Special Report
How cost of fuel is affecting Nigerians
Nigeria is the sixth largest exporter of petroleum in the world. As a result, a commodity that can easily define Nigeria’s economy is petrol. Thus, any change in the price of petrol can affect the nations micro and macroeconomic indices because crude oil is the primary state of the nations economy. The question is: How is the cost of fuel affecting filling station owners, motorists, commuters and the general public? It is on this reason Emmanuel Ntekim, in this edition of WatchmanPost special report, attempts to give answers to the question.
In the Beginning
Nigeria has had a long and turbulent journey with its oil industry, what we may call the fluctuations in the price of petrol over the years. Experiences has shown that any increase in fuel price will definitely affect the people. Let us look at the evolution of the prices of petrol in Nigeria.
On July 18, 2023, the Nigerian National Petroleum Company Limited (NNPCL) announced the newly reviewed pump prices of petrol across the country following the removal of subsidy on the commodity. We are told through a conflicting report from the NNPCL, and even some marketers, that the official pump price of petrol (PMS) in Nigeria is N617. But due to logistics and other factors that vary by location, the commodity presently goes for prices ranging from N600 to N700 per litre across the country, even at that, in Akwa Ibom the fuel per litre is approximately sold between ₦1,040 and ₦ 1,010 per litre.
It is on record that in the late 1960s and early 1970s, the price of a litre of fuel was between 6k (kobo) and 9k (kobo). Between that time and now, petrol price in Nigeria has increased tremendously. Here is a brief history of petrol prices in Nigeria under various administrations:
Gowon (1966-1975) from 6k to 8.45k
Murtala Murtala (1975-1976) from 8.45k to 9k
Obasanjo (1976-1979) from 9k to 15.3k
Shagari (1979-1983) from 15.3k to 20k
Buhari (1983-1985) from 20k to 20k (Price remains the same)
Babangida (1985 1993) from 20k to 39.5k
Babangida from 39.5k to 42k
Babangida from 42k to 60k (Private Vehicles)
Babangida from 60k to 70k
Shonekan (August 1993-November 1993) from 70k to N5 (Naira)
Abacha (November 1993-June, 1998) from N5 to N3.25k (Price drops)
Abacha from N3.25k to N15
Abacha from N15 to N11 (Price drops)
Abubakar (June 1998-May,1999) from N11 to N25
Abubakar from N25 to N20 (Price drops)
Obasanjo (1999-May, 2007) from N20 to N30
Obasanjo from N30 to N22 (Price drops)
Obasanjo from N22 to N26
Obasanjo from N26 to N42
Obasanjo from N42 to N50
Obasanjo from N50 to N65
Obasanjo from N65 to N75
Yar’Adua (May 2007-2010)– from N75 to N65 (Price drops)
Jonathan (2010-2015) – (New year present) N141
Jonathan – (After labour strike) N97
Jonathan – (As Feb, 2015 Election approaches) N87
Buhari (2015-2023) – from N87 to N165
Tinubu (2023-to date) – N165 to ₦1,040
The above is incredible how the price of petrol per liter has increased in Nigeria within the spate of 50 years. Petrol is, perhaps, the most used commodity in Nigeria. Some of its uses include:
Fuel for car/Motorbikes
This is the most common use of petroleum across the globe. It is the same in Nigeria. Whether for cars, SUVs, buses, motorbikes and so on, petrol is an unavoidable necessity (at least until we begin to have electric cars in the country). Until then, well continue to find automobiles of all kinds at filling stations across the country.
Fuel for power generators
The Up-NEPA syndrome is still a Nigerian phenomenon and will probably be for many years to come. This scarcity of electricity from the national grid and the resultant blackout common in the country has led to the proliferation of generators in many homes in Nigeria. For now, these generators need petrol and, in some cases, diesel to work. Therefore, the price of petrol will be a concern for such generator users.
Fuel for pump machines
Another area where petroleum is used massively in Nigeria is among vulcanizers and those who use different kinds of pump machines. Vulcanising is a major business activity among the lower class in Nigeria. Definitely, there is a lot of attention and focus on the price of petrol, especially among these people.
Petrol for industry
There are several industries in Nigeria that produce goods which have petroleum as a primary component. Jellies, pomades, and Vaseline are good examples of this. There are also glue-making industries that require petroleum in their production processes. The cost of petroleum will definitely be a cause for concern for such people.
Consumption of Fuel
Reports and researches have revealed that petrol consumption that was 60 million litres per day in May 2023 in Nigeria has gone down and now stands below 4.5 million litres per day. The extreme drop is attributed to President Bola Tinubu’s removal of petrol subsidies on May 29, 2023, a policy move aimed at curbing the country’s soaring debt which had reached ₦12 trillion in 10 years, according to Segun Adeyemi. He noted that the removal of fuel subsidy triggered an immediate surge in petrol prices, rising from ₦195 per litre to approximately ₦1,300 per litre. This sharp increase has had widespread economic consequences, pushing Nigeria’s inflation rate to an almost three-decade high.
Affecting Filling Station Owners
This is what Ikem Okuhu says in his article What the falling fuel consumption numbers say of Nigerias deeply troubled economy. According to him, this is happening even as the alarm was being raised about the potential closure of 10,000 petrol stations as a result of the drop in patronage. If fuel consumption has fallen from a high of more than 60 million litres per day in the month President Bola Tinubu was sworn in, to just over 4 million litres, less than 18 months after, nothing could tell Mr. President of the level of regression the economy has witnessed under him and, in so short a time.
Unemployment, says Ikem Okuhu, is the next factor and stems directly from the slow grind or total shutdown of industry. Let us even start with the information from the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), which said about 10,000 operators might be forced to close their businesses.
Through his illustration, first, you have to assume that these 10,000 petrol stations have four pumps at each of their stations and means four attendants for each pump. Assuming they run two shifts each day, that is eight employees. If you add the person in charge of the accounts department, the manager, the person in charge of selling lubes, the tanker drivers and other staff, you are talking about, at least, 15 employees for each of the 10,000 petrol stations. Add the 150,000 people that will be affected here to the hundreds of thousands of others who are daily losing their jobs as factory workers and other employees along the value chain and it would be clear where we are as a people.
The hardship occasioned by the increased fuel costs has fractured Nigeria’s social interactions and made coping impossible.
Economic hardships
According to Segun Adeyemi, inflation peaked at 34.19% in June 2024 before slightly declining to 32.7% in September 2024. The recent data from the World Bank shows that the rising cost of living has plunged 129 million Nigerians into poverty. The World Bank report paints a grim picture of Nigeria’s economic situation. The report reveals that poverty has escalated from 40.1% in 2018 to a staggering 56% in 2024. This means that over half of Nigeria’s population is now living in poverty.
“Since 2018, the share of Nigerians living below the national poverty line has risen sharply, resulting in approximately 129 million people now classified as poor,” the World Bank stated. “Real GDP per capita has not recovered to the level it was at prior to the oil price-induced recession in 2016. The COVID-19 pandemic compounded this drop-in economic activity, leaving millions more vulnerable,” the report added.
Nigerians forced to abandon cars
The skyrocketing price of petrol has forced many Nigerians to abandon their cars. A report by AFP details how the economic strain has led to lifestyle changes, with Nigerians turning to public transportation to cut costs. Emmanuel, a 72-year-old retired health worker, shared his experience with AFP. “I parked my car at my son’s house. I use public transport now. It is not convenient, but it is what the economy demands,” he said.
Car dealerships have also felt the impact of the economic downturn. Many Nigerians are trading in their fuel-guzzling cars for more efficient vehicles. “People are actually selling their big cars these days,” said Maji Abubakar, a car dealer in Abuja. However, the demand for such cars has significantly dwindled. “Even if you put them in the market, there isn’t much demand for them.”
Abubakar explained that the sale of cars with larger engines has plummeted. “It has been more than a year since I sold a car with an eight-cylinder engine, and the major reason is the price of petrol,” he added.
Effects on general public
President Tinubu has claimed that the decision to remove fuel subsidies was part of his administration’s effort to address Nigeria’s mounting debt burden. However, the consequences have been far-reaching. While the policy is aimed to curb excessive spending on subsidies, it has also placed immense pressure on millions of Nigerians, with many facing extreme economic hardship.
The ripple effect of these rising fuel prices is being felt across every sector of the economy. Transportation costs have surged, leading to higher prices for goods and services, and ultimately placing a heavy burden on Nigerian households and businesses alike. Inflation continues to rise, and the cost of living has become unsustainable for many citizens, forcing families to re-evaluate their financial priorities.
For businesses, the fuel price hike will drive up operational costs, making it more challenging to remain profitable. From logistics to production, no sector is spared, and companies are now faced with the dilemma of either passing these costs onto consumers or absorbing the losses themselves.
As petrol consumption plummets and inflation surges, the daily struggles of ordinary Nigerians highlight the challenging realities of the post-subsidy economy. Many citizens continue to grapple with the rising cost of living, with no immediate end in sight. Below are some of the effects:
Transportation Costs: The transportation sector has been hit hardest by the fuel price hike. Whether you rely on personal vehicles or public transport, commuting now comes with a significantly higher cost. For those using public transport, fare increases are already apparent, and vehicle owners face higher expenses on fuel, maintenance, and repairs. This has immediate consequences for employees, students, and business owners who depend on daily commuting.
Price hikes for goods and services: Rising fuel prices drive up the cost of transportation for goods, leading to higher prices for essential items, such as food and household supplies. Businesses also face increased operational costs, from production to logistics, which are often passed on to consumers. For everyday Nigerians, this means higher prices at the market, supermarket, and service outlets.
Business strain: Small and medium-sized enterprises (SMEs), which are the backbone of the Nigerian economy are especially vulnerable. Many SMEs rely on fuel to power generators or transport goods, and the sharp rise in fuel prices significantly increases their operating costs. The cumulative effect can reduce profit margins, slow down business growth, and force some to raise prices, which could impact customer retention.
Household budgets under pressure: With prices rising across the board, household budgets are strained. The cost of living has increased, making it harder for individuals and families to save, invest, or even maintain previous spending habits. Nigerians now have to re-prioritise their spending, with essentials like food, transportation, and healthcare taking up a larger share of monthly expenses.
The current rise in fuel prices presents significant challenges for Nigerians, affecting both businesses and households alike. However, by adopting practical strategies such as reassessing budgets, exploring alternative transportation and energy solutions, diversifying income streams, and advocating for policy change, individuals and businesses can mitigate the immediate impacts and build long-term financial resilience.
Practical strategies for managing rising costs
Herconomy, a platform of economic consultants, has offered practical steps to help Nigerians navigate the challenges. These among others are:
Reassess Your Budget: Now more than ever, it’s important to revisit your monthly budget. Prioritize essential expenses such as food, transportation, healthcare, and utilities over non-essentials. Be intentional about cutting back on discretionary spending. Whether youre managing a household budget or running a business, understanding where your money is going will help you allocate resources more effectively.
Consider Alternative Transport Options: Rising transportation costs may prompt individuals to explore alternatives such as carpooling with colleagues, neighbours, or family members to reduce fuel costs. For businesses, optimizing delivery routes or working with logistics partners to minimize transportation expenses can also ease the burden.
Adopt energy-efficient practices: Many Nigerians rely on fuel-powered generators due to inconsistent electricity supply, but fuel costs make this increasingly unsustainable. Exploring alternative energy solutions such as solar power or energy-efficient appliances, can help reduce fuel dependency over time. While these options may involve an upfront investment, the long-term savings are significant.
Diversify income streams: One effective way to cushion the financial impact of rising costs is to diversify your income sources. Consider taking on side jobs, freelancing, or turning a hobby into a business. Digital platforms now provide various opportunities for Nigerians to earn extra income, and having multiple income streams offers added financial security in times of economic uncertainty.
Explore group buying and community support: Buying in bulk through group purchases can help lower costs for essential items. Community groups, cooperatives, or neighbourhood associations can pool resources to buy food, fuel, or other necessities at a lower rate, passing on the savings to all members. This can be particularly effective for families and small businesses.
Save and invest wisely: Despite the financial pressure, it’s essential to continue saving, even if it’s a smaller portion than usual. Building an emergency fund can provide peace of mind during times of uncertainty. Look for savings and investment products that offer good returns and align with your financial goals. For businesses, keeping a cash reserve can help cushion unexpected operational costs.