CHAPTER ONE
INTRODUCTION
BACKGROUND OF THE STUDY
The term freight rate, according to Ndikom (2006), refers to the payment made to the carrier for the carriage and arrival of goods in commercial condition, ready to be given to the merchant. Maritime or shipping services are typically priced in conjunction with terrestrial modes of transportation and are subject to supply and demand forces. Furthermore, the demand and supply of international sea-transport services are derived primarily from the demand and supply of commodities (goods) transported by sea, and are thus influenced by elasticity (price changes and demand-supply variations) for those commodities. During normal times, the cost of transportation in proportion to market pricing is a significant factor impacting the exact elasticity of demand for shipping services. As a result, inflation is the rule of the day for imported commodities in Nigeria, resulting in a steady increase in the price of imported goods. According to experts, there is a direct relationship between market prices of imported goods and the shipping (transport cost) freight rate, with a positive change (upward increase) in liner freight rate resulting in an upward increase in the costs of imported goods and a negative change (downward decrease) in liner freight rate resulting in a downward (decrease) change in prices of imported products in Nigeria. However, the frequency of positive adjustments (rises) in liner freight rates, along with corresponding increases in market pricing of imported goods, has been so high over the years. According to Ndikom (2006), the continued rise in liner freight rates in Sub-Saharan African countries can be attributed to a number of factors, including: high port tariffs and dues charged to ship owners by Government Agencies and terminal operators in ports, high ship turn-round time (STRT) in Sub-African ports necessitating the payment of demurrage by ships; delays in cargo clearing processes by customs and other government agencies in ports, and a lack of national shipp As a result, even in the face of port changes that aim to alleviate the majority of the issues.
Freight rate, insurance, import duty, and handling charges, according to Okon (2006), are major factors in determining the value of various export and import commodities, as well as influencing demand for such commodities in the import market. This basically means that the shipping freight rate is an element that raises the cost of items, and hence the prices of export and import commodities in the market, as well as the main vector of our commercial exchange, because the majority of Nigerian international trade is carried by sea. Hampton,1989). The research, on the other hand, will aim to assess.
the relationship between the rate of liner freight and the market price of
Nigerians consume foreign goods.
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