The Lane Your Fleet Runs at a Loss - and How to Find It Before Fuel Prices Move Again

A 30-tonne truck running Lagos to Kano. Contracted rate set 18 months ago. Since then: diesel has moved from ₦1,100 to ₦1,700 at the depot - a 55% increase in the single largest cost line in the operation. The rate hasn't moved.

The operator knows fuel is more expensive. Everyone knows. But nobody has calculated what that 55% increase means for this specific lane, at this specific volume, against this specific contracted rate. The rate was viable when it was signed. Whether it is still viable is a question that requires a number, not a feeling.

This article is about how to calculate that number.

Why contracted rates lag cost reality in Nigerian logistics

Diesel accounts for at least 35% of trucking cash outflows in Nigeria. When diesel moves, everything moves - but contracted rates don't. They are locked into agreements that were negotiated in a different cost environment, with a different fuel price, against a different set of assumptions about what it costs to run a truck from Lagos to Kano and back.

The Lagos-Kano corridor alone carries nearly 40% of Nigeria's total freight volume. Average truck speeds on this route have fallen below 30 km/h. Informal checkpoints and levies add ₦50,000 to ₦100,000 per trip. Night curfews reduce asset utilisation to roughly 55% of potential capacity. Every one of these factors increases the fully-loaded cost per kilometre - and none of them were priced into the contract the operator signed a year ago.

The result: operators continue running lanes that were profitable at ₦1,100/litre diesel but are structurally loss-making at ₦1,700/litre. They absorb the difference into margin because they don't have a per-lane calculation that proves the loss. Without the number, the rate renegotiation conversation never starts.

The three inputs for a lane-level cost floor

A lane cost floor is the minimum rate at which a specific route remains commercially viable. It is calculated from three inputs.

Input 1: Fully-loaded cost per kilometre. This is not just fuel. It is fuel consumption per kilometre at current diesel prices, plus driver wages allocated per kilometre, plus tyre wear and maintenance per kilometre, plus tolls and levies per trip divided by trip distance, plus insurance and depreciation per kilometre, plus the cost of empty return legs.

That last item - the backhaul - is where most operators undercount. A truck that runs full from Lagos to Kano and returns empty has effectively doubled its cost per loaded kilometre. If the backhaul recovery rate is 30% (meaning only 30% of return trips carry paying cargo), the true cost per loaded kilometre is significantly higher than the headline fuel-plus-driver calculation suggests.

Input 2: Minimum acceptable margin. For a Nigerian logistics operator, a healthy gross margin on a lane sits between 20% and 35%, depending on the route, the cargo type, and the contract structure. Below 20%, the lane is not covering overhead. Below 15%, it is actively destroying value.

Input 3: The floor formula. Lane cost floor = Fully-loaded cost per km × distance ÷ (1 - minimum margin %). Any contracted rate below this number means every trip on that lane erodes the business.

A worked example: Lagos to Kano

Take a standard 30-tonne truck running Lagos to Kano. The distance is approximately 1,000 km one way.

Build the fully-loaded cost per kilometre at current prices:

Fuel: A typical 30-tonne truck consumes approximately 1 litre per 3 km. At ₦1,700/litre (current depot price, March 2026), that is ₦567 per km in fuel alone.

Driver wages: ₦150,000 per month, running approximately 6,000 km per month. That is ₦25 per km.

Tyres, maintenance, and depreciation: Approximately ₦80 per km for a well-maintained used truck.

Tolls, levies, and informal payments: ₦75,000 per trip (conservative mid-range of the ₦50,000-100,000 documented per trip on this corridor). Across 1,000 km, that is ₦75 per km.

Insurance and registration: Approximately ₦15 per km when allocated across monthly distance.

Backhaul adjustment: If the backhaul recovery rate is 40% (4 out of 10 return trips carry paying cargo), the effective one-way cost inflates by a factor of 1.3 - because 60% of return trips earn nothing but still cost fuel and driver time.

Total fully-loaded cost per km: (₦567 + ₦25 + ₦80 + ₦75 + ₦15) × 1.3 = ₦1,020 per loaded km.

Now calculate the floor:

Lane cost floor for Lagos-Kano (1,000 km, 25% minimum margin):

₦1,020 × 1,000 ÷ 0.75 = ₦1,360,000 per trip.

If the contracted rate for this lane is ₦1,100,000 - a rate that was commercially reasonable at ₦1,100/litre diesel - the operator is running every trip at a ₦260,000 loss. At two trips per week, that is ₦2.08M per month in margin destruction on a single lane.

At ₦1,100/litre diesel (18 months ago), the same calculation produced a cost floor of approximately ₦940,000. The rate of ₦1,100,000 cleared the floor comfortably. Today, it doesn't. The rate didn't move. The floor did.

What this means across a fleet

A logistics operator running 15 active lanes doesn't know which ones look like the Lagos-Kano example unless they run this calculation for every lane. Some lanes will be above the floor - the rate still clears the cost. Others will be below - every trip is a loss. A small number will be critically below - the gap is so large that no volume increase can compensate.

The pattern is consistent. In a typical 15-lane fleet, 4-6 lanes are operating below their cost floor at current diesel prices. The operator knows margin is compressed. What they don't know is which specific lanes are the problem, how large the gap is in Naira, and what the rate needs to be to restore viability.

That visibility is what turns a rate renegotiation from a conversation about "fuel is expensive" into a conversation about "this lane costs ₦1,360,000 to run and you are paying us ₦1,100,000. Here is the calculation."

The fuel surcharge conversation

The logistics industry globally has a mechanism for this - the fuel surcharge. A contractual clause that adjusts the freight rate automatically when fuel prices cross a threshold. In mature markets, fuel surcharges are standard in every logistics contract. In Nigeria, they are rare.

Most Nigerian operators absorb fuel cost increases because they don't have the analytical basis to trigger a surcharge conversation. They don't know the per-lane fuel cost allocation. They don't know the recovery gap. They don't have a documented cost floor that proves the current rate is unsustainable. Without those numbers, the shipper's response is always "everyone's costs are up" - and the conversation ends.

A per-lane cost floor changes that dynamic. When the operator can show that diesel at ₦1,700/litre creates a ₦260,000 gap per trip on a specific lane, and that gap compounds to ₦2.08M per month, the conversation shifts from abstract cost pressure to specific commercial exposure. The shipper is no longer being asked to accept a general price increase. They are being shown exactly what their current rate is costing the operator, lane by lane, in Naira.

Getting started

The inputs required to build a lane-level cost floor are not exotic. You need your current fuel consumption per km by truck type, your driver wages allocated per km, your maintenance and depreciation estimates, your per-trip toll and levy costs by route, your backhaul recovery rate by lane, and your contracted rate for each lane.

Most fleet operators have most of this data somewhere - in fuel logs, trip sheets, maintenance records, and contract files. The challenge is that it has never been assembled into a single per-lane view and recalculated as fuel prices move.

That assembly - and the recalculation as diesel prices shift - is what turns a lane cost floor from a one-time exercise into a live commercial instrument.

MarginCOS calculates this across your full fleet operation, updated each period, with the rate deficit expressed per lane in Naira. Join the logistics waitlist →