Road transportation is a sector that powers productivity in the economy. While its impact is relative to some, it is existential to the majority with the minimal rail network and few waterways connection, it is arguably the lifeline of commuting in Nigeria.
Like Professor Chukwuma Soludo posited in his open letter back in 2020, Nigeria cannot afford to lock down an economy like the developed nation because the bulk of us don’t earn if we aren’t mobile. Commuting to work could entail boarding the yellow danfos on Lagos roads, the micra and danfo in Ibadan. Or the mini cabs in Akure or Akoto in Ekiti. The Keke rides in Kano or in between streets nationwide and Okada are means of road transportation which Nigerians use daily
The informal sector of the economy is as large as the formal for context accounting for more than 2/3 of the employment in the country (according to a report by Jobberman in November 2024). The idea of remote or hybrid working arrangement is actually an elitist privilege of the fewest of few.
The road transportation component of our inflation as at November 2024 was 30.54%. This has been largely attributed to the deregulation cum subsidy removal policies of the incumbent government. The data below shows the trajectory of inflation in the subsector over time according to the NBS:
2021-17.56% (July 2021)
2022-29.3%
2023-30.54% (Nov 2023)
The subsidy removal in the price of PMS on May 29, 2023 and the devaluation of Naira combined to cause an unprecedented inflationary figure unseen in almost 3 decades. Not even the CNG has been able to stem this owing to its prohibitive transition cost and limited service points.
There are indeed other factors less talked about that have combined to influence the transport ninflation. Some of these are:
- Finance cost- The Greenbacks exchanges at a little below $/N1600 at the Official window. Nigeria does not manufacture internal combustible engine even though it has some CKD plants that assemble cars and trucks the most notable of them being Innonson. Buying a brand new vehicle is the preserve of the rich and Government establishment. This is understandable in that the average disposable income of most are lower than the cost. This factor has made the use of fairly used imported vehicles more attractive in Nigeria since the early 90s. The cost of these vehicles have also seen a hike with an average 18 seater bus going for N18.5m. Keke aren’t spared in this with the average price now in the region of N4m. To complicate issues, these fleets are acquired on hire purchase by the daring buyers who may end up paying 100% more on the initial price. Bank facilities are rarely available for this category of people aside the prohibitive rate of offering.
- Maintenance Cost- The devaluation of Naira has meant a rise in the prices of car consumables like engine oil, tyres and other spare parts. The peculiarity of the environment hasn’t helped matters as most of the spare parts used by car owners are also from used vehicles abroad with a huge distrust for pirated new products. Some of these have seen a 50% to 100% hike in price between June 2023 and November 2024. The old fleet acquired some 10 yrs (when the vehicles were above 10yrs used abroad) are almost 30yrs on the road. They require more maintenance and visit to workshops coupled with the state of the road network. The age of the vehicles also mean they would consume more fuel than millennium made fleet.
- Garage Racketeering- Arguably one of the worse man made factor that’s aided the transportation inflation. The union managing the parks collect from drivers a fixed portion of their takings most especially for intra and inter state commute. This ranges from 1 (for car who take 4 passengers) to 2 (for minivan). Buses who can convey 14 or more passengers are made to pay 3 persons fare as dues.
- General Inflation- Added to the aforementioned is the need for these operators to also meet up with the cost of living that’s seen a surge in prices of food, housing, health and others.
- Cost of clearing- This is pegged against the $ at the official rate. The business of used car sales has been in some sort of coma since the depreciation of the Naira. In some cases, the cost of clearing vehicles are more than the cost of purchase and shipment to Lagos ports.
Way Out
No doubt there’s a crisis on hand which hasn’t sparred the bulk of Nigerians. It also presents an opportunity to shape the future, boost productivity and make life more meaningful for the populace.
Below are some of the suggested recommendations
- There is an urgent need for sub nationals and the FG to partner with the transportation unions, CKD operators, car dealers, in making access to credit for fleet acquisition cheaper over a period of at least 7yrs. This should include Keke, Okada and others
- The need for the FG to designate some class of vehicles as duty free on importation for a period of 1yr. Such vehicles must be used solely for commercial transportation
- A firm regulation of park activities by sub nationals to ensure only defined fees are collected
- Sub-nationals should have in place subsidized mass transit and last mile buses most especially in populated cities and towns to convey citizens within their states
- A more flexible arrangement for CNG conversion/deliberate importation/manufacture of CNG factory fitted mobility.
- And lastly, a conscious and deliberate effort to promote local capacity in manufacturing quality spare parts with institutional support.
Thank you
Seun Orungbemi FCA
