The logistics industry is suffering from the effects of poor infrastructure and excessive interest rates

Over the past five years, the logistics industry’s prolonged falling profile has persisted. Poor infrastructure, policy concerns, excessive interest rates, and the depreciation of the naira have all contributed to this.

In fact, the sector has not been able to reach its full potential due to a significant infrastructure deficit, government regulations that hinder ease of doing business, a bad road network, unpredictable electricity, and many taxes.

This is made worse by the growing popularity of social media platforms and online shops like Facebook, Twitter, Instagram, WhatsApp, jumia.com, konga.com, and Mystore.com.ng, among others, as a result of increased Internet usage.

The volume of online transactions and internet usage have dramatically expanded over time, increasing rivalry among local service providers in the nation.

The development has continued to affect the country’s logistics sector’s operations, just as the industry’s listed businesses’ bottom lines have done in recent years as a result of increased operational costs and significant administrative costs.

For instance, a quick glance at a few of the listed companies in the sector revealed that ABC Transport Plc’s first-quarter revenue for the period ending March 31, 2021, decreased to N1.356 billion from N2.265 billion in Q1 2020.

 

The company was able to reduce its deficit by 42.17 percent, from N126.365 million in the first quarter of 2020 to N73.075 million. Additionally, the company’s half-year results for the period ending June 30, 2021, revealed a loss reduction of 75.23%, from a loss of N395.2 million in H1 2020 to a loss of N97.9 million, while revenue also decreased, from N3.431 billion to N3.025 billion.

 

The company also reported an 81.51 percent decrease in its loss from continuing operations for the full year ended December 31, 2021, from N478.886 million to N88.549 million, while sales fell to N6.570 billion from N7.751 billion reported in 2020.

 

Another company in the industry, Red Star, reported pre-tax profits of N98.53 million in the third quarter of 2020, down from N156.66 million in the corresponding period of 2019, a decrease of 37.10%. Additionally, its sales decreased by 0.9% from N2.623 billion in 2019 to N2.6 billion.

 

However, the company reported a Group Profit Before Tax of N413.9 million for the year ended March 31, 2022, up from N220.8 million in the same period of 2021, or an increase of almost 87 percent.

 

For the first quarter of 2020 that concluded on March 31, TransNationwide Express Plc reported a profit after tax of N9.591 million, up from N2.923 million in the corresponding period in 2019. This is an increase of 228.12%.

 

However, sales decreased from N213.306 million in 2019 to N191.021 million, a 10.45% decrease. Direct costs increased from N75.782 million in 2019 to N82.918 million in 2018.

 

Due to rising cost pressure, the company lost money again during the first half of 2021, going from a loss of N78.045 million in 2020 to a loss of N48.663 million. Revenue increased by 5.25 percent to N333.987 million in 2021 from N317.312 million in 2020.

 

The company’s cost of sales increased by 24.47 percent from N139.808 in 2020 to N174.026 million in 2021, while administrative costs increased from N255.218 million to N255.418 million.

 

The company reported a loss after tax of N39.711 million for the entire year ending December 31, 2021, down from a loss of N59.846 million in 2020. Compared to the loss of N74.400 million in 2020, the loss before tax was N34.273 million in 2018.

 

Nigeria’s logistics industry was worth N250 billion ($696 million) as of 2018, which is N50 billion ($140 million) more than in 2017. According to the 2018 Logistics and Supply Chain Industry Report, if the sector’s potentials are fully realized, it has the potential to rank among the industries with the quickest growth rates.

 

Operators argued over the weekend that the government must solve the issues impeding the industry’s expansion if it is to continue growing.

 

According to Moses Igbrude, president of Issuers and Investors Alternative Dispute Resolution Initiative (IIADRI), the country’s businesses, particularly those in the logistics industry, continue to face significant challenges from factors like rising inflation, deteriorating infrastructure, and the high cost of diesel and gasoline. These factors drive up maintenance and operations costs.

 

According to him, the country’s massive infrastructure deficit makes it unlikely that the sector would function at its peak because the logistics industry’s potential for growth is dependent on significant infrastructure development, such as safer roads and airspace.

 

He also made note of the fact that the rising level of insecurity across the nation is having a detrimental effect on the sector’s revenue generation and overall business operations.

 

“Carrying a cargo from Lagos port to Abuja costs more than twice as much as moving the identical container from Lagos port to China.

 

Nigeria has a serious issue with logistics. Banks are no longer backing the haulage industry in Nigeria due to the multiple difficulties it faces.

 

The likelihood of obtaining a loan when approaching a bank is extremely minimal. The price of diesel right now is unfathomable. Another area that is essential if you want to flourish in the industry is insurance coverage, but it also has a greater price tag. According to him, operators in the sector might not be able to operate at their best given all these obstacles.

 

According to Eric Akinduro, national coordinator of the Ibadanzone Shareholders Association, the logistics industry’s losses are a reflection of the unpredictability and instability seen in the country’s business environment because the industry is not exempt from what is going on in the economy.

 

“Transporting goods throughout the nation now carries a very high level of danger. Our roads are highly vulnerable to attack and incredibly permeable. Again, the poor state of our roads has caused a significant decrease in the number of logistical vehicles on the road.

 

“It is better for such business to cease operations if you compare the cost of repair to projected benefit because in the end, the operational cost will reduce the profit margin.”

 

In order to disperse risks, lower costs, and provide better services, he urged businesses in the sector to diversify their activities and make investments in other fields where they have a comparative edge.

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