- Workers, students trek to cut down on transportation costs
- Vehicle owners abandon cars for commercial buses
- Business owners reduce office hours Ostentatious living wanes
Ali Raji, an IT engineer with a Nigerian leading hi-tech company in Lagos, has three cars. He uses one almost daily to get to work while his wife, a banker, uses another, basically, to get to work and back Monday to Friday.
His brother, who lives with them, is in the custody of the third one. He uses it for home runs: getting the children to school in the morning and returning in the afternoon to bring them home. He also runs errands to the local malls and other places in the neighbourhood. He practically keeps the key to the car, sometimes cruising around with his friends.
But all that has changed, no thanks to the rise in the pump price petrol following the removal of fuel subsidy by the new Nigerian government.
“With the new pump price, which jumped from N185 to almost N600 per litre (over 300 per cent increase), it means I have to spend an average of N60,000 on fuel every week if I have to continue in that way. It is killing me so I told my family we have to adjust,” Raji enthused.
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President Bola Tinubu ended the subsidy regime during his inaugural speech on May 29, saying it was unsustainable and a drain on public finances.
Fuel subsidies cost the government over N400 billion (around $867 million) monthly, according to figures from state-owned oil firm, Nigerian National Petroleum Corporation (NNPC).
The subsidies had kept the price of fuel artificially low for decades, although prices had steadily climbed through the years.
Implemented in the 1970s, many governments had carried on with fuel subsidy but the immediate past President Muhammadu Buhari did not provide for subsidy in the budget beyond May when he handed over.
It has now been two months since the subsidy was halted and Nigerians are grappling with a soaring rise in living costs.
Transportation has gone up; automatically triggering food prices and costs for other household items.
Raji, who is categorised in the high-income bracket, said he experienced pains in his pocket and psyche in the first month of the hike and quickly had to readjust.
“I noticed that I spent N60,000 on petrol in the first week and as much as I tried to adjust, I was only able to drop down to N50,000.”
At this point, Raji took a decisive step: he put the car meant for home runs up for sale and resolved to go with his wife to the office in one car.
He said: “The family uses one car now for school and office runs.
“My wife and I now ride in one car. I drop her off at her office before heading to my place of work, and she joins me in the office later in the day so we come back together.
“As for our children, we encourage them to wake up early and we drop them off at their school on our way to the office. After school, they find their way home.”
Raji said he has cut his spending on fuel down to 20,000 per week since the adjustment. “Before the increase, I spend roughly the same amount on the three cars per week.”
Banker Emmanuel Anuolu travels to work on Lagos Island from his mainland home on the Lagos-Ibadan Expressway, Monday to Friday. “I used to assist four friends who live in my estate and going the same route. I drop them off in my office and they proceed to their respective offices. At the close of work, they will come back to my office for the return trip.”
After buying N30,000 petrol the first week after the hike, Anuolu realised he could not keep up with the high cost.
“I wanted to leave the car at home but the option of boarding commercial buses and the resultant cost was not a wise decision.
“I knew I needed help and mooted the idea with my friends for them to support me financially. They simply laughed it off.”
Anuolu hatched his carefully thought out plan the following week. He left much earlier than usual without calling on his friends and picked up four passengers going his route.
“On my way back, I did the same and made N10,000, which I used to refuel my car.
“The following day, my friends tracked me down and apologised for being insensitive.
“As I speak, they have been supporting me with N15,000 every week. The gesture is the subsidy and the adjustment I needed to keep afloat.”
Similarly, Engineer Ahmed Sina recounted a recent journey to Ibadan with his Toyota Highlander with four other club members.
He said: “Our plan was to go together in a Toyota Corolla Salon car belonging to one of us. Unfortunately, the car developed a fault a day before. I was left with no choice but to use my vehicle, which consumes much more fuel than a car.”
Situ said under the old pump price regime, he would not have bothered his club mates.
“But things have changed. I realised how much fuel and money I would be burning on the trip, and without support from my friends, it would dig a big hole in my pocket.
“Fortunately, they were considerate. They brought out money for fuel without being prompted.”
He noted that it is no longer fashionable and sustainable for four persons going the same place to put individual cars on the road. “That is the way to adjust to the new price regime and I know a lot of people have been doing that,” he said.
For Damola Iyiola, he had to sacrifice his comfort to make ends meet. He has dropped his car at home since the hike in the pump price of fuel, to ride commercial buses to work. “My salary cannot carry the bill as I have to spend three times more on my car,” he said.
Not only that, he spends at least two nights in one week in the office to further reduce the soaring cost of transportation.
“Cost of living has gone up. Food prices and school fees have gone up. Basically, prices of everything have gone through the roof since the fuel subsidy removal. I have to adjust to it by sacrificing my comfort.”
Likewise, Mr. Ezekiel Johnson, a banker with a frontline bank in Lagos Island, comes home only on weekends to lessen the burden occasioned by the hike in the price of fuel. This is coupled with the incessant traffic jam on the Lagos-Ibadan Expressway.
Johnson said: “The cost of fueling my car daily to go to work is killing me. The gridlock is also not helping me health-wise.
“I spend hours getting to the office and returning home, burning fuel and money. My body and pocket can no longer take it. I’m afraid that one day I will just break down.”
To avoid a burnout, Johnson has secured a room in the bank’s guest house, which he manages Monday to Thursday. “I come home on Friday and go back early Monday,” he said.
Johnson said his two children were away to the university and so he does not miss them much. “My wife is managing fine without me,” he added.
For Mrs. Foluke Fashaki, a housewife, the adjustment comes by way of cutting down on the use of their household generator.
She said: “Before the last increase, we used to buy at least 10 litres of petrol every two days.
“I have a baby who cannot sleep without a fan, so throughout the night, we have to keep the electricity on.
“My husband cannot afford it again because the 10 litres that we were buying with less than N2000 now costs about N5,000.
“We have designed a way to keep our baby asleep without a fan and adjust to the new life.”
Schoolchildren are not left out of the adjustment. The hike in the price of fuel has made many schools to increase their bus fees. Before now, schools charged between N15,000 and N20,000 on a student per term. The charges have jumped to about N40,000, necessitating students to walk from home to school and back.
Mrs Oluyombo, proprietress of Treasure Land Academy, Ogun State, said the school had to do some adjustments since the pump price increased.
She said: “We hardly make enough to cover the cost of fueling and servicing our buses before the latest increase in pump price.
“After the rise in fuel price, we had no choice but to increase our trabsport fee. The result is that some students, especially the older ones, stopped following our buses. Most of them walk home after school.”
As for Mr. Bakare Olanrewaju, a resident of Abuja, his own way of adjusting to the biting inflation is to do without the comfort of his car air condition (AC). “Before now I wouldn’t off my AC. But it has become expedient, due to the rising cost of living, to put off my car AC whenever the weather is favourable.
“In fact, as soon as the sun goes down, I wind down my windows and put off the AC so as to save fuel. That is a luxury I can no longer afford.”
In Lagos, transport cost has risen sharply, causing many workers trek part of the way in order not to overspend.
Before the subsidy removal, transportation from Oshodi to Mowe used to cost N600. Now it is N1000, while a short ride from Oshodi to Fatai Atere Roundabout, Mushin, which used to cost N100 now attracts N200.
Many workers in the Fatai Atere axis say they now trek from Oshodi to work as they could no longer afford the cost of transportation.
Miss Juliet, a security official in one of the blue-chip communication companies along the route, said her meager salary could no longer accommodate it.
She said: “Since the fuel hike and transport fare have gone up, I walk from Oshodi to the office every morning and in the evening when I am going home.
“My salary cannot accommodate that major increase. Maybe, when I get an increase in my salary I would begin to take a bus to the office again.”
Sikiru Adisa, who works as an unskilled factory worker in Ikeja, Lagos, has been spending more of his time in the office. “My house is in Ota, Ogun State, and for me to come to work every day, I spent at least N2,500 on transportation alone. I cannot afford it,” he said.
Adisa’s way of adjusting to the new price regime is to sleep in the office from Monday to Friday.
“I see my family only on weekends. Once I leave home on Monday morning, I find a way to sleep at work and go home on Friday evening. It is telling on my health but I don’t have any other way to go for now.”
WAITING ON MARKET FORCES
Although economic experts have supported an end to the subsidy regime, they have also suggested that fuel prices will now be determined by market forces under a free market policy.
The implication is that competition may force the price down just as it happened in the communication sector.
“Economist Bismarck Rewane agrees that halting fuel subsidy “makes economic sense”. But he says the saved proceeds from the scheme must be ploughed back into making the lives of Nigerians better.
Rewane said: “The economics of it (subsidy removal) makes sense… It is a more efficient thing because the subsidy cannot continue. But it has to be removed in a way that it can be used to enhance the quality of life of Nigerians.”
GOVT OFFERS RELIEF PACKAGE
President Tinubu rolled out a relief package in a nationwide broadcast on July 31, 2023. He announced the plan to spend billions of naira between now and March next year, to boost the economy and stimulate businesses.
He said: “To strengthen the manufacturing sector, increase its capacity to expand, and create good-paying jobs, we are going to spend N75 billion between July 2023 and March 2024.
“Our objective is to fund 75 enterprises with great potential to kick-start sustainable economic growth, accelerate structural transformation and improve productivity.
“Each of the 75 manufacturing enterprises will be able to access N1 billion credit at nine per cent per annum with a maximum of 60 months repayment for long-term loans and 12 months for working capital.”
On MSME, the President said N125 billion would be made available to energise the sector as a key growth driver.
“Our administration recognises the importance of micro, small, and medium-sized enterprises and the informal sector as drivers of growth. We are going to energise this very important sector with N125 billion.
“Out of the sum, we will spend N50 billion on conditional grants to one million nano businesses between July 2023 and March 2024.
“Our target is to give N50,000 each to 1,300 nano business owners in each of the 774 local governments across the country.
“Ultimately, this programme will further drive financial inclusion by on boardingbeneficiaries into the formal banking system,” he said.
President Tinubu announced another N75 billion for 100,000 MSME start-ups at nine per cent interest rate payable in 36 months.
He said: “In like manner, we will fund 100,000 MSMEs and start-ups with N75 billion.
“Under this scheme, each enterprise promoter will be able to get between N500,000 to N1 million at nine percent interest per annum and a repayment period of 36 months.”
The President said the government saved over N1 trillion from the petrol subsidy removal, which he said would be used to further develop different socio-economic sectors.
“In a little over two months, we have saved over a trillion naira that would have been squandered on the unproductive fuel subsidy, which only benefitted smugglers and fraudsters.
“That money will now be used more directly and more beneficially for you and your families. For example, we shall fulfill our promise to make education more affordable to all and loans to students who may need them,” he said.
To boost agriculture and food security, the President ordered the release of 200,000 metric tonnes of grains from strategic reserves to households across the 36 states and FCT to moderate prices. He also said that 225,000 metric tonnes of fertilizer, seedlings and other inputs would be provided to farmers.
President Tinubu said part of the N500 billion approved by the National Assembly would go into the cultivation of the over 500,000 arable lands across the country for all seasons cultivation.
“Our plan to support the cultivation of 500,000 hectares of farmland and all-year-round farming practice remains on course. To be specific, N200 billion out of the N500 billion approved by the National Assembly will be disbursed as follows:
“Our administration will invest N50 billion each to cultivate 150,000 hectares of rice and maize.
“N50 billion each will also be earmarked to cultivate 100,000 hectares of wheat and cassava.”
In the same vein, he said, workers’ salaries would be reviewed upwardly. “Once we agree on the new minimum wage and general upward review, we will make budget provisions for it for immediate implementation,” he said.
To bring down the transportation cost and assuage people’s burden, the President said N100 billion had been earmarked for the provision of 3,000 CNG-fueled buses, which would be given to transport companies at subsidised rates.
“Part of our programme is to roll out buses across the states and local governments for mass transit at a much more affordable rate.
“We have made provision to invest N100 billion between now and March 2024 to acquire 3000 units of 20-seater CNG-fuelled buses.
“These buses will be shared with major transportation companies in the states, using the intensity of travel per capita.
couching effects on workers while the 20 seater CNG buses are good for immediate palliative. It would enhance economic activities and provide jobs.
“The Infrastructure Trust Fund with transparency and accountability has so much long term benefits.
“Infrastructure investment in healthcare sector would reduce the outflow of Forex for foreign medical treatment, migration of medical professionals, and availability of good and affordable treatment in our hospitals.”
Lanre Ogundeyi, a businessman in the agro-allied sector, cautioned that the loan to the agric and manufacturing sectors should have a moratorium of six months before the commencement of repayment to enable them stabilise while FG should encourage and legalise crowd-funding in MSME.
“That is how it is done in other developing countries. But it should be properly monitored by CBN, and SEC to avoid default.”
He, however, envisaged a problem in the nano business financing: “Is there any statistical census of these businesses? How do you identify them? If care is not taken, the fund may end up in the pockets of civil servants without achieving its intended purpose.”
Likewise, he said the distribution of grains/fertilizer needs to be monitored and properly accounted for.
“This is important considering the fact that 80 per cent of farmers (especially in the south) have not benefited from it in the past,” Ogundeyi said.
Sola Ogunwale, Director at investment outfit Rawcon Royale Resources, is not optimistic that the FG’s relief package will bring outright economic liberation to Nigerians.
He said: “Looking at the intervention time focus, which is between July 2023 and March 2024, the objective is to fund enterprises with great potential to kick start sustainable economic growth through N75 billion payment to 75 enterprises.
“Each enterprise to get N1 billion per obligor at 9 per cent interest per annum, with a maximum of 12 – 36 months repayment for both working capital and long-term loan respectively.
“Also in the MSME, N125 billion is to be made available with N50,000 payment to 1300 nano businesses between July 2023 and March 2024, and N750,000 payment to 100,000 start-up MSMEs.
TAKE AWAY
“It has become evident the two-month-old subsidy removal triggered economic dislocation. This dislocation needs to be viewed in the context of the cost implication of energy crises on industrial productivity and growth.
“Let us look at the hypothetical scenarios: An increase in PMS rate from the old price of N185 per litre means 33,000 litres will cost N6, 105,000.00. Today, same 33,000 litres goes for N17, 061,000.00. That is an additional burden of N10, 956,000.00.
“Equally, in the Exchange Unification, we are talking about additional burden for manufacturers with a new rate of USD 10,000 at N840 equal to N8,4 million, from the old rate of USD 10,000 at N425, equal to 4,3 billion. Here, the additional burden of N4, 150,000.00 is what a manufacturing company has to deal with.
“To start with, the amount of N200 billion being touted is too paltry in the circumstance to kick start the economy in view of the magnitude of the dislocation at least for an import-dependent economy like ours. As a business one needs an average of an additional N415 to purchase a dollar post-policy introduction.
“For argument’s sake, a CBN official was quoted some time ago saying that FG through CBN disbursed over N1.4trilion between 2015 to date under Anchor Borrower Programme which is the same model under discussion. Even then, considered as more business-friendly compared to the moment, there were challenges against the programme.”
Ogunwale summarised that the Federal Government will need to give more to established enterprises than start-ups to achieve meaningful results.
“Allocation of the proposed intervention fund between established Enterprises and start-up MSME may be a factor for success.
“I am of the opinion that N125 billion may be needed to allocate to the former and N75 billion to the latter for any meaningful impact on the economy in the medium to long term, instead of the other way being proposed,” added Ogunwale.