When President Bola Tinubu during his inauguration in May announced the removal of fuel subsidy, the policy was greeted with mixed feelings. While some persons believed that it was a privilege that needed to be sacrificed to free the country from the oppression of a few individuals benefiting from the humongous money paid by the government for subsidizing fuel, others insisted that the new government should have first tackled the corruption in the subsidy payment process before deciding whether it is still necessary to retain the policy.
Despite the promises and interventions announced by the federal government to curtail the effects of the fuel subsidy removal adventure, six months later, Nigerians are still wondering if it would not have been better to indulge in the monstrous fuel subsidy cabals than endure the biting hardship which the removal has foisted on them.
Expectedly transportation cost has skyrocketed with food prices reaching all-time high in the country. In June, transportation fares witnessed over 100 percent increase across all routes. Ride-hailing companies, Bolt and Uber immediately announced price adjustments. The impact on commodity prices was instant. For instance, a 50kg bag of foreign rice which cost a little over N39,000 in June is now sold for about N60,000 and might rise higher as the festive season approaches. A middle-size tuber of yam sold for N800 in June this year, now sells for N1700. A kilo of chicken sold for N1,450 earlier in the year is now N3,200. Other food items are also following the same trajectory.
While Nigerians are still groaning under the burden of high transportation costs and rising food prices, the government further stretched the burden with the floating of the naira allowing market forces to determine the exchange rate as against the old practice of fixing the rate. Though widely perceived as a good move, the unified exchange rate regime instead of strengthening the naira has further fuelled the currency’s weakness and added to inflationary pressures.
Last month naira fell to an all-time low of N1, 300 to a dollar. Presently the naira is still fluctuating around N1,000 to a dollar and is projected to remain unstable in the coming months due to demand pressure for the dollar.
The combined effect of fuel subsidy removal and unification of the exchange rate has been brutal on virtually all sectors of the economy with some businesses already winding up and others embarking on aggressive cost-cutting measures to remain afloat.
As indicated earlier, food prices have increased in multiple figures in the last few months but the commodity market is not the only culprit. Both public and private institutions have also increased their rates to align with the current economic realities of coping with an over 200 percent fuel price increase and rising exchange rate.
For instance, all public and private educational institutions increased the cost of school fees this year and are still projected to further review the cost. Local manufacturing companies have also increased the prices of their goods as the cost of their production continues to rise. In August, Nigerian Breweries announced a review of prices of all its product lines. The adjustment according to the company was done to reflect the astronomical cost of doing business in the country. Seven-Up Bottling Company in September also issued a notification to customers informing them of price adjustments.
The Nigerian subsidiary of Internet Company, Google Nigeria last week also announced a price adjustment increasing the cost of subscription for a 100GB internet work allocation space from N3900 to N9500. The company also indicated that its current prices may further change.
he pay-television sector which relies heavily on Forex to generate its content has also announced price adjustments. Leading player in the sector, MultiChoice earlier this month, notified subscribers of a tariff increase in its effort to continue to provide premium content despite the difficult economic terrain. The company had previously adjusted the price in May. Another pay television company, Startimes, also adjusted prices in May and September this year.
Until the gains of fuel subsidy removal and the new Forex policy which the federal government promised, begin to trickle down, Nigerians must continue to face the reality of price adjustments in all sectors of the economy. Hopefully, things will get better as the new administration has pledged.