Nigeria's manufacturing sector is experiencing a significant increase in logistics costs, with major listed companies reporting sharp growth in selling, distribution, haulage, and freight expenses in their H1 2026 financial statements. Dangote Cement, for example, saw selling and distribution expenses rise to N401.85bn from N321.39bn, a 25% increase, while haulage costs climbed 25.6% to N318.60bn from N253.64bn.
The pressure is not limited to Dangote Cement, as other manufacturers also reported increased logistics costs. Nestlé Nigeria saw marketing and distribution expenses increase 26.9% to N93.55bn from N73.68bn, while freight expenses rose 37.5% to N31.58bn from N22.98bn. Nigerian Breweries also reported a 22.1% increase in selling and distribution expenses to N159.62bn from N130.67bn.
The rising logistics costs are affecting manufacturers' profitability and operations. The Chartered Institute of Logistics and Transport estimates that over 90% of Nigeria's freight and passenger movement is by road, leaving manufacturers exposed to road conditions, congestion, fuel costs, vehicle maintenance, and longer delivery times. Poor roads are a significant component of the logistics-cost problem.
The impact of higher logistics costs extends beyond the transportation bill, as it can raise the cost of goods sold, compress margins, or force companies to increase selling prices. However, some companies have managed to absorb part of the cost pressure through pricing, volumes, productivity, or other cost savings. Dangote Cement's profit before tax rose 34.4% to N981.39bn, despite the increase in logistics costs.
BUA Foods provides a different picture, with the company's H1 revenue declining 16.2% to N765.12bn from N912.51bn, while selling and distribution expenses fell 14.6% to N30.44bn from N35.63bn. The company attributed the reduction partly to lower logistics expenses, which helped protect its margins.
The Nigerian Investment Promotion Commission estimates that logistics costs in some sectors can range between 40% and 60% of production costs, compared to a global benchmark of 15% to 20%. Manufacturers' groups have consistently identified inadequate roads and other infrastructure gaps as constraints on production and distribution.
The Federal Government's industrial policy targets a reduction in trade costs through improvements in roads, logistics, and related infrastructure. For manufacturers, the significance is whether such improvements translate into lower movement costs. With H1 results showing distribution and freight expenses rising faster than revenue at several major manufacturers, H2 performance will provide a clearer indication of how much of the burden companies can continue to absorb.
Key points
- Manufacturers face increasing logistics costs due to poor road conditions and infrastructure gaps.
- Rising logistics costs can impact manufacturers' profitability and operations.
- Companies are exploring ways to absorb or mitigate the cost pressure through pricing, volumes, productivity, or other cost savings.
