Nigeria’s transport sector is in recession

by MMC
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Nigeria’s transportation and storage sector has declined for two consecutive quarters, entering a recession for the first time in 30 months. Data from the latest gross domestic product report by the Nigerian Bureau of Statistics (NBS) showed that the sector lost 36% of its size in the third quarter, after losing over 50% in the previous quarter.

“This rate represents a decrease of 77.4 percentage points compared to the same quarter of the previous year and an increase of 14.8 percentage points compared to the previous quarter,” the report said. It also said the sector contributed 0.84% ​​to real GDP in the third quarter, down from 1.34% last year. Road transport, the most active sub-sector, contracted by 43.65%.

Since May 29, when Bola Tinubu removed Nigeria’s costly oil subsidies, prices have remained at a record high of 617 Naira. The federal government said it would save billions of dollars with the move. However, this subsidy would have makes a quiet returnbecause gasoline prices have stopped moving with oil prices since July.

BES data shows that the average retail price paid by consumers for petrol in May was 238.1 Naira, an increase of 162.9% in September (626.2 Naira). The average retail price of diesel also increased from N844.28 per liter to N890.8 in September. Intra-city bus travel became more expensive, increasing by 105.9% to N1,337.8 in September from N649.6 in May, while intercity travel became 47% more expensive.

Nigerians have tried to adapt to this price shock by looking for alternatives. In July, the country saw a sharp increase in the number of gasoline-powered vehicles and generators. However, this wave subsided after gas prices soared. 26% And 14% in September and October respectively. High energy and food prices have pushed Nigeria’s inflation to a two-decade high of 27.3%.

More so, alternative energy could not move things forward because most Nigerians do not own a car. No recent data exists, but in 2018, 94% of Nigerians did not own a vehicle. Most cars on Nigerian roads (95%) are bought second hand. And thanks to rising import costs, there’s no solid reason to believe that figure has improved. According to the National Bureau of Statistics, Nigeria spent N140 billion on used vehicle imports in the first quarter of 2021 and N150 billion in the fourth quarter of 2020. But this year alone, the naira has lost more than half its value against the dollar . This is the same reason why electric vehicle adoption has not gained momentum in Nigeria. Even if they want alternatives to fuel, their income is generally too low to afford these cars.

In recent months, the Nigerian government has notably sought ways to revive the transport sector using alternative fuels. For example, the federal government announced the deployment 11,500 CNG bus in October. The Ogun State Government also said it convert 2000 bus to CNG for free.

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