How to Start a Logistics Business in Nigeria

Quick Takes

How much does it cost to start this business?

Starting a logistics business in Nigeria can be a rewarding venture, especially given the increasing demand for efficient delivery services. The cost to begin a logistics business can vary based on several factors, including the scale of your operations, location, and the level of service you intend to provide. Here are some insights to help you get started:

1. Initial Investment:
   • You can start a modest logistics firm with as little as ₦500,000. This amount covers essential expenses such as registration, licenses, and initial operational costs.
   • For a more comprehensive setup, consider allocating a budget between ₦500,000 to ₦10 million. This range accounts for variations in business size and scope.
2. Key Expenses:
   • Vehicle or Bike Purchase: Depending on your chosen mode of transportation (e.g., bikes, vans, trucks), allocate funds for acquiring suitable vehicles. Second-hand options may be more cost-effective initially.
   • Registration and Licensing: Register your business with the Corporate Affairs Commission (CAC) and obtain necessary permits and licenses.
   • Office Space: If you plan to have a physical office, factor in rent and utility costs.
   • Personnel: Consider hiring delivery personnel, dispatchers, and administrative staff.
   • Technology: Invest in tracking systems, communication tools, and software for efficient operations.
   • Marketing and Branding: Allocate funds for promoting your logistics services.
3. Operational Costs:
   • Fuel and Maintenance: Regular fuel expenses and vehicle maintenance are ongoing costs.
   • Salaries and Wages: Payroll for your staff.
   • Insurance: Insure your vehicles, goods, and employees.
   • Miscellaneous Expenses: Unexpected costs may arise, so maintain a buffer.
4. Business Model:
   • Decide whether you’ll focus on last-mile delivery (local deliveries within cities) or long-haul logistics (interstate or international).
   • Explore partnerships with e-commerce platforms, retailers, and manufacturers.
5. Profitability:
   • Logistics businesses can be profitable, especially with the growth of e-commerce and online transactions.
   • Provide reliable and timely services to build trust with clients.

Remember that thorough planning, understanding the logistics industry, and delivering excellent service are crucial for success.

How much can you make per month?

The income you can make per month in a logistics business can vary significantly depending on several factors. Here are some considerations:

1. Business Scale: The size of your logistics operation matters. Are you running a small local delivery service or a larger interstate or international logistics company? Larger operations generally have higher revenue potential.
2. Services Offered: Consider the range of services you provide. Are you focusing on last-mile delivery (within cities) or long-haul logistics (interstate or international)? Different services have varying profit margins.
3. Pricing Structure: Determine how you’ll charge clients. Common pricing models include flat fees, per-mile rates, or percentage-based fees. Ensure your pricing covers costs and allows for profit.
4. Client Base: Building a solid client base is essential. Establish partnerships with e-commerce platforms, retailers, manufacturers, and other businesses that require logistics services.
5. Operating Costs: Subtract your operational costs (fuel, maintenance, salaries, insurance, etc.) from your total revenue to calculate your profit. Remember to account for unexpected expenses.
6. Market Demand: The demand for logistics services is influenced by economic activity, population density, and consumer behavior. High-demand areas can lead to better earnings.
7. Efficiency and Reliability: Providing reliable and efficient services builds trust with clients and encourages repeat business.

Example Scenario: Suppose you’re running a last-mile delivery service in a busy city. You handle local deliveries for e-commerce companies. Here’s a simplified breakdown:

1. Initial Investment:
   • You can start a modest logistics firm with as little as ₦500,000. In USD, this is approximately $337.
   • For a more comprehensive setup, consider allocating a budget between ₦500,000 to ₦10 million. In USD, this range translates to roughly $337 to $6,744.
2. Monthly Revenue:
   • Let’s assume you handle 500 deliveries per day, charging an average of ₦500 per delivery. That’s ₦250,000 daily or approximately ₦7.5 million per month (assuming 30 days). In USD, this is about $5,060.
3. Operating Costs:
   • Fuel and maintenance: ₦2 million (approximately $1,348).
   • Salaries (drivers, dispatchers, admin): ₦1.5 million (approximately $1,011).
   • Insurance and miscellaneous: ₦500,000 (approximately $337).
4. Profit:
   • Monthly revenue minus operating costs:
     • ₦7.5 million – (₦2 million + ₦1.5 million + ₦500,000) = ₦3.5 million (approximately $2,364).

Remember that these figures are based on a simplified example, and actual earnings can vary. It’s essential to conduct thorough market research, plan your finances, and adapt to changing conditions. 

What is the minimum required to start this business?

To start a logistics business in Nigeria, the minimum capital required can vary based on your level of operations. Here are some estimates:

1. Modest Setup:
   • You can begin with as little as ₦300,000. In US Dollars (USD), this is approximately $202.
   • This amount covers essential expenses such as registration, licenses, and initial operational costs.
2. Comprehensive Setup:
   • For a more comprehensive logistics business, consider allocating a budget between ₦500,000 to ₦10 million. In USD, this range translates to roughly $337 to $6,744.
   • The higher end of the range accounts for variations in business size, scope, and investment in assets like vehicles.

Remember that these figures are approximate and can vary based on factors such as location, business model, and services offered. Thorough planning and understanding the logistics industry are essential for success.

What are the best states to start this business?

When considering starting a logistics business in Nigeria, several states offer favorable conditions for entrepreneurs. Here are some of the best states to consider:

1. Lagos State:
   • Lagos is a bustling commercial hub and the most populous city in Nigeria. It boasts a large and diverse market, robust infrastructure, and government support for businesses.
   • Key advantages include:
     • Cosmopolitan Nature: The state’s diversity allows tailoring marketing and business strategies to various consumer groups.
     • Foreign Trade Flow: Lagos accounts for 90% of Nigeria’s foreign trade flow and contributes over 30% to the country’s GDP growth.
     • Infrastructure: Reliable access to electricity, road networks, and modern communication services.
     • Government Support: Lagos offers tax incentives and grant programs for entrepreneurs.
2. Anambra State:
   • Anambra is known for its vibrant commercial activities and entrepreneurial spirit.
   • Advantages include:
     • Business-Friendly Environment: Anambra encourages small and medium-sized enterprises (SMEs) through policies and incentives.
     • Skilled Labor: Availability of skilled workers.
     • Strategic Location: Proximity to major markets in the southeastern region.
3. Ogun State:
   • Ogun is close to Lagos and benefits from its proximity to the Lagos port.
   • Advantages include:
     • Industrial Zones: Ogun hosts industrial estates and free trade zones.
     • Access to Ports: Proximity to Lagos ports facilitates import and export activities.

4. Rivers State:
   • Rivers is a major oil-producing state with a growing economy.
   • Advantages include:
     • Port Harcourt: The capital city has a thriving business environment.
     • Oil and Gas Industry: Opportunities in logistics related to the oil sector.
5. Abuja (Federal Capital Territory):
   • Abuja serves as Nigeria’s administrative center and attracts businesses.
   • Advantages include:
     • Government Presence: Proximity to government agencies and embassies.
     • Emerging Market: Growing demand for logistics services.

6. Enugu State:
   • Enugu is known for its coal mining history and emerging commercial activities.
   • Advantages include:
     • Strategic Location: Central location in the southeastern region.
     • Growing Economy: Opportunities for logistics growth.

Remember that each state has unique characteristics, and your choice should align with your business model, target market, and growth plans. Conduct thorough research and explore local opportunities to make an informed decision.

What are the known examples of this business?

Here are some well-known logistics companies in Nigeria that provide a range of services to meet the transportation, delivery, and supply chain needs of businesses:

1. DHL Nigeria:
   • DHL is a global logistics company that offers express delivery, freight forwarding, warehousing, and e-commerce logistics solutions to customers in Nigeria.
   • They streamline supply chain operations and improve delivery performance.
2. FedEx Nigeria:
   • FedEx is a multinational logistics company providing express delivery, logistics, and e-commerce solutions.
   • In Nigeria, they enhance supply chain performance, reduce costs, and improve customer satisfaction.
3. UPS Nigeria:
   • UPS is a leading global provider of logistics, transportation, and supply chain management solutions.
   • In Nigeria, they offer services such as express delivery, freight forwarding, customs brokerage, and warehousing.
4. GIG Logistics:
   • GIG Logistics is a Nigerian company offering express delivery, e-commerce logistics, and freight forwarding services.
   • They provide end-to-end logistics solutions for safe and efficient product delivery.
5. Red Star Express:
   • Red Star Express is another prominent logistics company in Nigeria.
   • They specialize in courier services, freight forwarding, and supply chain management.
6. Jumia Logistics:
   • Jumia, a well-known e-commerce platform, operates its logistics arm called Jumia Logistics.
   • They handle last-mile delivery for online orders.
7. Tranex:
   • Tranex provides logistics services, including transportation, warehousing, and distribution.
8. Courier Plus:
   • Courier Plus focuses on courier services and delivery solutions.

These companies play a crucial role in moving goods and materials across Nigeria, contributing to the economy’s growth and efficiency. Whether you’re a business owner or an individual, these logistics providers offer reliable solutions for your transportation needs. 

So, if you’re thinking of starting a logistics business in Nigeria, there are a few  more things you need to know.

• Understand the logistics 

Before you start a logistics business, it’s important that you have a good understanding of the industry and what it involves. There are many different aspects to logistics, from transportation and warehousing to customs clearance and supply chain management. Make sure you do your research and understand all the different facets of the business before you get started.

• Carve a niche 

There are many different niches within the logistics industry. You could focus on transportation, warehousing, customs clearance, or supply chain management. Once you’ve decided what area you want to focus on, you can start to build your business around that niche. Let’s see details on some of the aspects you can choose:

• Transportation: 

This could be business to business (b2b) or business to Customer (b2c). Whichever you choose, it entails providing transportation solutions for your clients. This means you rent out cars, buses, or even bicycles to your clients. 

You will be offering services to different categories of customers. Mainly, luxury, middle-class, or low-budget.

•  Warehousing: 

This aspect of the logistics business entails storing goods for your customers. It could also be b2b or b2c. 

You could also add transporting your customer’s goods from a pickup point to the warehouse to your services. This means you will need trailers.

• Package delivery: 

Package delivery is the most common aspect of the logistics business in Nigeria. Almost all logistics companies engage in this service.

It simply involves picking up goods for your customers and delivering them to their designated locations.

• Customs Clearance:  

This service is meant to make it easy for your customers to import or export goods. So, you need to be well prepared for this aspect of the logistics business before you start.

One of the things you need to do is to familiarize yourself with the customs service systems and rules. 

This aspect involves shipment documentation and clearing.

• Supply Chain Management (SCM): 

SCM is the aspect of logistics business where you help your client oversee the movement, storage, and distribution of goods or services across the supply chain.

For instance, a large juice production company will need a logistics business to transport fruits from farm to factory; transport the end product (the juice) from factory to warehouse where the goods will also be transported to distributors. The chain goes on until it gets to the end consumer. An SCM logistics company handles this.

• Get your plan on paper 

After you’ve done your research and decided on your niche, it’s time to start putting together a business plan. Your business plan should include your goals and objectives, your marketing strategy, your financial projections, and your organizational structure. This document will be your road map for starting and running your business.

We can hold your hand through this planning process by designing a professional business plan. Click here for a free business plan

• Plan your Finances

Like any business, starting a logistics business in Nigeria requires financial planning and preparation. You’ll need to have the start-up capital to cover the costs of renting or buying warehouse space, hiring staff, and investing in the necessary transportation and technology infrastructure.

You need to make sure that you have enough capital to get your business off the ground and to cover any unexpected costs. There are a few ways to raise capital, such as taking out loans, seeking investors, or using your savings. Once you have a solid financial plan in place, you can move on to the next steps of starting your business.

Creating a financial plan will also help you to track the progress of your business and make necessary adjustments along the way. For example, if you find that you’re not generating as much revenue as you had anticipated, you may need to scale back your operations or rethink your pricing strategy.

• Get registered and licensed 

Register your business with the Corporate Affairs Commission (CAC). You’ll need to provide basic information about your business, as well as pay a registration fee.

Obtain a business license from the Nigeria Investment Promotion Commission (NIPC). This will allow you to legally operate your business in Nigeria.

You might also need to get some form of a license from the Nigeria Customs service if you will be working in that line.

• Take advantage of Tech

Set up a website for your business. This is essential for logistics businesses, as potential customers will want to be able to track their shipments, packages, etc, online.

Make use of technology in your business. There are many software programs available that can help you manage your shipments and track your inventory

You also need to have a heavy social media presence for marketing. We’ll talk more about this next.

• Advertise, market, and serve 

Advertise your business. Let people know that you’re there and that you’re ready to help them with their logistics needs.

You can make use of social media platforms to establish your presence in your potential customer’s minds. Facebook, Instagram, and Social media are some of the strong weapons you can use.

Traditional adverts on Tv, radio, and billboards will also help to widen your visibility.

Most important is providing excellent customer service. This is essential for any business, but it’s especially important in the logistics industry. No one will patronize your logistics business if you are known to care less about their packages or shipments. So, you want to be in the positive part of your customer’s minds.

The Logistics business is a very promising business in Nigeria because as the economy keeps expanding more businesses will emerge, and these businesses will continue to require logistics services. You however need to understand the logistics market well before you start the business. Our professionals are ready to help you through researching and starting your logistics business in Nigeria. Click this link now for a business consultation.

Frequently Asked Questions

1. What is a logistics business, and why is it essential?

A logistics business involves planning, implementing, and controlling the movement and storage of goods, services, or information within a supply chain. It encompasses transportation, warehousing, inventory management, and more. In Nigeria, logistics is crucial due to the growing demand for efficient delivery services, especially in the e-commerce sector.

2. How profitable is the logistics industry in Nigeria?

The logistics industry can be highly profitable if managed effectively. With the rise of e-commerce and increased consumer demand, logistics companies play a vital role in moving goods across the country. However, success depends on factors like service quality, operational efficiency, and market understanding.

3. What are the steps to start a successful logistics company in Nigeria?

Here are the essential steps:

• Choose Your Method of Operation: Decide whether you’ll operate as an agent, carrier, or contractor.
• Understand the Logistics Industry: Study the industry, including competitors and trends.
• Create a Business Plan: Outline your business goals, target market, and financial projections.
• Select a Location: Consider proximity to major markets and transportation hubs.
• Secure Funding: Determine your startup capital and explore financing options.
• Set Up a Website: Establish an online presence for your logistics business.
• Hire Staff: Recruit drivers, dispatchers, and administrative personnel.

4. What legal requirements should I be aware of when starting a logistics company in Nigeria?

Ensure compliance with legal obligations:

• Business Registration: Register your logistics company with the Corporate Affairs Commission (CAC).
• Licenses and Permits: Obtain necessary permits for transportation and logistics operations.
• Insurance: Insure your vehicles, goods, and employees.
• Tax Obligations: Understand tax requirements and obtain a Tax Identification Number (TIN).
• Safety Standards: Adhere to safety regulations for vehicles and personnel.

5. How can I promote my logistics company effectively?

• Digital Marketing: Utilize social media, email marketing, and a professional website.
• Networking: Attend industry events, collaborate with e-commerce platforms, and build partnerships.
• Word of Mouth: Provide excellent service to encourage referrals.
• Branding: Create a strong brand identity that reflects reliability and efficiency.

6. What are some common challenges faced by logistics businesses in Nigeria?

• Traffic Congestion: Urban traffic can delay deliveries.
• Infrastructure: Poor road conditions and inadequate facilities.
• Security Risks: Cargo theft and vandalism.
• Regulatory Hurdles: Navigating permits and compliance.
• Competition: The industry is competitive, so differentiation is essential.

7. How can I ensure customer satisfaction and retain clients?

• Timely Deliveries: Meet deadlines consistently.
• Communication: Keep clients informed about their shipments.
• Transparency: Provide real-time tracking and updates.
• Problem Resolution: Address issues promptly and professionally.
• Quality Service: Strive for excellence in every aspect of your logistics operations.