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By Adeola Jayeola
Supply chain disruptions are a recurrent phenomenon that persistently challenges market stability and economic resilience of global economies. They are formidable forces that demand global attention and bold action. However, the solutions do not entirely rest on advanced economies like the United States, Some of the most innovative solutions have emerged from unstable economies like Nigeria, one forced to adapt to issues like erratic exchange rates, high inflationary pressures, unpredictable policy shifts, fuel shortages, infrastructure deficits and scarcity, all of which culminate in frequent disruptions to supply-chain operations in the country. Drawing on my professional experience managing large scale logistics operations in Nigeria, this article explains how Nigerian businesses’ form resilience in adversity, and stresses lessons global supply chain can learn through innovation and proactive leadership, especially in this era of climate volatility and geopolitical risks.
Introduction
Vulnerable economies are marked by uncertainties. Families and businesses alike must deal with erratic macroeconomic conditions, unreliable currency values, and poor infrastructure. I have weathered related storms managing logistics operations in Nigeria Breweries. Navigating challenges like changing foreign-exchange policy, inflation caused high production costs, port delays, insecurity, power grid failures, and bad roads, have reinforced my values in foresight, collaboration, integrity and discipline
Understanding Nigeria’s Economic Drivers
Nigeria is plagued with numerous economic issues including shocks from a high exchange rate which adversely affect industrial output in the country, particularly in the short run even as inflation impacts productivity. It is widely known that when currency weakens sharply, the costs of food and other input rise, severely pressurizing supply chain costs”
Another study captures the inflation, exchange rate, interest rate, and GDP vulnerability in Nigeria, stating that about 90% of the subsectors of the economy are sensitive to these vulnerabilities. This volatile exchange rate negatively impacts trade balance, which is especially felt by manufacturers who source and rely on foreign raw materials. AIMS Press
Regulatory and foreign exchange policy reforms such as the automation of foreign exchange trades and the naira float aimed at stabilizing the macroeconomy affect importers, manufacturers, and logistics providers in the short run. Reuters+1
One challenge notoriously associated with Nigeria is its unreliable and frequent outages, which put some strain and indirect costs on its logistics operations, cold chain systems, manufacturing, and warehousing. It was recently reported by Reuters that an estimated US$29 billion is lost annually to these grid failures. Reuters
As Nigeria grapple with the challenges enumerated above, it also faces a darker challenge – “wealth in the midst of waste.” The landfills at urban centers are repugnant and a threat to the health and growth of the country. Speaking of resilience in adversity, urban dwellers out of survival instincts turned to sourcing wealth from these seemingly “wastelands,” becoming “waste pickers,” a move that have been found to be highly rewarding, and has been organized into formal entities in some parts of the country.
Measurable Impact
In response to the erratic changes in foreign exchange prevalent in 2023 and 2024, there was a massive shift from importing raw materials to local sourcing. Companies like Chemical and Allied Products (CAP) shifted to sourcing 90% of its calcium carbonate locally. The result was a 60% decrease in production costs, a reduced dependence on imports and protection from foreign exchange instabilities.
With inflation spiraling out of control into rates as high as 30–35% at times, and a resultant naira depreciation, the Central Bank of Nigeria increased its benchmark interest rate to 22.75% to combat inflation and foreign exchange pressures. This move, though painful, helped stabilize some supply chain cost expectations.
Lessons for Global Supply Chains Through My Professional Lens
Sequel to my lived experience leading logistics and sales operations in Nigeria, the strategies below which have proven vital in navigating uncertainties and building supply chain resilience in Nigeria can be employed in other fragile economies:
Since many vulnerable economies face risks similar to Nigeria’s, localized sourcing should be upheld over reliance on imports where possible. This provides an easy bypass of foreign exchange risks, with a high potential to significantly reduce production costs.
Contracts negotiation should be actively pursued in local currency, or a fixed foreign exchange rate.
This would limit the exposure to the erratic nature of foreign exchange rates. Businesses should also strive to maintain foreign exchange reserves for rainy days. This shows foresight and discipline which are both crucial.
Inventory levels should be tracked using dashboards, vis-à-vis delivery delays and custom clearance times. The Lead time arising from this can then be factored into making suitably informed future decisions.
Vulnerable economies can leverage informal market intelligence, as opposed to relying on formal dashboards. In my earlier role as a sales executive in Nigeria’s fragmented retail supply chains, I got real-time updates from local shopkeepers and transporters, which provided early warnings on disruptions like flooding, protests, or road closures. A crowd-sourced data platform integrates employees, drivers and community inputs, and if backed with respect, good relationship and integrity, would help with the early detection of shocks than formal reports.
Global firms should team up with local partners who understand regulatory and infrastructure challenges, so that they can be adequately guided on alternative pathways to standard operating procedures that have been disrupted. This partnership with stakeholders, suppliers, government agencies, is a collaborative and respectful way to work.
Ensuring transparency in reporting cost overruns and delays for prompt problem resolution. Accountability and integrity are “must-have” values when working with people.
Global economies can build resilience by implementing process improvements through revised standard operating procedures and updated performance metrics (KPIs) that will flag issues early.
Global supply networks are more shock absorbent with flexible operational models in place. Their agility to plan for alternative routes, adaptable warehouse, redundancy and more counts towards this.
There should be zero reliance on the power grid of any economy struggling with regular power outages. Forward-looking businesses should strive to integrate alternative sources of power like solar, micro-grids and hybrid fleets into their operations. It is even more important for advanced economies like the United States whose warehouses and cold-chain operators to adopt this micro-power redundancy, as climate shocks and natural disasters increasingly strain the US grids.
Global supply chain, particularly the advanced economies can model Nigeria’s decentralized micro entrepreneurship in recycling household and industrial wastes. A good number of the world’s fast-depreciating natural resources can be found housed within these wastes, especially in landfills, and salvaged. This would potentially reduce landfills across economies, pave the way for innovations, reduce import dependency, unemployment opportunities, combat climate change and resultant natural disasters, and support the sustainability development goals of the World Health Organization
Conclusion
Building supply chain resilience requires foresight, creativity, and values honed in adversity. Nigeria’s recent shifts in sourcing strategies, monetary policy, and operational practices offer lessons for supply chain professionals globally. By integrating these lessons from Nigeria using data informed strategy and values-driven leadership, global supply chain system can become not only efficient but also adaptive, inclusive, and sustainable.
References
Okafor, T., Adegbite, E., & Abiola, B. (2018). Exchange Rate Fluctuations, Inflation and Industrial Output in Nigeria. IJSCM. Retrieved on December 21, 2024. https://www.ocerint.org/intcess18_e-publication/papers/394.pdf
Nuhu, M., & Co-authors. (2021). Impact of Exchange Rate Volatility on Inflation in Nigeria. Journal of Contemporary Research in Business, Economics and Finance. Retrieved on December 21, 2024. https://www.researchgate.net/publication/350125723_Impact_of_Exchange_Rate_Volatility_on_Inflation_in_Nigeria
Oyadeyi, O. O. (2024). Macroeconomic Uncertainty and Sectoral Output in Nigeria. Economies. Retrieved on December 21, 2024. https://www.mdpi.com/2227-7099/12/11/304
Anyaogu I.(2024) Reuters. “Why Nigeria’s power grid is failing” Retrieved on December 21, 2024. https://www.reuters.com/world/africa/why-nigerias-power-grid-is-failing-2024-12-11/
World Bank. (2024). Putting Waste to Work in a Circular Economy. Retrieved on December 21, 2024. https://thedocs.worldbank.org/en/doc/f0ccf3267e94d9be1789dba8d7d01eab-0460012024/original/S4YE-Knowledge-Brief-Putting-Waste-to-Work-in-a-Circular-Economy-May-13-1.pdf
White House Council of Economic Advisers. (2021). Building Resilient Supply Chains, Revitalizing American Manufacturing. Retrieved on December 21, 2024. https://bidenwhitehouse.archives.gov/wp-content/uploads/2021/06/100-day-supply-chain-review-report.pdf
