Transportation business in Nigeria is still growing with the increase in population which is estimated at about 180,000 million as at 2018. Going into transport business in Nigeria is a viable proposition since the market is there for you and beside, those in the business already are racking handsome profit.
What makes the business economically viable is that the demand by commercial bus users surpass the supply. Even car owners use commercial transport so it is safe to say that up to 70% if the Nigerian population use public transport.
Before I go into how to start a transportation business, I will first of all show you the types of transportation business in Nigeria today. They are many and varied and different entrepreneurs choose different types of transportation business because of their interest and experience.
Types of transportation business
1. Motor cycling (Okada): This is the use of motor cycle to carry passengers within a town, city and villages. Motor bike, popularly known as okada is used to carry one or two passengers at a time, though some states discourage carrying two passengers. But the days of using motor cycle as a means of transportation is numbered since some states have banned the use of okada as a means of transport, particularly in the cities, other states are likely to follow suit in due course.
2. Tri-cycling (keke napep): This is an improvement to motor cycle and officially meant to carry three passengers, some drivers carry four passengers, even others in some states carry five passengers. Keke napep is in vogue and it is likely to be used as a means of transportation in the foreseeable future. Some state government have proposed replacing motor cycle with keke napep.
3. Commercial luxury bus and mini-bus : These are used for both town and inter-city services to carry passengers. Workers that commute to work or others travelling outside the state use this means.
4. Car town service (taxi): This is also used to convey passengers within and out of the state. It is a more secure means of transport than the unregistered and unpainted kabu-kabu because each owner registers the car with the state government agency . There is also another form of car service known as kabu-kabu, also used to carry passenger but for a short distance journey.
5. Haulage transport service: This is the use of different types of automobile to carry goods for a charge. Different types of vehicles include, tanker, trailer, tipper, etc. are used to convey different kinds of goods.
6. Offer hire purchase services: This type of business is spreading to all the states of the federation. It is a new way to transportation business in which you get regular income, more or less, it is a guaranteed income. It works in this way: you buy whatever type of would be commercial vehicle at a particular price and hire them out to different type of drivers at higher prices. The driver will pay for the price agreed installmentally. For example, an entrepreneur buys ten tri-cycle at ₦500,000 each and hire each one out at ₦700,000 each with ten months instalment of ₦70,000 each month, after which the hirer becomes the owner. So with the instalment payment of ₦70,000 per month, the total amount payable at the end of the 10th month is ₦700,000. Assuming the entrepreneur received all the instalments, he makes ₦200,000 from each of the tri-cycle. It is a cool business, is it not?
7. Other classes of transportation business such as the use of aircraft, train, ship or canoe and pipeline are outside the purview of this article. Since the article is designed for an average Nigerian who want to be an entrepreneur as a transporter.
Before you start…
To make a headway and be highly successful in transportation business in Nigeria, you must be aware of the following:
- You must as an entrepreneur and have a reasonable knowledge as a driver and/ or mechanic. The reason for this is simple, the average commercial driver is dishonest. He will tell you lies about police arrest today, the next day it is about the vehicle breaking down, all in an attempt to make extra money . Sometimes he would absent himself from duty with the excuse he is feeling unwell, would you allow your vehicle to be idle for how many days before he reports back to duty?
- You must pay close attention to the activities of the drivers, monitor their trips over time before you can have some level of confidence in them. You must investigate what is the average daily costs of running transportation business and the average revenue that is feasible and possible before you agree with the driver how much he would deliver on daily or weekly basis.
- Have a reasonable idea what action of the driver constitute an offence for which he can be arrested as well as know the route of your drivers. In fact study the traffic laws of the state in which you are operating.
Steps to start a transportation business
Here is a breakdown of how to start a successful transport business, concentrating more on commercial buses.
- Decide on the type of transportation business you want to carry out
- Choose your location and the routes that are lucrative
- Obtain your vehicle either through lease, hire purchase or an outright buy
- Driving it yourself
- Engaging a professional driver
- Grow your transportation business
Below are the steps in details:
1. Decide on the type of transportation business you want to carry out
If it is tri-cycling business or Okada business, they are slightly different from commercial bus business. The capital investment and the regular vehicle maintenance and running costs is much higher than tri-cycling business, however the daily return is also different.
2. Choose your location and the routes that are lucrative
Do your research properly to make sure your location is best suited for the transportation business you want to operate in terms of the financial demands of the Area Boys and the State Government.. I would recommend that you start small and acquire good experience before you grow big.
3. Obtain your vehicle either through lease, hire purchase or an outright buy
You must register the vehicle with the licensing authority, obtain vehicle insurance and other necessary documentation that will enable you to operate in your location without hindrance. You must also belong to the National Association of Road Transport Workers.
- Nigerian Association of Road Transport Owners (NARTO)
- Road Transport Employers Association of Nigeria (RTEAN)
- National Union of Road Transport Workers (NURTW)
- National Association of Government Approved Freight Forwarders (NAGAFF)
4. Driving it yourself
My advice at this stage is that you should be the professional driver to drive your first commercial bus or tri-cycle since at this stage you have one vehicle, you will manage it more prudently than the best driver.
So you make sure you have a driving licence and be a member of the transport union. If you drive a commercial vehicle for a year, you are no longer a stranger in the transportation business and you stand to gain so much when eventually you buy your second vehicle and then engage a professional driver.
5. Engaging a professional driver
If you have other businesses you are running, engage a professional driver and negotiate favourable memorandum of understanding between you and your driver. These may include: the return the driver must deliver every day/week and what happens if the driver does not meet the agreed return obligations.
The amount agreed with the driver is sometimes dependent upon the location, type of vehicle as well as size of vehicle. For example, an entrepreneur in Ibadan operating commercial transport service and using a professional driver would demand far less return from his driver than his counterpart operating in Lagos state.
Don’t forget that the professional driver must be familiar with the vehicle engine he is going to drive and other vehicle peripherals, this is necessary so that the driver will always be able to drive the vehicle to the mechanic workshop whenever the unexpected happens, i.e. vehicle break down.
6. Grow your transportation business
Plough back your profit to your business and buy more vehicles. It is only by prudent management of your resources and hard work of your transport business that you become successful. You should also consider option of inter state transport business in Nigeria.
Nothing in this world is easy to handle, not even transportation business, especially when you want to be successful and expand quickly. Be prudent and careful: avoid the problems with the police by obtaining the right vehicle license, renew it together with the insurance certificate and other dues and levies when they are due. Also avoid the problems of LASMA and other transport unions and possibly the Area Boys.
This a a basic business plan for transportation business in Nigeria. You should do your feasibility study on transportation business in Nigeria depending on the area you want to operate, then had with this knowledge here. Good luck.
If you are looking for other ideas, check out our page: Business ideas