• Thursday, February 29, 2024
businessday logo


How high fuel costs hindered transport sector growth in 2023


The surge in Nigeria’s inflation rate, which increased to 28.9 percent in November 2023 and high energy costs are the major economic headwinds that negatively affected Nigeria’s passenger transport and haulage business in 2023.

Energy costs started soaring in early June 2023 following the fuel subsidy removal announcement by President Bola Tinubu during his inaugural speech on May 29, 2023. This led to an increase in the petrol pump price from N195/litre during the subsidy era to N565/litre and to as much as N637/litre depending on the state and dealer.

Read Also:Top 10 African countries with cheapest fuel at the outset of 2024

With the increase in pump prices, Nigeria’s interstate transportation fares started soaring by over 100 percent from between N11,500 and N12,500 per trip during subsidy to between N26,000 and N33,500 in June, which was an off-season rate.

Meanwhile, interstate transport fares further soared higher in December, which was the peak season for Christmas holiday travellers. With the fare rise, Christmas travellers paid between N32,000 and N40,000 and more for a bus ticket to embark on an interstate trip.

Read Also: Unilever raises safety awareness for transporters

This development moved the Federal Government to intervene by slashing interstate transport fares by 50 percent and announcing free train rides for Nigerians from Thursday, December 21, 2023, to January 4, 2024.

“The transport fare is on the high side, but it is expected because, with the removal of the petrol subsidy in May 2023, the interstate transport fare moved from an average of N11,000 per seat to as much as N26,000 per seat. So, it is not surprising that a bus ticket to the East or Abuja from Lagos will be over N40,000 this Christmas,” Chijioke Osondu, a Lagos-based businessman told BusinessDay earlier in December.

The cost of transportation has a huge impact on the market prices of commodities vis-à-vis inflation because market dealers will always factor in the cost of transportation before setting the prices of commodities.

Aside from passenger transport, importers were also affected as they paid a premium to move their laden containers from the seaports in Apapa to warehouses across the country due to the price of diesel.

BusinessDay checks show that the cost of moving containers from Lagos port to importers’ warehouses in Lagos increased by an average of 100 percent in 2023.

According to truckers, buying diesel for N1,300/ litre, made it difficult for them to break even.

In the year under review, transporting a 40-foot container from Apapa to Mushin that used to be N400,000 grew to N800,000 while the transport cost of a 20-foot container from Apapa to a warehouse in Lagos hits between N350,000 and N400,000 from about N200,000.

Also, transporting a 40-foot container from Lagos to Onitsha or Nnewi in the East soared to N1.8 million while a 20-foot container from Lagos to a warehouse in Onitsha or Nnewi was moved for N800,000.

Read Also: How inflation, FX waged war against businesses in 2023

Meanwhile, the cost of taking a 40-foot container from Lagos to Abuja grew to N1.6 million; a 20-foot container from Lagos to a warehouse in the north hit N800,000; a 40-foot container from Lagos to Kano costs went up to N2.4 million while a 20-foot container from Lagos to Kano cost as much as N1 million.

“The soaring price of diesel is seriously affecting our business and it is no longer easy for one to embark on a trip without making sure that the payment will cover the money spent on fueling the truck,” said Bello Yusuf, a truck operator.

Another factor that dealt with the transport business in Nigeria within the period under review was inflation which hiked the prices of spare parts and the cost of vehicle maintenance for transporters and car owners.

“Vehicle spare parts are very expensive. One China tyre sells between N170,000 and N180,000 each while tokunbo tyre sells for between N100,000 and N110,000 each. Imagine how much a trucker will spend to change the tyres of a truck that goes with 18 to 22 tyres,” Yusuf said.

Car spare parts were not left out as car owners also took their share of the cake.

Stephen Udochukwu, who drives a 2008 model Toyota Camry, said he spent over N800,000 to put his car in order in preparation for the Christmas trip.

“I spent N150,000 alone to change the four-shock absolvers, which was formerly sold for N90,000 in 2022; N45,000 to change the radiator that was formerly sold for N25,000; N45,000 to buy gear oil that was formerly sold for N25,000; two shafts that used to go for N25,000 for N75,000; engine oil that was N15,000 is now N25,000; engine seat that was N10,000 before now sells for N20,000; ball joint N15,000; tie rod N10,000 and steering rubber that was N5,000 before now goes for N10,000.

“There were other little parts that I changed, and the mechanic collected a service charge of N30,000 that was formerly charged N15,000. In addition to the mechanical work, I spent over N350,000 to do the bodywork alone, fix some bad parts and repaint my vehicle. I was forced to repaint my vehicle because the last time I did that was five years exactly in 2018,” Udochukwu said.