Given the current economic challenges facing Nigeria, transportation seems to be a connecting factor that has contributed to the hardship bedevilling the country due to the high cost of living.
For instance, immediately the price of fuel moved from N195.00 per litre to N438.00 and N557.00 per litre, and prices in the marketplace rose as a corresponding impact.
Gradually, prices of products, especially food items that were sold for less than half a thousand naira per measure, are currently selling from N2300 to N3500 a measure.
Jerome Vede, a worker at a barbershop in the Karu area of the Federal Capital Territory (FCT), said: “Powering the generator in the shop is what has been consuming our profits. The high cost of fuel is affecting our business; by the time you buy five (5) litres of petrol at N6,000 or more, a major part of the earnings is already spent on power,” he stated.
Stanley Ade said he had to close his café because he could not cope with the high cost of power. “How much were we making? Fuel for the generator took all the money and forced us out of business,” Ade lamented.
Currently, the government still pays much as a subsidy every month to cover shortages for petrol to be sold between N1110.00 to N1350.00 in Nigeria.
In June 2024, a draft copy of the Accelerated Stabilisation and Advancement Plan (ASAP) presented to President Bola Tinubu by the Minister of Finance and Coordinating Minister of the Economy, Wale Edun, stated that: “At current rates, expenditure on fuel subsidy is projected to reach N5.4 trillion by the end of 2024. This compares unfavourably to N3.6 trillion in 2023 and N2.0 trillion in 2022,” the report said.
Between May 2023 and date, the Federal Government has increased the price of petrol many times. From N195 to between N448 and N557 per litre, marking a 185.64% increase.
The second increment took place in June 2023 with an increase from N557 to N617 per litre, making an increase of 10.77%. Here, NNPCL said the hike was caused by market dynamics.
In September 2024, the Federal Government also increased the price of fuel from N855 to N897 per litre, marking an increase of 45.38%.
One month later, in October 2024, the Federal Government again increased the price of petrol from N897.00 to N1030.00 per litre.
In highlighting the consequences of indiscriminate hikes in fuel prices on Nigeria, an expert in the transportation sector, Dr. Emeka Okengwu, explained that transportation provides market accessibility by linking producers and consumers so that transactions can occur.
“Transportation is an economic factor of production of goods and services, implying that it is fundamental in their generation.
“This means that irrespective of the cost, an activity cannot take place without the transportation factor and the mobility it provides. Thus, relatively small transport costs, capacity, and performance changes can substantially impact dependent economic activities.
“An efficient transport system with modern infrastructures favors many economic changes, most of them positive.”
He stated that the economic importance of the transportation industry can thus be assessed from a macroeconomic and microeconomic perspective:
“At the macroeconomic level (the importance of transportation for a whole economy), transportation and related mobility are linked to a level of output, employment, and income within a national economy. In many developed economies, transportation accounts for between 6% and 12% of the GDP. Further, logistics costs can account for between 6% and 25% of the GDP.
“The value of all transportation assets, including infrastructure and vehicles, can easily account for half the GDP of an advanced economy.
“At the microeconomic level (the importance of transportation for specific parts of the economy), transportation is linked to producer, consumer, and distribution costs.
“The importance of specific transport activities and infrastructure can thus be assessed for each sector of the economy.
“Usually, higher income levels are associated with a greater share of transportation in consumption expenses. Transportation accounts for between 10% and 15% of household expenditures. In comparison, it accounts for around 4% of the costs of each unit of output in manufacturing, but this figure varies greatly according to sub-sectors. Thus, from a general standpoint, the economic impacts of transportation can be direct, indirect, and induced,” he explained.
Surveys in some markets within Abuja again confirmed that rising transportation costs are hurting the economy through indiscriminate hikes in the prices of commodities.
By May 2024, a bag of 50kg rice was sold between N70,000 and N72,000 in Abuja markets and neighbouring states.
A bag of 25kg was sold between N32,000 to N35,000, while a bag of 10 kg was sold between N14,000 to N16,000.
The increase pointed to the effects of fuel hikes. Speaking with a trader at Nyanya market, Joshua Duada blamed the situation on insecurity and high transportation costs.
“It is very expensive to bring goods here (referring to Abuja). By the time you spend so much on fare, you will have to adjust the price in order to recover your money,” he stated.
At Karu market, Chineye Okafor said that foreign exchange and transport logistics are the indices pushing food prices upward.
“You see, the depreciation of the naira over time is causing prices of commodities, including food, to go up.
“Another factor is transport logistics. If you want to move goods from one state to the other in this country, you pay through your nose.
“When these goods arrive, the only way for you to recover your capital is to sell at a price that is high so that you are not at a loss,” she explained.
At the moment, the price of 50kg of rice has increased to over N87,000 and above, depending on the brand and quality of the rice.
Another expert, Nathaniel Atume, noted that as long as the federal government is still paying fuel subsidy, the price of petrol and every other thing will continue to rise because someone will have to pay for the cost to cover importation expenses.
He said even though Dangote refinery is on board and selling product to Nigeria, the majority of petrol is imported, therefore falling heavily under the whip of surging exchange rates.
“Obviously, if the economic policies of the federal government are not implemented effectively and immediately, the country may soon face another fuel increase, thereby pushing inflation further high,” he concluded.
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