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Tuesday, August 9, 2016

How to start a profitable Interstate Road Transport Service in Nigeria

Interstate road transport service involves transporting people and products/cargo from one part of Nigeria to the other and this business offers a lot of growth for businesses which are well run as the business creates opportunities to expand by between 50 to 300% per annum depending on the route and how efficiently the business is run. From my research I’ve discovered that a road transport service than grow its fleet by 50% every 4 to 12 months.
A road transport service in Nigeria is in high demand because thousands of Nigerians use the road as the main means of moving goods and services from one part of the country to another.

An estimated 3.3 million people travel daily from one part of Nigeria to other via interstate transport services. The most popular road routes are; Lagos to Abuja, Lagos to Port Harcourt, Kano to Abuja, Lagos to Benin, Abuja to Enugu, Lagos to Kano, Lagos to Onitsha and Aba to Port Harcourt which record the highest volume of road travelers daily. The most common reason people travel is for business as traders to buy goods from one part of the country where it is cheaper to resell in another part. For instance people travel from Lagos to Kano or Kaduna to buy Tomatoes and Onions to resell in Lagos at Mile 12 market, on the other hand many people travel from Abuja to Lagos to buy consumer goods such as clothing and other fashion items, stationery, mobile phones, computer accessories etc to resell to residents or Abuja and Environs.

Another reason people travel albeit occasionally is for leisure or official trips. For instance NYSC corps members being mobilized to camp, civil servants on official trips, business executives on marketing assignments to name a few. In addition to these are people who travel for holidays such as Sallah, Easter and Xmas. We won’t also forget people who travel for weddings, burials, coronations etc.

Opportunities in Road Transport Service in Nigeria

There are many opportunities in interstate road transport service in Nigeria and this is something a few companies have taken advantage of. First consider the huge population of students in various secondary and tertiary institutions in the country. That segment alone comprising over 4 million students is worth billions of Naira per annum. Second opportunity as earlier mentioned are traders who number over 6 million who travel even more frequently. Thirdly, millions of people need to send documents and goods at short notice from one part of the country to the other. This has led to many road transport companies setting up logistics and courier services to meet this demand. Some successful companies in this business include; Ifesinachi Transport services ltd, Young Shall Grow, God is Good, Peace Mass Transit, Edegbe Line and Chisco Transport Services to name a few. So if you intend going into this business it is good to mention a few areas you can specialize in;

Short trips - These are trips that last less than 5 hours and usually involves moving people and goods from one state to a neighbouring state such as from Abuja to Jos, Lagos to Benin, Lagos to Ibadan or Abuja to Kaduna. Because these trips are quick it is possible to use one bus for two trips a day. They are usually less expensive and prices go from N1,000 to N3,000 depending on the distance and volume of traffic on the trip.

Long trips – These are trips which last for more than 5 hours and are usually between distant states and cities such as Abuja in North Central region to Lagos which is in the South West or Enugu to Kano, Lagos to Port Harcourt, Abuja to Uyo etc. They are usually expensive and price ranges from N4,000 to N8,000 depending on the location.

Cargo Movement – This involves movement of both goods and items from one part of the country to another. The amount charged for this service depends on the weight and the distance of the trip.

Courier Services – this involves express movement of parcels and items on short notice usually less than 72 hours. They are more expensive than cargo which can take longer than 72 hours.
Why this business keeps growing annually
·         Large population of local business travelers
·         High cost of flight
·         Insufficient Airport facilities
·         Fast growing population
·         The poor state of the Nigerian railway system

Challenges in Road Transport Service
However this business opportunity has many challenges which could negatively affect sales, increase the cost, reduce profitability and lead to loss of vehicles and even manpower. Some of these challenges are;
      High Road Crashes – about 0.03% accident rate which makes Nigerian roads some of the most notorious for road crashes. A single crash can negatively affect the success of a small transport company and even lead to it closing down
·         Armed robbery – Highway Armed robberies are very common on some routes especially at nights and these has led to loss of lives and property
·         Fuel price crisis – which often leads to low patronage and hike in transport fares
·         Poor Road Network – this can reduce the efficiency rate of transport companies as they can only do fewer trips whereas with improved road network there could be more trips which means more income
·         Sharp Practices by workers – some drivers and cashiers can be very dishonest they could secretly load passengers and cargo on some vehicles and not remit the money to the company. This is even worse when those involved work as a syndicate.
·         Activities of touts – touts who harass drivers for illegal tolls also constitute a threat to income and sometimes security personnel are also involved in this
·         Scarcity of quality drivers – good drivers who have been properly trained and have very good experience in road safety management and defensive driving are in short supply which is bad for business because one bad driver can cause the company to lose a lot of money.

Legal and Financial Requirements to set up a road interstate transport company in Nigeria
·         Registration with CAC
·         Registration with NURTW and NARTO
·         Accreditation by FRSC as a mass transit service
·         1 NO of 14 seater bus in very good working condition – N1,200,000
·         An office location – N300,000
·         Furniture and stationery – N120,000
·         3 months’ salary for (1 Driver, 1 Cashier and 1 Manager) – N360,000
·         Insurance – N120,000
·         Contingency – N300,000
·         Total – N1,800,000