In 1977, the then-military regime passed a decree that sought to control the prices of natural resources by ensuring it is not sold above the regulated price. This began the country’s forty years of experience with the subsidization of petroleum products. Over those years, trillions of Naira that could have been invested in critical sectors of the economy went down the drain as fuel subsidy in Nigeria. Successive administrations attempted to remove the subsidy and each faced stiff resistance from labor unions and civil society organizations.
Then came the Petroleum Industry Act which effectively rendered the 1977 decree obsolete and hence opened the door for removal of the subsidy. As of June 2023, the fuel subsidy is officially lifted.
The removal of subsidy can be likened to the weaning of an infant by his mother. Nigerians have been bottle-fed for more than forty years and now the bottle is taken away from them. This development is bound to have a series of trickle-down effects on not only the country’s economy but the lives of ordinary Nigerians.
It is against the backdrop of this overdue weaning of Nigerians, that this article will assess how the removal of the fuel subsidies will affect issues such as; transportation, housing, wages, and retail services.
Transportation
Transportation is the life wire of any city, region, and nation. It is the medium through which people, ideas, and goods are moved from one location to the other.
In Nigeria and indeed many other parts of the world, petroleum resource is the single most popular source of energy that power vehicles.
From motorcycles that convey the middle-income man from his home to his place of work. To the public buses that serve the purpose of conveying commuters from one part of the city to the other. Down to the lorries and trailers that transport farm products from the rural areas to the cities. All these vehicles are driven and powered by petroleum.
With the removal of subsidy on Nigerian fuel, the price of a liter has risen from 190 naira to well above 500 naira – more than 200% increase. This will invariably affect the cost of transportation in all Nigerian cities and as well the prices of goods.
People and goods are not moved unless there is a demand for them to be moved. The demand for people to travel to their places of work can never change. Neither is the demand for farm produces to be transported to the city. This means that regardless of how much a liter of petrol is sold, people and goods must be moved.
The cost of these movements will, however, be borne by the ordinary Nigerian. And it is for this reason that Nigerians have to look for options to cope with the sharp sting of price hikes.
Here are some of the ways to cope with the rise in transportation costs:
- Bicycles are old and trusted means of transportation with very minimal maintenance and operation costs. Investing in bicycles is a wise decision in this era. Plus, bicycles are environmentally friendly and improve the rider’s physical fitness.
- Carpooling is the process through which one car is used to carry more than one passenger at a time. The time of driving in a car alone should be behind us. It will be a good idea to scout for reliable neighbors with whom you share similar movement schedules and routes to be sharing the same ride and splitting fuel costs. In cases where such private cars are not available, using public buses is a good option as the fare is cheaper.
- Walking or trekking is a great way to exercise one’s body, cover reasonable distances and connect with one’s surroundings. For distances that are not significantly far, trekking is a good option to explore. An additional advantage of this is that it fosters social cohesion and bonding among people that walk together.
- Trip planning is a great way to ensure that you achieve the most tasks in one single trip when using a vehicle. This is possible by aligning your errands and ensuring you achieve the most in a single outing. This can also be achieved by planning and identifying the shortest routes to arriving at your destination.
Housing
Housing is an important factor in the discussion of fuel subsidy removal and the attendant rise in transportation costs. This is because the distance between one’s home to his place of work is a great determinant of how much he will spend on transportation.
As it is in many cities, most of the places of work and institutions are concentrated in the central business district. This makes the price of land, housing, and rent at the center of any city to be off the roof. This makes it very hard for low-income earners to own or rent a house in central areas of the city. In essence, many people will have to commute long distances to their places of work. For that reason, the tips suggested on coping with transportation costs will come in very handy.
But then, there is also the issue of student housing to contend with when assessing the effects of transport fares. Many of the public universities in Nigeria do not have adequate accommodations for their students. This is what has given rise to the off-campus renting phenomenon in towns surrounding many federal and state universities.
With the rise in transportation costs, many students who live far from the school will watch as their monthly stipends evaporate on transport fares. For this reason, there will be an increased demand for houses that are very close to the school. If our knowledge of off-campus landlords is anything to go by, then an increase in rent fees is very imminent.
With the increase in transport cost, housing costs, and purported removal of education subsidies, the future of Nigerian students’ life experience is taking a very rigorous shape. The school hostel will become hotly competitive among students in the coming years.
If the money saved from fuel and education subsidy removal should be used for anything, a purposeful improvement in student housing has to be given utmost importance. The connection between good housing and better life experience is well established.
Public institutions and especially state governments should as a matter of urgency invest in building houses through private partnerships for their employees in reasonable locations that will significantly reduce travel time. The housing stock deficit of Nigeria should gain from the removal of subsidies by seeing remarkable investment in the sector.
Wages
The issue of wages is as contentious in Nigeria as it is anywhere in the world. The working class is always demanding better pay and working conditions while the owners of capital and the means of production are never short of tricks to pay less. The removal of fuel subsidy has opened a floodgate for the timeless debate around what the minimum wage should be. Presently pegged at 30,000 Naira, many states of the country and indeed employers of labor in the private sector are not able to pay minimum wage.
This subsidy policy will add to the already strenuous dynamics that exist in the labor market. As a response to the subsidy removal, Kwara and Edo states have announced a reduction in working days as a temporary measure. This cosmetic approach may offer succour for the working class but it doesn’t address the bigger picture. The impact of the subsidy removal cuts deeper than working days.
It will be left for experts in economics to proffer ways that will ensure an increase in wages will not translate into inflation. This seems like a tall order and a herculean task. The prospect of a new economic team to be headed by the new Vice President of Nigeria offers a refreshing case study for interested students.
As a significant part of low-income earner’s wages get expended on transportation costs, the need for more austerity measures among families will be seen. This is further compounded by the fact that most low-income earners live in the outskirts of cities. As the cost of rent in central areas is well above their income.
The failure of many state governments and private institutions to provide housing for their staff in places that are closer to their places of work further compounds this. Workers who live in staff quarters located inside their place of work will hardly have the issue of transportation costs to contend with. But this is Nigeria, where those government staff housings have since been sold to people with connection to the government. A decision that will now serve as a source of hardship for staff who desperately need to live close to their place of work.
Retail Services
More than 70℅ Nigerians are employed in the informal sector with little or no structure. A significant part of this sector is dominated by retailers and providers of other minor services. This section of the economy will be worst hit by the increment in petrol prices. The market at this level is erratic and responds sharply to changes in market dynamics.
Due to the low purchasing power of many Nigerians, they rely on retail services for their day-to-day needs. Most Nigerians can not afford to buy a bag of rice to keep at home that will last them a few months. In fact, the price of a bag is higher than the minimum wage in the country. This leaves many Nigerians exposed to the recurring increase in prices that will arise from the removal of subsidy.
The cost of traveling to the market alone to purchase these items on a recurring basis consumes the meager wage of the masses. Now, providers of services will have no option but to hike their service fees. This is another incursion into the finances of service requesters.
The logistic business that connects retailers to consumers by delivery service will suffer some significant hit as a result of rising costs in transport fares. The past few years have seen the rise of online businesses especially on social media. And these businesses rely heavily on delivery services to connect with their customers. When customers can not afford to pay for delivery fees on one or two items whose costs are not significant, these online small-scale businesses can be negatively affected.
The push and pull between retailers and consumers is one that will continue to swing for the next foreseeable time being. Businesses have to either increase the prices of their wares to incorporate delivery fees. Or continue to fight the endless back-and-forth negotiations with customers who are not finding the heat of the economy on their lifestyle funny.
Conclusion
The subsidy removal policy has shown us how very much dependent the socioeconomic life of Nigeria is on petroleum. The effects of the increase in petrol prices cut across all sectors from transportation, and housing to retail services. It has also been established that a single policy can change the entire social fabric of a nation. The effects of forty years of subsidizing petroleum products to Nigerians have created a psyche of dependency on government help.
In an administration that is very much tilting towards the transfer of responsibility to Nigerian citizens, the next few decades will be very decisive. Many hardworking and wise Nigerians will climb up the ladder to success while those who choose to cling to the bottle of subsidy will be lost to the wind of change.
The next generation of Nigerians will be those who toil to survive the waters with little to no government help. And this will create a consciousness of keeping the government accountable to its duties. Because, after all, Nigerians are now being made out of their own sheer determination and struggle not half-hearted subsidies.
