Nigerian companies incurred over N170 billion in travel and transport-related expenses in the financial year that ended in 2023.
This is according to research findings from about 40 quoted companies on the NGX, operating in different sectors of the economy.
The data highlights the significance of travel-related expenses in the general operations of Nigerian businesses.
Transport, Travel, and Accommodation Expenses
According to our research analysis, companies spent a whopping N174 billion on travel and accomodation expenses in 2023, up from the N115 billion incurred in the same period in 2022.
Travel expenses include the cost of local and international travel, hotel-related expenses, and other related costs. The data also reveal that most companies have maintained different nomenclature for recording travel-related expenses.
While some had expense lines for local and/or international travel, others either bundled it with accommodation or with other non-travel-related costs.
For this analysis, Nairametrics focused on transport-related costs such as domestic and foreign travel and accommodation expenses.
This considerable expenditure highlights the rise in road and air travel in 2023, as foreign exchange depreciation and the rise in fuel expenses (following the subsidy removal) affected costs.
- For example, airfares more than doubled in the year under review as airlines updated rates to reflect changes in exchange rates and hikes in aviation fuel costs. Major hotels across the country also raised room rates to cover the spiraling costs of goods and services, impacting accommodation expenses.
- The increased spending was also more pronounced in 2022 compared to prior years, mostly due to the global return to travel as organizations fully resumed activities following the remnants of the COVID-19 lockdown.
- The cost of transporting products, especially in a country with a vast geographical spread and varying infrastructure quality, is a significant factor in the overall expenses of companies in this industry.
While the banking and brewery sectors dominated the travel expenses landscape, other sectors also contributed to the overall figure. Companies in the telecommunications, energy, and manufacturing sectors also recorded notable travel expenditures, reflecting the broad impact of travel costs across the economy.
Breakdown of Travel Expenses
The banking sector led the spending with about N70.4 billion, representing over 40% of the total travel expenditure. Banks have often been criticized for their large travel-related spends, especially related to private jets.
- Access Bank led the banking sector’s expenses on travel, with about N28 billion incurred in 2023.
- The Brewery Sector, led by Nigerian Breweries, is second with about N68.7 billion incurred on travel, transport, and accommodation-related expenses.
- Nigerian Breweries led with about N64.9 billion, reporting its transport expenses to include the cost of transporting its products across the country.
- Besides Access Holdings and Nigerian Breweries, UBA, FBN Holdings, MTN, and Dangote Cement also spent significantly on transport-related expenses.
- UBA, for example, incurred N14.2 billion, higher than N9.8 billion a year earlier. Another Tier 1 bank, FBN Holdings, incurred N10.8 billion compared to N6 billion recorded in 2022.
- MTN and Dangote Cement incurred N7.8 billion and N7.7 billion, respectively, compared to N4.1 billion and N4.4 billion for both companies in 2022.
The significant expenditure on travel and transport-related costs by Nigerian companies in 2023 can be understood better when viewed against the backdrop of the country’s inflation trends. As of July 2023, Nigeria’s inflation rate stood at 33.4%, with an average inflation rate of 24.7% for the year.
- Particularly relevant to these companies’ spending, transport inflation for 2023 was 26.7%, reflecting the rising costs in the sector, exacerbated by the depreciation of the naira and increased fuel prices following subsidy removal.
- Similarly, inflation in the Restaurant and Hotel sector, which directly impacts accommodation expenses, averaged 24.2% for the year but surged to 29.9% in July 2023.
- These inflationary pressures significantly contributed to the elevated costs of travel and accommodation, making it more expensive for businesses to operate across Nigeria.
- The rise in transport and accommodation inflation underscores the challenges that companies face in managing operational costs amidst a volatile economic environment.
As inflation continues to affect various sectors, Nigerian businesses may need to explore cost-saving measures to navigate these economic headwinds effectively.