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Rising transportation costs amidst high unemployment rate

Transportation in Nigeria is by land, water and air. Across the states of the federation, the patronage a means of transport gets depends on the locations and amount of transport infrastructure available. Therefore, considering the spatial characteristics of each Nigerian state, intra and interstate modes of transport could be different, depending on what is available and convenient for the commuters.
In the urban areas of most states, we see more of road, air transport and sometimes water and rail. In the rural areas, it is more of road transport if there are no rivers, or more of water transport if the location is a riverine area.

As shown by the National Bureau of Statistics (NBS), transport expenditure is a major component of non-food and total expenditures. In 2009, Nigeria’s total transport expenditure was N823.24 billion. In other words, the cumulative transport expenditure of the three arms of government, firms and households in the country added up to N823.24 billion, representing 3.39 percent of the nation’s total consumption expenditure. That year, 63 percent of the nation’s transport bill, or N517.13 billion was spent in the urban areas whereas N306.10 billion or 37 percent was spent in the rural communities.

Still on 2009, urban transport expenditure of N517.13 billion represented 4.87 percent of urban dwellers’ total consumption expenditure. Put differently, when an urban dweller in that year spent N10,000 as total consumption expenditure, N487 was spent as transport fare. On the contrary, when a rural dweller spent the same amount of money, only N225 was spent as transport fare.

Fast forward to 2019/2020, and as stated in the consumption expenditure data released by the NBS, the nation’s transport expenditure had increased by 214 percent from N823.23 billion to N2.59 trillion. Its components, urban transport expenditure had risen by 173 percent from N517.13 billion to N1.41 trillion while the rural transport expenditure component had increased by 285 percent to N1.18 trillion from N306.10 billion a decade ago.

While the urban transport expenditure’s share in total national transport expenditure fell to 54 percent in 2019/2020 compared to 63 percent in 2009, the rural share of the total transport expenditure jumped to 46 percent from 37 percent in 2009.
What the above analysis implies is that when a rural dweller spent N225 as transport fare out of every N10,000 he earned in 2009, the same individual spent N559 on transport out of every N10,000 he made as income in 2019/2020. The urban dwellers that spent N487 as transport fare about a decade ago spent N738 in 2019/2020 on the same need.

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A major factor attributed to the consistent rise in the transport fares across different modes is the gradual deregulation of the downstream segment of the oil and gas industry in Nigeria. In effect, the prices of petroleum products are to be decided by market forces.

Source: NBS, BRIU

That position is reasonable because, between February 2020 and March 2021, the prices of crude oil (OPEC) have risen by 8.89 percent at the international market. Between December 2020 and March 26, 2021, the prices of the same product have risen by 22.2 percent from $51.27 per barrel on December 31, 2020 to $62.63 per barrel as of March 26, 2021.

Further, headline inflation rose the highest in 46 months to 17.33 percent in February 2021. In February 2020, inflation was just 12.20 percent. Another factor is the unemployment rate that soared to 33.3 percent by December 2020 up from 23.1 percent in Q3 2018. Presently, 23.18 million Nigerians are unemployed making Nigeria as one of the worst hit countries by unemployment challenges in the world.
“Before the landing cost of fuel became this prohibitive, the prices of petroleum products had been adjusting in line with the market forces. What we said then was that the deregulation policy would be tested when the crude oil prices rose at the international market. At the current price, petroleum products should be selling around N200 a litre or more.

“At the current crude oil prices, the marketers are engaging with government and the position of deregulation is yet to be made clear to everyone. Should we question the deregulation policy? My position is that government should have allowed the market forces to determine the prices of products, but I think there are other considerations open to government”, Junad Ahmad, analyst at Meristem Securities said.

The February 2021 transport expenditure data shows that transport fares across the different modes in the country have continued to rise, implying households and firms are now sacrificing other needs to meet transportation expenses.

Across the different transportation modes, transport fare paid to motorcycle popularly known as Okada rose the most between February 2020 and February 2021. On the average, the fare paid for this mode of transport increased by 102.69 percent during the period in Nigeria, as further analysis shows that out of the 36 states and FCT Abuja, seventeen states recorded higher growth than the national average.

In Benue State, the fare paid to motorcycle rose the most during the period under review. On a year on year basis, the increase was 232.16 percent between February 2020 and February 2021. The rise in motorcycle fare was 212 percent in Oyo; 199.20 percent in Plateau; 186.50 percent in Jigawa, and 173.59 percent in Kano.
Other states where the journey by motorcycle rose by three digits are Delta, 155.74 percent; Ekiti, 148.79 percent; Borno, 140.92 percent; Taraba, 133.26 percent; Yobe,130.99 percent; Cross River, 129.13 percent; Zamfara, 126.72 percent; Kebbi,116.53 percent; Katsina, 113.27 percent; Kwara, 111.66 percent; Gombe, 109.29 percent and Ondo, 103.79 percent.

The rise in transport fare for movement by bus within the state was highest or by 395.42 percent in Bauchi State in the last twelve months. Transport fare for within the state movement increased by 138.81 percent in Imo State. The increase was 134.92 percent in Jigawa; 133.77 percent in Niger; 122.25 percent in Ondo, and 114.24 percent in Gombe State.

The increase in Delta State was 110.33 percent; 108.91 percent in Kano; 107.32 percent in Edo State; 107.09 percent in Yobe; 106.63 percent in Ekiti and 102.11 percent in Ogun State. Other states of the federation recorded double digits growth in within the state transport fares except in Oyo State where the within the transport fare fell by -6.18 percent. On the average, the within-the-state transport fare rose by 85.63 percent nationwide.
Interstate bus transport fare increased by 44.34 percent on the average between February 2020 and February 2021. The most increase was in Kaduna, Bauchi and Enugu states while the least growth in interstate transport fare was in Borno, Benue and Abuja.

Imo and Ebonyi states witnessed the most increase in water transportation fares during the reference period. They were the only states with three digits growth in water transport fares at 113.90 percent and 102.80 percent respectively.
The states with the least growth in water transport fare were Delta, Ondo and Taraba at 20.65 percent, 11.89 percent, and 4.18 percent respectively.

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