President Bola Tinubu’s inaugural speech announced the removal of fuel subsidies, which caused prices to rise rapidly from 198/200 per litter to 470/600.
“The fuel subsidy is gone; we shall instead re-channel the funds into better investment in public infrastructure, education, healthcare, and jobs that will materially improve the lives of millions.” President Tinubu.
The announcement has resulted in discomfort among the citizens across all sectors and placed the country on edge with citizens of the country groaning.
Responding to @General_Oluchi tweet
“How much is a liter of fuel in your area today? Is the fuel price getting better? How are you navigating it? Share some tips in the comments. ”
I’m still scared to visit the filling station I still can’t comprehend it. Fill my car tank with 30,000 Naira!!!
The provision of fuel subsidies has been a contentious issue in many countries, including Nigeria. These subsidies aim to alleviate the burden of high fuel prices on citizens and businesses.
However, the subsidies are costly for the government and have been plagued by corruption and inefficiency in Nigeria. While removing fuel subsidies had negative consequences regarding increased prices and scarcity, it positively impacted the Nigerian stock market. On the first trading day after Tinubu’s inauguration as president, investors in the Nigerian Exchange Limited gained N1.5 trillion, marking a three-month high for the market.
The Market Capitalization reached N30.349 trillion, the highest since February 27, the first trading day after the last presidential election. The NGX All-Share Index also surged by 5.22 percent, settling at 55,738.35, and the Year-To-Date returns appreciated from 3.36 percent to 8.76 percent.
The subsidy removal decision was based on the fact that the 2023 Appropriation Act did not provide for petrol subsidies beyond June, marking the end of the 18-month extension period approved by the previous administration.
The 2023 Appropriation Act of the Nigerian government is a bill that outlines the government’s spending for the year 2023.
According to data from the Nigerian National Petroleum Company Limited and the Nigeria Extractive Industries Transparency Initiative, it is worth noting that under former President Muhammadu Buhari’s administration, the petrol subsidy had already consumed N6.88 trillion.
Importance Of Fuel Prices on the Economy
Understanding the Ripple Effect of Fuel Price Hikes
The removal of fuel subsidies in Nigeria, as declared by President Bola Tinubu, has had a significant ripple effect across the country.
Within 24 hours of the announcement,
- Prices skyrocketed from N195 per liter to N600 per liter in many parts of the country.
- long queues formed at most fuel stations across the country
- 100% increase in transport fares.
- Many fuel outlets even shut down, exacerbating the scarcity and leading to panic buying among motorists.
An operations manager for one of the lead organizations in Nigeria, Segun Awomore in an interview with GetFundedAfrica acknowledges that many companies depend on costly yet reliable Diesel generators as their main backup power source. Despite the recent surge in fuel prices affecting procurement expenses, he believes employees are responding reasonably and patriotically. However, HR reports increasing employee dissatisfaction. To address this, plans are underway to implement measures such as raising transport allowances and acquiring staff buses to alleviate their burdens.
“Firstly, most companies I know of use Diesel generators as their primary alternative power source. And its price is, though expensive, relatively stable.
Though little, it goes without saying, the new fuel price rise has reflected in the cost of some of our new procurements. Considering how quick our people are when it comes to exploiting situations like this, I believe everyone is being relatively reasonable and patriotic.
For the employees, HR have reported a growing level of discontent and we aim to address that by providing palliative (increase in transport allowance, acquisition of staff busses to convey staff from certain areas etc. are part of the popular policies being assessed) to help ease their burdens.”
Strategies to Manage the Fuel Price Hike
Managing the fuel price hike can be challenging for start-ups and small businesses. However, there are several strategies they can implement to mitigate the impact. Here are four strategies to consider:
Implementing cost-saving measures:
- Evaluate and reduce unnecessary fuel consumption: Encourage employees to adopt fuel-efficient driving practices, such as avoiding idling, carpooling, and optimizing routes.
- Embrace telecommuting and flexible work schedules: By allowing employees to work remotely or adjust their schedules, you can reduce commuting costs and fuel consumption.
- Adopt energy-efficient equipment: Invest in energy-efficient vehicles, machinery, and appliances to minimize fuel usage and lower operational costs.
Diversifying energy sources:
- Explore alternative fuels: Investigate the feasibility of using alternative fuels like natural gas, biofuels, or electricity for machinery.
- Invest in renewable energy: Consider incorporating solar panels or wind turbines to generate clean energy for your operations, reducing dependence on fuel.
Streamlining operations and supply chains:
- Optimize inventory management: Implement just-in-time inventory practices to minimize storage requirements and transportation costs.
- Consolidate suppliers: Negotiate favorable contracts with fewer reliable suppliers to reduce transportation costs and streamline logistics.
- Use technology for supply chain visibility: Utilize supply chain management software to track inventory, analyze demand patterns, and optimize routes for delivery.
Enhancing operational efficiency:
- Conduct energy audits: Identify energy-intensive areas in your operations and implement energy-saving measures, such as upgrading insulation, using energy-efficient lighting, or installing smart thermostats.
- Improve vehicle maintenance: Regularly service and maintain vehicles to ensure optimal fuel efficiency, including checking tire pressure, replacing air filters, and using the recommended grade of motor oil.
- Implement remote monitoring and automation: Utilize technology to monitor equipment and automate processes remotely, minimizing the need for manual intervention and reducing fuel consumption.
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