The impact of rising fuel prices in Nigeria is extending across various sectors, and the last-mile delivery industry is no exception.
With operating costs surging, delivery companies are left with the challenge of balancing price hikes while retaining price-sensitive customers. As businesses struggle to adapt, a number of logistics companies are beginning to adjust their pricing models.
Remedial Health, a health-tech startup supplying medications to pharmacies, has been among the first to respond to these economic changes. In an email to its customers, the company highlighted the necessity of revising its delivery processes due to costly fuel prices.
Similar changes are occurring across the industry, with several logistics companies adjusting their rates or preparing to do so. Fez Delivery, for example, has announced a 23% price increase, with the cost of deliveries between 0 and 5kg rising from ₦2,500 to ₦3,075. This change, while essential for business survival, is a tough pill to swallow for both the company and its customers.
Seun Alley, CEO of Fez Delivery, acknowledged the difficulty in implementing these changes: “Our prices definitely have to change. But what we want to do is to ease our clients into that phase. At the moment, we are taking serious blows to keep operations running.”
The rising cost of logistics is squeezing last-mile delivery services, many of which operate on thin margins. However, navigating these changes is a delicate balancing act.
On one hand, companies must raise prices to remain operational, while on the other, they risk losing customers who are highly sensitive to cost fluctuations. According to Seun Omotosho, COO of Gokada, customers often opt for cheaper delivery options when urgency isn’t a factor, adding another layer of complexity to pricing decisions.
For smaller businesses, the situation is even worse. Olawale, an online phone and gadgets vendor, described how he has shifted to using public transport to deliver his goods after delivery services like DHL increased their prices significantly—from ₦12,000 to ₦14,000 for phones, and for laptops, from ₦12,000 to ₦21,000.
This sharp rise has pushed many entrepreneurs to explore alternative, cost-effective ways of ensuring their products reach customers.
In response to these pressures, some delivery companies are exploring incentives and discounts to retain their customer base. In offering riders bonuses based on the number of completed orders or providing discounts to frequent customers, companies aim to mitigate the impact of rising costs.
Others are looking further ahead, with a focus on electric vehicles (EVs) as a prospective long-term solution to the fuel price dilemma. While the adoption of EVs in Nigeria may still be a few years away, companies are optimistic that they could help reduce operating costs and stabilise delivery pricing in the future.
The issue of fuel price increases has also prompted discussions about how businesses in Nigeria can innovate to remain viable in an increasingly challenging economic climate.
Across various sectors, companies are experimenting with new strategies to absorb costs without losing customers. For example, some industries are leveraging digital platforms to simplify operations and reduce overhead costs, while others are shifting to more sustainable business models.
Similar challenges are being faced globally. In other African countries, last-mile delivery companies are dealing with rising costs due to fuel price hikes and inflation. In Kenya, for instance, logistics companies are looking into expanding their fleets with electric motorcycles to cut down on fuel expenses.
The move towards electric vehicles is gaining traction in other regions too, as companies strive to reduce their reliance on fossil fuels and explore greener, more cost-effective alternatives.
Ultimately, the ability of Nigerian last-mile delivery companies to weather the storm will depend on their flexibility in adjusting to these economic issues.
Whether through gradual price increases, customer incentives, or long-term investments in sustainable technologies, the industry will need to adapt if it hopes to remain competitive.
