• Wednesday, July 24, 2024
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Nestle, four others’ transport costs hit N43bn in six months

Nigeria’s logistics sector seeks tech, policies, infrastructure overhaul

The total transportation cost incurred by five fast-moving consumer goods (FMCG) companies in the country rose by 27 percent in the first half of 2022 compared to the same period last year, a BusinessDay analysis shows.

The companies are Unilever Nigeria Plc, Nestle Nigeria Plc, Cadbury Nigeria Plc, NASCON Allied Industries Plc and Dangote Sugar Refinery Plc.

BusinessDay analysis of their financial statements, obtained from the Nigerian Exchange Limited, showed that the amount spent by the companies on transportation rose to N43.19 billion in H1 2022 from N33.79 billion in the same period last year.

NASCON’s transport cost soared by 57.98 percent. The cost of transport for Nestle increased by 20 percent, while that of Unilever surged by 57.84 percent. Cadbury saw an increase of 7.62 percent in transport cost while that of Dangote Sugar rose by 27.72 percent.

Akinloye Ayorinde, a financial analyst, said the reason for the high cost of transport and logistics is the high cost of diesel.

“The Russia-Ukraine situation, the crude oil market, and the high cost of diesel are all contributing to the high prices that transport companies are charging the FMCG firms and the FMCG firms that distribute their product themselves.”

Rising transport costs triggered by soaring crude oil prices have increased the cost of marketing and distribution expenses for FCMG companies.

Due to the drop in oil prices and the interruptions brought on by the COVID-19 pandemic, Africa’s largest economy has experienced two recessions during the previous six years. Prior to the pandemic and the Russia-Ukraine crisis, companies repackaged their goods into smaller sachets at lower prices due to strong inflationary pressures, low incomes, and weak purchasing power.

Read also: Transport cost among major drivers of inflation – NBS

Consumers’ purchasing power has been diminished in recent years.

“The fundamental cause of the issue is the high cost of agricultural products, whose prices have increased dramatically and led to a shortage of products on the worldwide market, and increase in the products available,” Ayorinde said.

Economic experts say that many manufacturing firms that are yet to recover from the COVID-19 disruptions are facing severe pressures as the Russia-Ukraine crisis rages on. They noted that manufacturers in Nigeria have suffered production hiccups as the supply of raw materials like wheat became limited and the price of diesel, a major source of energy, surged significantly.

A market survey of some products shows that the prices have increased by 50 percent or more over the last four months.

The price of 250grams of Dangote sugar has increased from N100 to N200; while that of 350grams of Nasco cornflakes rose from N700 to N1,300, and Closeup also took an increase of N550 from N350.

According to the National Bureau of Statistics, the country’s headline inflation sustained its upward movement as it rose to 19.64 percent in July 2022, the highest since October 2005 compared with 17.38 percent in July 2021.

Rob Kleinjan, finance director at Nigerian Breweries, during the company’s pre-Annual General Meeting media briefing in April, highlighted the rising cost of fuel and diesel, which has an impact on the production and distribution process, saying the company would have to review the price of its products upward during the year.