- New petrol prices to dent Nigerians savings by adding to their monthly budget;
- Public transport commuters set to pay more;
- Traders expected to pass on transport cost burdens to consumers.
Three Increments in 3 months!
Good things come in threes, but not for Africa’s giant, which has experienced three pump price increments in three months. The Federal Government announced the new price, ₦151.56. And now the daily expenditure of Nigerians seems uncertain as they say goodbye to ₦148 per litre.
The new price has received public outcry, expectedly so, given the economic state of things; failing economy met pandemic, plus increasing prices. But perhaps what’s more important is understanding what the new price means to your finances.
In 2019 alone, petrol usage amounted to 20.8 billion litres, i.e. about 57.2million litres every day. Nigerians clearly rely on the product!
So with the change in fuel pump price, here is a peep at how much the new fuel price can affect your finances.
Fuel bills
A direct impact of rising petrol prices is an increase in transport costs; that much is obvious. In 2019, according to the National Bureau of Statistics, Consumption Expenditure Pattern In Nigeria 2019, Nigerians spent ₦2.5 trillion on transportation, the highest non-food expense.
Using the transport fare Watch report for July 2020 by NBS, and the pump price for July, one can easily expect a rise in transportation cost.
In July, the average fare paid by commuters for the bus journey to intra-city increased by 3.36 percent month-on-month.
Calculations, using data released by NBS, showed bus fares increased in Lagos, Rivers, Kano and Abuja city by 7.41 percent, 4.94 percent, 3.18 percent, and 0.91 percent. And these changes reflected in the petrol price changes for the month.
Unfortunately, another cost that one cannot do much about is fuelling generators for commercial or personal use. An additional bill that will increase the cost of living for an average Nigerian.
“We should expect more and more persons attempting to use public transport to commute, and maybe drive on weekends,” said Kunle Ajayi, a financial expert.
He added that “the new fuel prices over a prolonged period may force households to reallocate resources. If I have to increase a certain amount of fuel, then either I will save less or I will have to cut down on other expenses. So if the higher prices remain for a long time, it could affect demand for other products or reduce savings.”
Price of essential commodities to go up
The new petrol would also mean that the cost of transporting goods goes up across the country. In that regard, we can expect a commensurate upsurge in prices of essential commodities, food items and other goods.
Already, information from the Consumer Price Index (CPI) report released by NBS showed a significant increase in the prices of food items in July; with the new outlook, we can expect things to increase further.
“Definitely traders need transport to move their goods as transportation cost increases so will the prices for food items continue to rise, you don’t expect us to operate at a loss,” Samuel Morka a trader said.
Cost of housing
Typically, the cost of housing depends on the area in which the property is located. However, the steep rise in the cost of transportation will see more residents living too far from their businesses and offices attempting to relocate. This will, in turn, cause an increase in the price of houses in commercial locations in states.
Already, experts regard Lagos as one of the most expensive countries for expatriates in 2020, according to a recent survey by Mercer’s 2020 on the cost of living.
Positioned at 18, Lagos moved up seven places in ranking from last year, which the reports attributed to inflated house rents and high prices for groceries. Again, future implications appear daunting, if trends are to be taken at heart (which they should).
With the government not looking to reduce the price of petrol due to planned deregulation, perhaps it’s time to “brace for impact”, strategise and maybe downsize.