Fuel Price Evolution in Nigeria From 1973 to 2024 – Fuel Subsidies And Its Effect On Transportation

Fuel Price Evolution in Nigeria From 1973 to 2024 - Fuel Subsidies And Its Effect On Transportation

Introduction:

For decades, Nigerians have observed the fluctuating journey of fuel prices, spanning from a humble 6 kobo in 1973 to a staggering 617 naira per liter in 2023. This historical narrative unveils the intricate dance of economic policies, global market forces, and political decisions, delving into the profound impact these fluctuations have had on the nation’s transportation which includes public transportation and private transportation like car rental costs.

FUEL PRICE SUMMARY

1973-1999: Formative Years

The early years saw relatively modest increases:

  • Gowon (1973): 6k to 8.45k (40.83%)
  • Murtala (1976): 8.45k to 9k (6.5%)
  • Obasanjo (1978): 9k to 15.3k (70%)
  • Shagari (1982): 15.3k to 20k (30.72%)
  • Babangida I (1986): 20k to 39.5k (97.5%)
  • Babangida II (1988): 39.5k to 42k (6.33%)
  • Babangida III (1989): 42k to 60k (42.86%)
  • Babangida IV (1991): 60k to 70k (16.67%)

 

1993-2003: Turbulent Transitions

  • Shonekan (1993): 70k to N5 (614.29%)
  • Abacha I (1993): N5 to N3.25k (price dropped 35%)
  • Abacha II (1994): N3.25k to N15 (361.54%)
  • Abacha III (1994): N15 to N11 (price dropped 26.67%)
  • Abubakar I (1998): N11 to N25 (127.27%)
  • Abubakar II (1999): N25 to N20 (price dropped 25%)

 

2000-2007: Obasanjo’s Changes

  • Obasanjo I (2000): N20 to N30 (50%)
  • Obasanjo II (2000): N30 to N22 (price drops 26.67%)
  • Obasanjo III (2002): N22 to N26 (18.18%)
  • Obasanjo IV (2003): N26 to N42 (61.54%)
  • Obasanjo V (2004): N42 to N50 (19.05%)
  • Obasanjo VI (2004): N50 to N65 (30%)
  • Obasanjo VII (2007): N65 to N75 (15.39%)

 

2007-2015: Fluctuations and Peaks

  • Yar’ Adua (2007): Back to N65 (price drops 15.39%) (Kudos to the only president that made sure fuel prices reduced)
  • Jonathan I (2012): N65 to N141 (116.92%) 
  • Jonathan II (2012): N141 to N97 (price drops 31.21%)
  • Jonathan III (2015): N97 to N87 (price drops 10.31%)

 

2015-2023: Buhari’s Era and Contemporary Challenges

  • Buhari (2016): N87 to N145 (66.67%)
  • Buhari’s term (2015-2023): N87 to N195 per litre (124% increase)

 

2023: Tinubu’s Impact

  • Tinubu (2023) : N195 to N557
  • Tinub (2023) : N557 to N617

 

1973-1999: Formative Years

  • Gowon (1973-1976): Post-oil crisis and global demand fluctuations led to incremental hikes, impacting transportation costs. Fuel prices rose from 6 kobo to 9 kobo.
  • Obasanjo (1978-1982): Economic challenges prompted a substantial hike from 9 kobo to 20 kobo, affecting transportation expenses. Shagari’s era saw continued shifts due to global oil market dynamics, influencing transport costs.
  • Babangida I & II (1986-1991): Economic reforms to align with global trends resulted in a 97.5% increase, affecting transportation affordability.
  • Shonekan & Abacha (1993-1999): The ’90s witnessed subsidy introductions, abrupt changes, and price drops, impacting the transport sector. Shonekan’s economic instability led to a staggering 614.29% increase and he spent only 82 (days) in power while Abacha’s tenure brought fluctuations, including a promising drop in 1993, and a big increase later in that year which finally ended with a short drop in 1994..

 

2000-2007: Obasanjo’s Changes

  • Obasanjo I (2000): Subsidies were introduced with a 50% increase, impacting transportation costs positively. However, the subsequent removal of subsidies in 2003 resulted in fare hikes to cover increased operational expenses.
  • Obasanjo IV (2003): Subsidy removal resulted in a sharp 61.54% increase, directly affecting transportation expenses.
  • Obasanjo VI (2004): Subsidy reinstatement eased the burden, but the 30% hike reflected the complex balance between domestic needs and global economic shifts, impacting transportation costs.

 

2007-2015: Fluctuations and Peaks

  • Yar’Adua (2007): A commendable 15.39% decrease showcased efforts to stabilize prices, including positive implications for transportation costs. Yar’adua is notably the only president who didn’t increase fuel prices during his administration.
  • Jonathan I (2012): Economic pressures and subsidy removal led to a dramatic 116.92% increase, triggering the Occupy Nigeria protests, and significantly impacting transportation costs.
  • Jonathan II (2012-2015): Subsidy reinstatement and political considerations resulted in fluctuations, with a 10.31% price drop by 2015, providing relief to transportation costs.

 

2015-2023: Buhari’s Era and Contemporary Challenges

  • Buhari (2016): The 66.67% increase marked a response to global oil market dynamics, influencing transportation expenses.
  • Buhari’s term (2015-2023): Subsequent years witnessed a 124% increase, impacting the transportation sector as economic challenges persisted.

 

2023: Tinubu’s Era and Subsidy’s Final Chapter

  • Tinubu (May 2023): Immediate removal of subsidies resulted in a surge from N195 to N540 per liter in June and an unprecedented N617 per liter by July, significantly impacting transportation costs. Cost to fill a car tank (July 2023): Approximately N120,000.

 

Fuel Subsidy in Nigeria: A Double-Edged Sword

Fuel subsidy has played a recurring role in Nigeria’s economic story, acting as both a support system and a source of controversy. Originally designed to shield citizens from the direct impact of global oil market changes, the subsidy has evolved into a complex mechanism influencing fuel prices and, consequently, transportation costs.

Genesis of Subsidies: Introducing a Helping Hand (2000)

Fuel subsidies began in the 1970s and became institutionalized in 1977, following the promulgation of the Price Control Act, which made it illegal for some products (including petrol) to be sold above the regulated price. While the concept of subsidy itself is noble, its administration in Nigeria has been plagued with serious allegations of corruption and mismanagement. The concept of subsidies was first implemented during Obasanjo’s administration in 2000, to ease financial burdens on citizens. While it did lead to a 50% increase in fuel prices, the overall intention was to support economic growth.

Subsidy Removals: Tough Choices and Ripple Effects

Subsequent administrations grappled with the dilemma of maintaining subsidies. A major issue was the unsustainable financial cost of subsidies. As of 2016, Nigeria was reported to have spent $30 billion on the fuel subsidy. Some other issues include the smuggling of fuel to other neighboring countries, which accounted for 51% of daily fuel consumption in Nigeria, and endemic corruption. The subsidy point for fuel is importation (or supply) rather than at the pump for eligible users who are meant to be less privileged to help make a better living for themselves only. Subsidy, in its current form, encourages arbitrage and other forms of corruption. When subsidies were removed, particularly in 2003 and 2012, fuel prices spiked, creating ripple effects in the transportation sector. These removals often sparked public outcry, resulting in protests and social unrest.

Subsidy Reinstatements: Balancing Act

In response to public pressure, subsidies were sometimes reinstated, offering temporary relief to transportation costs. Obasanjo’s reinstatement in 2004 provided a brief respite for commuters, showcasing the delicate balance between economic policies and public sentiment.

Contemporary Subsidy Challenges: Navigating Buhari’s Era (2015-2023)

The Buhari administration from 2015 to 2023 faced the ongoing challenge of managing subsidies amid economic uncertainties. The removal of subsidies in 2016 marked a significant shift

Conclusion: Navigating Fuel Price Evolution in Nigeria

The journey through Nigeria’s fuel price evolution reveals a story shaped by economic policies, global shifts, and political decisions. From Gowon to Tinubu, fuel prices responded to reforms and subsidy dynamics. The intended remedy of subsidies also posed challenges with corruption and financial costs. The removal and reinstatement of subsidies sent ripples through transportation costs, affecting public and private commuting expenses. As we step into the post-subsidy era marked by Tinubu’s bold move, the immediate surge from N195 to N617 per liter underscores the delicate balance between economic policies and public welfare. Navigating this complex terrain requires careful subsidy management, economic growth considerations, and citizen welfare priorities, emphasizing the crucial interplay between fuel prices, subsidies, and transportation expenses for Nigeria’s economic future.

For individuals and businesses, including car rental companies in Lagos, car rentals in Abuja, and car rentals across Nigeria, the fuel price evolution directly impacts operational costs. Commuters relying on car rental services and public transportation in Lagos may experience adjustments in pricing structures based on fuel price shifts. Similarly, car rentals in Abuja and other parts of Nigeria may recalibrate their rates in response to the broader changes in fuel costs. However, car rental marketplaces like autogirl, can maintain stable prices due to the structure they operate.

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1 comment

  • Prince
    January 29, 2024 at 9:08 pm

    Informative Post!

    Reply

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