Effects of Fuel Subsidy removal on economy & logistics company in Nigeria

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Effects of Complete Fuel Subsidy removal on economy & logistics company in Nigeria

Nigeria's economy operates and scales on several factors, and logistics cost is one of the factors that affect the pricing system in trading. The cost of fuel (Diesel, Petrol, and kerosene) will affect the price of commodities. Fuel Subsidy by the Federal Government has been a cushion to the price of fuel in Nigeria for a long time. Fuel subsidy regime is like the government paying part of the cost citizens need to purchase fuel.

On 29th May, 2023, President Bola Tinubu announced through his inaugural speech as the new President of Nigeria that "fuel subsidy is gone" which means the government is no longer subsiding fuel again. All the filling stations in Nigeria increased the fuel pump price to like 600 Naira per litre or more depending on the locations in Nigeria.

In this article, I will be focusing on the effects on the cost of running a logistics company and the economy. Fuel subsidy removal affected and made pricing increased by over 200% on delivery of goods and this has affected the cost of purchase by consumers.

Effects of Fuel Subsidy removal on Economy and logistics

  1. Hike in Fuel Pump price and quality of petroleum products
  2. Increase in cost delivery
  3. Increase in Cost of Purchase

Hike in Fuel Pump price and quality of petroleum products

As soon as President Tinubu announced the fuel subsidy removal, many filling stations closed their outlets and some started selling at high prices. Some filling stations like Mobil, BOVAS, NNPC  are still selling at reasonable prices. The prices of petrol became competitive between Major Marketers and Independent Marketers.

Increase in cost delivery

Both sellers and buyers of goods are feeling the effects by experiencing high cost of delivery. The cost of delivery has be doubled because the cost of fuel is like 300% increased. Many transporters abandon their vehicles because they cannot avoid the cost of fuel.

Increase in Cost of Purchase

Market prices of all products whether physical or digital increased because all of them depend on the cost of delivery from the origin to the destination. The cost of foods, raw materials, and finished products increase beyond normal calculations. Suppliers have to increase the market value to meet up to cost price and have some profit margin. Both suppliers and buyers experience inflation of price.

Moreover, the Nigeria economy experienced a price increment of like 300% because of the government fuel subsidy removal. This has been the experience of all Nigerians since May, 2023. I believe the government will soon look for some program that will be like a cushion effect to the price inflation.

If you are an importer or Exporter, Distinctcushy will figure out the best prices for all your deliveries of consignments and cargoes in Nigeria. You can discuss your shipping needs with our experts. We look forward to working with us while you experience the best delivery at more competitive charges

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Follow Michael Adewale:

International Freight Forwarder, Shipping Consultant and Customs Clearing Agent

He is Chief Executive Officer at Distinctcushy Global Freight Forwarding Company Limited, an International Freight forwarding company and Customs Clearing Broker in Lagos, Nigeria. He loves integrity and value honesty with importers and Exporters in Nigeria and abroad.

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