As the holiday season draws near, Nigerians are grappling with a record-high transport inflation rate of 30.54% in November 2024, according to the Consumer Price Index report by the National Bureau of Statistics (NBS).
This figure, the highest recorded this year, underlines the escalating cost of transportation for individuals and businesses alike.
Transport inflation has been a persistent challenge throughout 2024, consistently outpacing the levels recorded in 2023. In January 2024, the rate stood at 25.92%, a significant increase from 21.02% in January 2023.
After stabilizing mid-year at an average of 25.63% in May and June, the rate surged to 27.21% in September following an uptick in fuel prices. November’s 30.54% marks a year-on-year increase of 3.52 percentage points from 27.02% in November 2023.
Drivers of transport inflation
The surge in transport costs has been driven by a mix of economic and policy-related factors. Chief among them is the removal of fuel subsidies implemented shortly after President Bola Tinubu assumed office in May 2023.
- While the policy aimed to stabilize public finances and spur economic growth, it triggered a sharp rise in petrol and diesel prices, essential inputs for road and public transport.
- This policy decision has not been without controversy. There have been reports that the Nigerian National Petroleum Company Limited (NNPCL) requested an additional subsidy refund of N1.19 trillion for July 2024, citing exchange rate differentials on Premium Motor Spirit (PMS) importation and joint venture taxes.
- By June 2024, exchange rate differentials amounted to N4.56 trillion due to under-recovery on petrol imports from August 2023 to June 2024, climbing to N5.31 trillion by July.
- These figures have raised concerns about the fiscal impact of subsidy payments on the Federation Account. Exchange rate fluctuations, coupled with the rising cost of importing PMS, have strained government revenues, prompting questions about the sustainability of the partial subsidy framework.
Also, the devaluation of the naira, from N769 per US dollar in June 2023 to an average of N1,550 per dollar in December 2024, has exacerbated the situation. Imported spare parts, vehicles, and fuel costs have surged, forcing transport operators to pass these costs onto consumers.
Persistent issues, including poor road infrastructure and limited alternatives like rail transport, have compounded inefficiencies and costs in the sector, adding to the burden on Nigerians.
Transport inflation rose by 27.94% in 18 months under Tinubu
These inflationary pressures mirror the broader economic challenges that have intensified since Tinubu’s inauguration. Transport inflation rose from 23.87% in May 2023 to 30.54% in November 2024, a sharp increase of 6.67 percentage points (27.94%) in just 18 months.
- Similarly, Nigeria’s headline inflation rate surged from 22.41% in May 2023 to 34.60% in November 2024—the highest level in nearly three decades. This represents an increase of over 12 percentage points in 18 months.
- The Central Bank of Nigeria’s aggressive monetary tightening—raising interest rates by 875 basis points in 2024—has had limited success in curbing inflation.
Households face eroding purchasing power due to rising daily expenses, while businesses, particularly small and medium enterprises, struggle with higher logistics costs that drive up the prices of goods and services.
FG hiked fuel prices five times before the December decrease
Under Tinubu’s administration, petrol prices have skyrocketed, rising by 505.71% from N175 per liter in May 2023 to N1,060 per liter in October 2024.
Nairametrics noted at least five price hikes during this period, including increases in May and June 2023, September 2024, and twice in October 2024.
- The combination of fuel price hikes, naira devaluation, and persistent transport inflation has left many Nigerians reeling, highlighting the need for urgent interventions to address the economic pressures facing the country.
- However, the Nigerian National Petroleum Company Limited (NNPCL) over the weekend reduced its ex-depot price for Premium Motor Spirit (PMS), commonly referred to as petrol, to N899 per liter, marking a significant adjustment in the downstream petroleum market.
- This follows a similar price cut by Dangote Refinery, which had earlier reduced its price to N899 per liter.
- As the festive season heightens the demand for mobility, the burden of transport costs remains a stark reminder of the economic hurdles Nigerians continue to navigate.
What you should know
- To further alleviate the financial burden on Nigerians during the Christmas and New Year celebrations, President Bola Tinubu approved free nationwide train rides from December 20, 2024, to January 5, 2025. The initiative is part of broader efforts to cushion the impact of rising transportation costs on citizens.
- Also, the Federal Government announced a 50% reduction in interstate transport fares for the festive season. This arrangement, facilitated through a memorandum of understanding (MOU) with key transport stakeholders, aims to make travel more affordable for Nigerians.
- With the recent reduction in petrol prices and government interventions to lower transportation costs, Nigerians may experience some respite amid the economic pressures of the season.
- Further declines in fuel prices and a stable naira could sustain these cost-cutting measures into the new year.
