…why transport is actually high asides subsidy
…how govt can handle the palliatives
The recent removal of fuel subsidies in Nigeria has had a significant impact on the cost of transportation. As a result, transportation fares have increased drastically, causing financial difficulties for many Nigerians.
This issue is further compounded by an inflation rate of 22.22%. While the country awaits palliatives from the Tinubu administration, there is a debate on whether the focus should be on providing stipends to poor Nigerians or directing the palliatives towards the transportation sector.
Chigozie Chikere, a Chartered Member of the Chartered Institute of Logistics and Transport (CILT) Nigeria, supports the idea that the Nigerian government should prioritize palliatives for the transportation sector.
In his explanation, the impact of the removal of fuel subsidies on transportation has been significant.
He noted Private oil marketers and the Nigerian National Petroleum Company Limited (NNPCL) have been engaged in counteraccusations.
“The Independent Petroleum Marketers Association of Nigeria (IPMAN) claims to have ordered 202.5 million litres of products since October 2022 when petrol was priced at N183 per litre. However, NNPCL has not delivered the ordered products thus far.
“With the fuel price now at N467.39 per litre (NNPC cost price), NNPC is demanding an additional payment of N284.39 from marketers to cover the backlog of supply. This new figure raises the cost of a 45,000-liter capacity truck to N21 million, compared to the N8.2 million paid in October when fuel was N183 per litre. This has become a contentious issue.”
He further explained that it is evident that each N1 added to the fuel pump price affects transportation costs, often resulting in artificially inflated passenger fares. The increased fuel pump prices, he said, have led to a decrease in the number of vehicles on the road, causing more Nigerians to stay at home or resort to walking for transportation.
“Both urban and rural dwellers are feeling the impact. In response to the exorbitant transportation expenses, the governments of Edo and Kwara states recently decided to reduce the number of working days to three per week.
“In Lagos Island, people are now paying up to N100 per kilometre. For example, a distance of 10 kilometres that previously cost between N400 and N500 now amounts to N1000. I mentioned that the passenger fare increases are artificial because the subsidy on diesel was removed several years ago.”
In addition, he said, despite the significant price difference, diesel buses used for passenger transport have been charging the same fare as their counterparts using fuel engines. Diesel currently sells for N750 to N850 per litre, whereas fuel was sold at less than N200 per litre.
“Strangely, owners of both diesel and fuel vehicles have been collecting the same passenger fare, yet only fuel vehicle owners complain about running at a loss. This raises the question: why do passenger fares increase astronomically whenever there is an increase in fuel pump price?”
The transport expert opined, Fuel subsidy removal is not a bad idea at all, adding, when former President Obasanjo introduced the concept of deregulation, it was adequately explained to Nigerians, and they embraced it.
“However, the issue lies in the absence of a well-defined program that would have paved the way for full deregulation. If such a plan had been in place, we would have been better prepared for the announcement made by the new administration.
“Nevertheless, it is better late than never. Now that fuel subsidies have been removed, what truly matters is the steps being taken to mitigate the impact on transportation.
“We have been told that a nation’s economy relies not only on its railway system but also on its public transport buses. Therefore, any action aimed at reducing passenger fares will have a positive impact on the economy,” he said.
Chigozie further explained that it is crucial to recognise that fuel prices are not the sole contributors to fare increases; multiple taxations also play a significant role. In Lagos Island alone, illegal taxes weigh heavier than legal taxes.
“These are the areas where the government should focus its attention to reduce passenger fares, especially during this period. The earmarked $800 million intended to alleviate the burdens on the masses following the fuel subsidy removal should be utilised wisely, particularly in implementing mass transportation solutions.
“If the government can also provide revolving loans for private operators in the transportation sector, I believe the impact on Nigerians will not be as severe as it currently is, and we can end the year on a more positive note.”
According to the transport expert, in Nigeria, people spend up to 50% or more of their monthly income on transportation, which is unreasonably high. Therefore, addressing affordability is a critical challenge. When individuals spend more than 10% of their monthly income on transportation costs, it is known as transport poverty.
“The government can tackle this issue by either reducing the contributing factors to transportation cost hikes or by increasing the minimum wage for workers. By doing so, future increases in passenger fares will not pose a problem for the Nigerian masses.”
