It is fair that i put up a reasonable opinion on the subject of how
fuel subsidy affects the Nigeria life. You can be the Judge and decide
if the current government has set up a machinery to impoverish you,
and ground its economy. However, i will share a RAY of HOPE for Smart
Businesses/Entreprenuers and others who are looking for ways to
prosper in a “damaging” economy.
Right now, The most important question to ask today is …. Who does
the Subsidy removal benefit?
The expected benefits of subsidy removal are to bring prices to an
efficient level as well as make the sub sector more attractive to
private local and foreign investors, while it increases government
These expectations, in as much as they are beneficial, are welcome, as
any policy to improve one or more sectors of the economy is needed.
But in real terms………….. this is how susbsidey removal affects
all of us as Citizens and Business organizations in Nigeria.
(1) The Impacts on Businesses .
Aside the existing cost burdens of doing business in Nigeria, Nigerian
businesses and corporate Firms are affected in three ways following
the unprecedent hike in fuel price announced early in the Year:
a) The cost of energy bill increases for those that rely heavily on
petroleum powered generators for energy. The impact on energy bills is
high because most companies in Nigeria still depend on generators to
power their offices, also most household
run on “i-pass-my-neighbor” generator. This is because the governement
(PHCN) has failed, grossly to increase our power output , thereby,
electricity supply is grossly inadequate and/or unreliable.
b) the cost of intermediate inputs increase as a result of increased
cost of transportation of individuals and goods
With these additional costs, naturally, business will spread the
incremental costs on the cost of goods and services produced.This
increase in the cost of doing business will also affect the output
level and profitability of firms as they operate within their budget
(2) Impact on and off the distribution and transport system
The second pathway through which the change in prices will affect
households is the transportation and distribution network. This
network is powered by petroleum products and consequently it has
strong inter-sectoral linkages with the sub-sector; following a
subsidy reduction, the highest increases in prices are in the energy
sector followed by the transport sector.
As a result of this linkage, increases in the prices of the petroleum
products lead to increases in passenger and goods
transportation costs. Ultimately, the increase in transportation costs
results in further increases in the cost of intermediate and finished
goods, and this is coupled with increases attributable to the cost of
I have observed most fares have increased by 100% as taxi drivers are
adjusting to the new cost of the fuel prices. Also, the cost of
Photocopying, barbing, Pure water (satchet)…are also gradually on
(3) Impact on government income and expenditure.
The third pathway through which the change in prices affects the
household is through their impact on government revenue and
expenditure. Subsidy removal increases government revenue and
therefore possible government expenditure. However
subsidy removal also leads to lower revenue because of the slow down
in growth rate which the increase in prices will cause. It has been
noted that the increases lead to a slow down in growth of national
income This is as a result of limits imposed on firms by their budget
Through these three pathways, the ripple effects of the price
increases reach households, causing an increasing and untold hardship
to the common man.
As i promised above, i will share a SMART MOVE businesses can adopt to
SURVIVE the economy while growing their market share. The paradigm
shift will help Business make decisions that addresses;
Outsourcing non-core competences
Automation of processes
Creating Brand Loyalty
attracting more clients and sales
And ………Eveything that reduces cost…..improves customer
interraction…….and depends on NEW Technologies that their market
audience are crazy about.
There is no better time for your organisation to read the best selling
book that i term the Survival guide to Oil Subsidy Removal, i wrote
it to address how your organisation can leverage on new media to
attract and keep customers flocking to your door. For your FREE
Download of “GET MORE CUSTOMERS ONLINE: 10 Super-Secret Strategies to
Attract Clients magnetically to You” Click here
About Me: Wole is the Founder of Citygist.com, Nigeria’s No.1 Real
Aggregation website, where you can read latest updates from Newspapers
and Websites you’d love to read. He tweets @MrSpokentwice.