• Sunday, June 16, 2024
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BusinessDay

Nigeria’s cost of living crisis worsens on fuel price hike

The recent surge in the price of fuel across the country will worsen the country’s cost of living crisis as households struggle to keep up with the rising cost of goods and services.

Over the past year, Nigerians have been struggling to afford basic needs and desperately seeking financial support as inflation erodes household incomes.

The situation has continued to worsen since the beginning of the year with prospects of more due to the recent hike in fuel prices.

“Cost of living is about to skyrocket with this fuel subsidy removal,” Dapo David said in a tweet while reacting to the announcement removal of the fuel subsidy.

Also, Tosin Olaseinde, the founder of Money Africa tweeted, “This has been a long year. Cash scarcity, the surge in diesel price and electricity cost, election tension, and now subsidy removal. Please when exactly are we going to rest?” she asked.

On Monday, May 29, President Bola Tinubu announced during his inaugural speech the removal of the petrol subsidy.

“Fuel subsidy is gone. The subsidy can no longer justify its ever-increasing costs in the wake of drying resources,” he said.

“We shall instead re-channel the funds into better investments in public infrastructure, education, health care, and jobs that will materially improve the lives of millions,” Tinubu said.

Barely three hours after the speech, fuel prices across the country surged by an average of 200 percent. Currently, pump prices across Nigeria are selling between N400-600.

BusinessDay reported that fuel is selling at the highest in Maiduguri at N577 per litre and lowest in Lagos state at N488 per litre, according to a reliable document.

Read also: 90% of Nigerians cut back on spending as inflation surge – Survey

Since the announcement, commuting has been difficult for many Nigerians. Transport fares for public vehicles and ride-hailing apps have doubled and buses have been scarce, spending more time queuing at petrol stations for fuel.

“Fuel drives our economy so you can imagine the impact of the recent surge. I usually pay N500 from Ketu to Obalende but I paid N1,000 because of the recent surge in fuel prices,” Ofure Imaku, a research analyst at a consultancy firm in Ikoyi said.

“The cost of living crisis will further worsen because prices of everything are going to surge again,” she said.

Nathan Ezeanaka an agric engineer also complained about the hike in transport prices.

“I travelled before the inauguration and went back today. The bus fare has doubled,” he said.

Many Nigerians are already living in fear of what this means to their standard of living.

“Nigerians should brace up for another round of inflation because the surge in fuel prices will trigger a sharp rise in prices of goods,” Michael Odundo, a painter said.

Nigeria’s inflation at 22.22 percent in April is far outpacing wage growth, according to data from the National Bureau of Statistics.

Food prices are up by over 150 percent, and transportation costs have almost doubled respectively year-on-year, according to BusinessDay’s market checks.

With food inflation hitting 24.61 percent, the key driver of Nigeria’s core inflation as over 90 percent of the country’s working population spends 60 percent of their income on food and related expenses, analysts say.

An FAO 2023 report, said 25.3 million Nigerians are food insecure, and malnutrition rates in most northern states have more than doubled.

Analysts believe that the removal of the petrol subsidy will cause inflation to surge and cause the cost of living to rise in the short term but foresee a long-term benefit.

Samson Owolabi, investment research analyst at ARM Securities predicts severe inflation on the back of petrol subsidy removal.

“The price of everything will skyrocket significantly. We should brace up for the effects such as prolonged fuel scarcity and harsh business environment,” he said.

Samson said that however, these impacts will only be for a short period if the government takes the necessary steps to curb inflation.

Tajudeen Ibrahim, director of research and strategy at Chapel Hill Denham, also said that in the short term, the cost of living will rise, but there are long-term benefits to the removal of subsidies.

“N3.63 trillion is the amount that is budgeted for subsidy for six months this year, and we have an education sector that is suffering from low funding. And for instance, the highest education level (the Universities) requires only N1.1 trillion,” he said.

Ibrahim said that eventually, Nigerians will see the benefit of the removal.
“By the time we begin to see the benefits and dividends of subsidy removal, I think more Nigerians will feel the positive impact because currently, we have only three states/cities enjoying the subsidy,” he said.

Edobong Akpabio, chairperson of the agriculture and allied sector group of the Lagos Chamber of Commerce and Industry said the fuel subsidy removal will impact the cost of doing business, generally and that includes the activities in the food system.

“The cost of food was already taking a good chunk of the income of individuals and families and the subsidy removal is bound to exacerbate the situation. Nevertheless, I support the removal of the fuel subsidy,” she said.