is no more news and that it does not come as a surprise that the petrol and diesel-powered automobile/cars we have long been accustomed to still dominate the motoring landscape and indeed Africa with all the innovations and developments around mobility and transportation.
No doubt, the world is advancing clean and renewable energy options in particular around electric vehicles (EV) adaptations. More so the popularity of EVs is growing and the disruption is already rapid in developed economies. But what baffles the author is that Nigeria seems not to be bothered and we continuously move on with our daily tasks without referencing what happens around us globally.
It is a common knowledge that the way to go is net zero emissions by 2050 across all business units and supply chains including transportation. This is a key priority and a growing renewable energy footprint around the world but Africa is to the contrary from context observation.
From the records and with a follow up survey by the author in 2024 across the Republic of Ireland a small country with a population of less than 6 million, as it stands four out of every five homes now power their cars with 100% electric because the future of energy is electric.
Such acceptance can promote energy security, zero-emission, reduced energy cost and sustainable future easily without any economic concerns. Is this achievable in Nigeria in the nearest future? Achieving net-zero emissions in Africa presents significant challenge due to factors like limited access to reliable electricity, reliance on traditional fuels, and underdeveloped and old infrastructure.
In Nigeria and indeed most countries in Africa transportation sector is one of the largest contributors to global carbon emissions, with traditional gasoline(fuel) and diesel vehicles being primary sources of air pollution and environmental degradation.
In response to these concerns, the rise of electric vehicles (EVs) could represent a significant shift towards more sustainable and eco-friendly transportation options yet we are at the infant stage of adoption on the continent. As the world grapples with climate change and the depletion of fossil fuels, electric vehicles offer a promising solution to reduce pollution, enhance energy efficiency, and promote sustainability.
Therefore, this piece presents key benefits, and the need to explore policy options for future potential of electric vehicles in Nigeria and indeed on the continent of Africa.
From observation, one of the most compelling benefit of wide spread usage of electric vehicles is their environmental impact. Unlike traditional vehicles that run on internal combustion engines, EVs are powered by electricity stored in batteries, which means they produce zero emissions. This can significantly reduce air pollution, particularly in urban areas like Lagos, Port Harcourt, Abuja and the likes where traffic congestion and poor air quality are major concerns.
By shifting from gasoline(fuel) to electricity, EVs can help reduce the number of harmful gases, such as carbon dioxide (CO2), nitrogen oxides (NOx), and particulate matter, which are linked to health challenges and serios climate change. Emissions, primarily carbon dioxide is a key driver of climate change. The gas is usually trap heat in the atmosphere gradually warming up the planet and causing intense heat wave and disruption of the ecosystems.
So, to reduce the emissions of CO2 from combustion engines, working by burning fuel and overheating with high engine noise, electric vehicles are desirable. Because they more energy-efficient compared to their gasoline-powered counterparts, more so, EVs are with less maintenance culture and repair expectations are low.
In fact, EVs are more cost-effective in the long run, despite high initial purchase price because over time the operational costs of running are lower. Believe it or not, EVs have fewer moving parts compared to conventional cars, where there is no need for oil changes, oil filters and radiator or coolants.
In fact, the brake systems tend to last longer because of regenerative braking technology, a feature common in many electric vehicles. The cost of electricity for charging is also typically lower than the cost of the usual fuel or diesel, further reducing the lifetime costs of owning an EV.
With all the aforementioned the future of electric vehicles looks promising but technological advancements in battery storage, such as solid-state batteries and faster-charging technologies, are expected to improve to enhance the overall EVs performance, its affordability, and convenience.
As the global demand for clean energy grows globally, it is the hope of the author that governments in Africa in particular Nigeria will step up their efforts to encourage the adoption of electric vehicles. Though effort on Compressed Natural Gas (CNG) promotion is high in Nigeria in recent times which is a clear alternative to high cost of fuel currently but the real global standard and future of transportation is electric.
Many countries have now introduced stricter emissions regulations, offering financial incentives such as tax credits, rebates, and subsidies to make EVs more accessible to consumers Nigeria should not be an exemption, our government can also initiate similar policies.
Additionally, several governments have set ambitious goals to phase out the sale of new gasoline and diesel vehicles in favor of zero-emission models EVs within the next few decades, Africa can also start promoting this.
In addition, businesses and investments drive can be channeled into this developing critical area. Such as investment in home charging solutions, public charging infrastructure,wide spread charging stations, encouraging car manufacturers and private companies to set up assembling plants in Africa countries.
Investing inhome charging solutions, will make it easier for individuals to charge their vehicles overnight. Theseinvestment options and widespread infrastructure will help reduce range anxiety and make electric vehicles a more viable option for everyday consumers in Africa.
While challenges such as charging infrastructure, battery costs, and range limitations remain, ongoing advancements in technology, along with supportive policies and growing consumer demand, are driving the transition toward a cleaner, more sustainable transportation systemthios can also happen in Africa.
As electric vehicles become more affordable and accessible, they have the potential to significantly reduce our reliance on fossil fuels, improve air quality, and create a more sustainable future for generations to come. Good luck!
How may you obtain advice or further information on the article?
Dr Timi Olubiyi, an Entrepreneurship & Business Management expert with a PhD in Business Administration from Babcock University, Nigeria. A prolific investment coach, adviser, author, columnist, seasoned scholar, Member of the Institute of Directors, Chartered Member of the Chartered Institute for Securities & Investment (CISI), and Securities & Exchange Commission (SEC) registered capital market operator. He can be reached on the Twitter handle @drtimiolubiyi and via email: [email protected], for any questions, reactions, and comments.
The opinions expressed in this article are those of the author- Dr Timi Olubiyi and do not necessarily reflect the opinions of others.
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