Despite the removal of fuel subsidies Nigeria's transport inflation sees its first decline in over two years - BUSINESS INSIDER
- Nigeria experiences a rare downturn in transport inflation, marking the first decrease in over two years.
- Despite the removal of the gasoline subsidy and a spike in crude oil prices.
- The removal of subsidies, fuel price hikes, and currency policy has created complications.
For the first time in more than two years, transport inflation unexpectedly declined, according to Nigeria's inflation report from the National Bureau of Statistics (NBS), which was issued last week.
In particular, Nigeria's transport inflation fell to 27.04% in October 2023 from 27.18%, the peak for the preceding two years, the previous month.
Interestingly, July 2019 marked the last time that transport inflation fell. The decrease occurred in spite of the spike in the price of crude oil and the termination of the gasoline subsidy, which increased the cost of transportation across the nation's various regions.
The elimination of Nigeria's gasoline subsidy sent shockwaves across the country's transportation industry and the broader economy. Prices for Premium Motor Spirit (PMS) skyrocketed, rising by more than 200% from a comparatively low average of N189 per liter to an astounding N600.
The country's transportation networks were affected by this sudden and significant increase in gasoline costs.
The country saw a significant impact on transportation as PMS costs skyrocketed. A cascading impact of the spike in gasoline costs was felt by several forms of transportation.
The withdrawal of subsidies also caused Nigeria's native currency, the naira, to significantly depreciate in value relative to the US dollar. The local currency's floating and the National Autonomous Foreign Exchange Market's (NAFEM) integration of many FX exchanges drove a depreciation of more than 40%.
The difficulties the transportation industry, especially the aviation industry, was facing were made worse by this depreciation. The elimination of subsidies, increases in fuel prices, and depreciation of the currency brought a perfect storm for the aviation sector.
Airlines had to navigate an even more hazardous environment on top of the ever-increasing price of aviation fuel.