Business Intelligence

BUSINESS INTELLIGENCE
Nigerian courier firms want independence - DHL Nigeria

Published: 09-MAY-07

The cost of doing business in Nigeria is high, how have you been able to sustain your global reputation in the face of high cost of executing your contracts?

Well, itís been an extremely competitive industry in Nigeria. There are more than a hundred and forty, I think, registered courier companies (or Express companies). We (DHL) saw how well business is here, apart from express we have a freight business, we have a logistic business and we have DHL Nigeria Aircraft coming in. And in all these areas, particularly in the freight business and the express business, we have discovered that courier business is very competitive here. It is also very price-sensitive. Itís like a continual battle to convince our customers that our relatively higher prices, they are when compared with those of most of the other courier companies, are worth the extra. But I think weíre succeeding, our results show weíre succeeding. You know competition is good.

Your business depends greatly on an efficient logistic system and yet logistics-related problems are prevalent hereÖhow do you manage yours?

Well I am the Managing Director of the courier business. Although, Iím the Director of the aviation business as well, but I would restrict my comments to my end. I know a bit about the freight business but not too much. Iím also a long time member of the Nigerian Air Courier Association and a past chairman. So Iíll talk a little bit about the industry. I think the main issue is what I will call infrastructural problems in the economy. That is the problem with the courier industry. Weíre still suffering from leftover attitudes from the 1950s and this is reflected in legislation. Courier companies were a threat to the national post office and as a result it was decided that they needed to be regulated and restrained by the post office. Whereas everybody knows that the post office just improved recently, its no longer as good as it used to be. Again, we all know that NIPOST (the Nigerian Postal Service) has no expertise to regulate anybody. So, you can imagine that the courier industry is to be legally regulated by a department in NIPOST, thatís one constraint.

Another thing thatís a part and parcel of that oldfashioned attitude is the restrictions on the weights that courier companies can carry. This doesnít exist in many other countries. It is illegal to bring in a shipment of more than 20 kilos as a courier company in Nigeria. Whereas in most countries there arenít any weight restrictions. Basically everybody knows that courier, because itís faster basically, is even more expensive than freight. And most of the countries that have a separate clearance procedure for courier and importing freight donít have this artificial weight restriction. I think the government, and in particular NIPOST, recognises they are anomalies and they need to be changed and we are lobbying as a courier organisation to get that change. We want it to get modernised, but these things take a long time. I think thatís the thing thatís preventing the courier industryís advance.

So, if these changes take place, what do you think will be the result?

I think it will be generally better, but it may not necessarily be what the industry wants. Basically, the industry wants independence. I am not sure if it is necessary to have a regulator for the courier sector. Well, Iím not convinced because itís necessary because itís a very small industry. For example, the total turnover of all the estimated 143 courier companies in Nigeria is about N708bn, which is about 1/5th of the turnover of Nigerian Breweries. So why would you need a regulator for the courier industry? However people seem to feel itís necessary, but we want an independent one.

Is DHL Nigeria fully owned by the international company?

It only just became fully owned by them. Nigerian shareholders when the company was set out by law had to have 60 percent minimum. That was changed I think in 1997 that no local shareholder was obligatory. So since 1997, we gradually bought out the Nigerian shareholders. So itís now 100 percent owned by the international company.

How big are your operations?

We have about 80 officers. Half of them are our own officers and the other half are our agents. Then we have those who are called Ďexclusive agents,í their offices look like DHL offices but in fact itís their own businesses. In all, we have about a thousand people employed in our courier business. Of course quite a number of those third party agentsí staff. In terms of geographical strength, something like 50 percent of our outlets are in the West, especially in the Ibadan and Lagos axes. We have 25 percent in the East ó Port Harcourt, Enugu, Abia, Warri, Onitsha, and then the rest is in the North ó Abuja, Jos, Kano, Maiduguri. We have a broad geographical spread. We have plans to increase probably by another ten offices. We have to look at what the stakes of business is in these places.

How competitive has the Nigerian market been? Is it a lucrative business?

Itís lucrative, but it is because itís so competitive. It isnít necessarily lucrative for everybody. In our case weíve had about one-third of the Nigerian market in domestic shipment, thatís domestic express shipping and about half or 50 percent of the international express shipment. We used to believe that we could get international shipment from home business without providing the domestic service but we no longer believe that. Weíre actively promoting our domestic service because we realise that unless we can give a broad service domestically and internationally, itís not realistic to think we can get to the relatively high margin international shipment and not be able to deliver domestically. So we aim to increase our share in domestic market.

I do remember that a while ago, you were the official courier company for some embassies?

We still are. You remember we used to handle the UK visa thing? But we donít do that anymore.

So why did you stop doing the visa thing?

Well, originally, the British High Commission wanted to outsource, to some extent anyway, their busy activities. The High Commission recognised the stress outside, the fuel price hikes, and all, so we were contracted to provide these services. The idea is for people to apply for visas from our offices and it will then be sent to the High Commission. So there wonít be much of this problem with queuing. After a while, the British high commission wanted to take a step further and outsource visa procurement. We bid for that along with four or five other companies and we didnít get it for various reasons. Later, the people who won asked us to provide the logistics for them but we didnít want to do that because we thought that it was a risk. We didnít know if it would be right, if something went wrong, they would blame DHL. We also didnít want to sub-contract with a company that we didnít know anything about, so we declined to sub-contract the logistics with the company who won it. But we still do some work for the High Commission.

After that it goes to the High Commission?

Yes. They even have high commission staff in there. Weíll see how it works. We are still interested in bidding when it comes up again.

Whatís the relationship between big companies like yours and the smaller courier firms?

We provide a service for these small companies. Most of the courier companies in Nigeria are small and they donít have an international network. So the only way they can accept shipment from somewhere internationally is to get us to help them do it. So, we collaborate.

-Business in Africa Magazine (West Africa)



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