SBM intelligencea geopolitical research firm, says that despite gasoline subsidies, transportation costs and gasoline prices rose disproportionately from 2017 to 2021.
SBM stated this in a new report by the research firm titled “Growing Fuel Subsidy and Transport Costs: Which Way Forward, Nigeria?”
He said that in five years, gasoline prices have increased by 12.1%, gasoline subsidies by 890% and transportation costs by 283%.
According to the report, from 2017 to 2021, transport costs have seen a steady increase where the price of fuel has been almost constant.
“This suggests that there are other factors that drive the cost of transport and artificially keep the price of fuel low. fuel for the period,” SBM Intel said.
In an effort to keep fuel prices low, the federal government continues to fund gasoline subsidies that have steadily increased over the years.
“To maintain the price of fuel at the pump at 145 naira in 2017, the NNPC said it spent 144.53 billion naira on subsidizing petrol, while the cost of transport varied from 122 naira to 138 naira, an increase obvious. In fact, the price of fuel went down by $0.06,” he added.
He said that between 2017 and 2018 the cost of the fuel subsidy increased by 405%, but the price of fuel remained constant throughout.
In 2019, the cost decreased by 25%, but the decrease is insignificant compared to the initial increase of 405%.
Further, he noted that 2020 saw an alarming spike as the government committed N1.192 trillion in grants, more than double the cost of 2019.
By 2021, the subsidy had gobbled up 1.43 trillion naira, an astonishing increase of 890%, over five years.
The NNPC had asked 3 trillion naira from the government to fund the subsidy this year, after the FG suspended plans to “withdraw the subsidy by January 2022 as required by the Petroleum Industry Act (PIA), which has was enacted in August 2021”.
In contrast, the price paid by Nigerians at the pump “increased only from N145/litre to N165/litre between January 2017 and December 2021, an increase of 12.1%. In dollars, the price of gasoline even fell from $0.49 in January 2017 to $0.40 in December 2021”.
The company said that although the price of gasoline only increased slightly during this period, transport costs across Nigeria increased more significantly.
“By November 2018, the cost of transport had risen to 192.46 naira, a 12% increase from the price in December 2017, but the price of fuel remained constant throughout,” he said. .
“Between December 2018 and December 2019, the cost of transport increased by another 36%, with no change in the price of fuel.
“Between December 2019 and May 2020, the cost of transport rose by 208%, the biggest increase in 2017 and 2020. This was at a time when the country was hit by COVID-19.
“At this time (April to June 2020), the price of petrol was reduced to N125, but transport costs did not decrease. Instead, it skyrocketed to N611. 92 in May 2020.”
According to the research firm, this confirms that the cost of transport in Nigeria is not solely determined by the price of fuel.
“In July and August 2020, the fuel price returned to the original N145, and in September it sold for N162 and remained constant for the rest of the year,” SBM Intel said.
“But it’s interesting to note that the cost of transportation has been steadily increasing every month. It never remained constant. By the end of 2020, the cost of the fuel subsidy stood at N1.192 billion, more than double the cost of 2019.
“Similarly, the cost of transport in December 2020 had doubled compared to January 2019. Between 2020 and 2021, the cost of the fuel subsidy increased by almost 20%, the cost of transport increased by a corresponding 33% while that the price of fuel has increased by a measly 1.8%.