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FUEL SUBSIDY REMOVAL (2023) AND TRANSPORTATION COST BURDEN ON HOUSEHOLD BUDGETS: A CASE STUDY OF COMMERCIAL DRIVERS AND COMMUTERS IN PORT HARCOURT

CHAPTER ONE

INTRODUCTION

Abstract

The removal of Nigeria’s fuel subsidy on 29 May 2023 precipitated a sharp rise in petrol prices from ₦195 to over ₦617 per litre within weeks. This price surge triggered a cascade of socioeconomic effects, particularly within the Port Harcourt Metropolis, where transportation costs escalated by 248–350% and household purchasing power contracted by an average of 31%. This study examines the budgetary repercussions of this abrupt fiscal shock on both commercial drivers including taxi, bus, and okada operators and daily commuters across Obio/Akpor and Port Harcourt City Local Government Areas. Methodologically, the research draws upon pre- and post-removal household expenditure records from 800 families, daily income logs maintained by 400 drivers, and systematic tracking of transport fares across 42 routes. The findings reveal that transport expenditure now accounts for 28–46% of household income, a marked increase from the prior range of 9–14%. This financial strain has compelled 62% of low-income families to reduce food consumption by two to three meals weekly, while 18% of school-aged children have been withdrawn from education due to unaffordable transportation costs. Commercial drivers, despite implementing fare increases, experienced a 41% decline in real income as fuel expenditures now consume 68% of daily revenue. In response to these findings, the study advances a policy proposal the Port Harcourt Transport Relief Package which integrates targeted fuel vouchers, route-specific fare regulations, and expansion of mass transit infrastructure. Projections indicate that this intervention could restore 34% of pre-removal living standards for approximately 1.4 million affected residents within an 18-month timeframe.

1.1 Background of the Study

On 29 May 2023, President Bola Tinubu unveiled the abrupt termination of Nigeria’s longstanding petrol subsidy regime, a policy shift that effectively dissolved government-mediated price controls which had incurred expenditures of approximately ₦4.3 trillion during the preceding year. The subsequent fuel price trajectory exhibited dramatic escalation, with Port Harcourt retail stations marking an increase from ₦195–₦210 per litre to ₦510–₦540 within two days of the announcement. This inflationary pattern persisted through December 2023, when prices settled between ₦617–₦685, ultimately surging to ₦1,050–₦1,200 in parallel markets by mid-2025 according to data compiled by the Nigerian National Petroleum Company Limited and Rivers State Ministry of Energy.

The urban transport ecosystem of Port Harcourt, Nigeria’s petroleum epicenter housing 1.9 million inhabitants, demonstrates near-total reliance on road-based mobility solutions, with commercial vehicles accounting for ninety-four percent of daily transit activities. The city’s transportation network, comprising forty-two primary arteries, facilitates connectivity between residential districts and commercial-industrial hubs. Comparative analysis of pre- and post-subsidy commuting expenditures reveals a fourfold multiplication of costs, elevating the financial burden on average commuters from ₦400–₦600 to ₦1,600–₦2,400 per diem as documented in the 2025 Port Harcourt Urban Transport Study.

Operational dynamics within the commercial transport sector, which encompasses approximately forty-eight thousand licensed operators, underscore the systemic impacts of subsidy removal. While daily fuel requirements remained relatively constant in volumetric terms, the monetary outlay for thirty-five to forty-five litres of petrol escalated from ₦8,000–₦9,000 to ₦36,000–₦48,000. This cost inflation precipitated a paradoxical compression of real earnings among transport providers, as regulatory constraints and consumer price sensitivity inhibited compensatory fare adjustments commensurate with input cost increases.

Macroeconomic repercussions manifested through rapid deterioration of household financial positions, with transport-related expenditures consuming an expanding share of disposable income. Where low- and middle-income families previously allocated nine to fourteen percent of their budgets to mobility, this proportion swelled to twenty-eight to forty-six percent within a single fiscal quarter. Rivers State emerged as the nation’s most severely affected jurisdiction, registering three hundred and twelve percent inflation transmission from the policy change, particularly within food and transport sectors.

Conceptual analysis of these developments through established economic paradigms reveals the emergence of novel distress patterns. While Engel’s Law anticipates prioritization of food expenditures during income contraction, the Port Harcourt case demonstrates exceptional deviation through disproportionate transport cost absorption, generating compounded pressure on non-essential spending categories. Empirical assessment of household coping mechanisms documents widespread adoption of deleterious survival strategies including dietary rationing, educational discontinuation, and asset divestiture, collectively indicating systemic stress within the urban socioeconomic fabric.

1.2 Statement of the Problem

The fuel subsidy removal has precipitated a fundamental shift in transportation expenditures, transitioning from a manageable routine cost to an existential financial burden for Port Harcourt’s households and transport operators. Analysis reveals commercial drivers allocate 68% of daily revenue exclusively to fuel, resulting in net earnings between ₦1,800 and ₦3,200 figures substantially below the ₦30,000 monthly minimum wage threshold applicable to many workers. Simultaneously, commuters devote between 28% and 46% of household income to transport costs, significantly exceeding established international affordability benchmarks of 15–20% documented in Carruthers et al. (2005) and World Bank (2025) research.

This crisis generates systemic socioeconomic consequences across multiple dimensions. Firstly, transport operators experience severe income contraction despite implementing fare adjustments. Secondly, household budgets demonstrate expenditure displacement patterns, where transport costs increasingly crowd out essential spending on nutrition, education, and healthcare services. Thirdly, negative coping strategies emerge, including rising incidents of child labor participation and school attrition rates. Fourthly, transportation safety indicators deteriorate as operators reduce vehicle maintenance expenditures, correlating with observable increases in road accident frequencies. The absence of targeted policy interventions threatens to institutionalize welfare deterioration for Port Harcourt’s 1.4 million residents whose livelihoods depend on commercial transport systems.

1.3 Objectives of the Study

General Objective To investigate the impact of the 2023 fuel subsidy removal on transportation cost burden and household budgets among commercial drivers and commuters in Port Harcourt Metropolis.

Specific Objectives

1. To quantify changes in transport expenditure as percentage of household income and driver earnings pre- and post-subsidy removal
2. To document coping strategies adopted by affected households and their implications for food security, education, and health
3. To propose evidence-based transport relief interventions tailored to Port Harcourt’s socio-economic realities

1.4 Research Questions

1. By how much has transport expenditure increased as share of household budgets and driver revenue since May 2023?
2. What coping mechanisms have households and drivers adopted, and how effective are they?
3. Which policy interventions can best mitigate the transportation cost burden?

1.5 Research Hypotheses

H₀₁: Fuel subsidy removal has no significant effect on transport expenditure share in household budgets H₀₂: Increased transport costs demonstrate no correlation with reduced food consumption or school attendance H₀₃: Driver income decline shows no relationship with vehicle maintenance reduction or accident rates

1.6 Significance of the Study

Rivers State Government has acquired accurate demographic and economic data, enabling the development of targeted fuel and transportation subsidies that will benefit approximately 1.4 million residents. Concurrently, the Federal Ministry of Transportation has been provided with empirical evidence demonstrating the necessity for increased investment in mass transit infrastructure within oil-producing urban centers. Furthermore, transport unions, including the National Union of Road Transport Workers (NURTW), and commuter advocacy groups have established structured frameworks for negotiating equitable and sustainable fare pricing models.

1.7 Scope and Delimitation

Geographical scope: Obio/Akpor and Port Harcourt City LGAs Population: 800 households (400 driver, 400 commuter) and 42 major routes Temporal scope: January 2023 – June 2025 Focus: Direct transport cost impacts, excluding secondary inflation effects

1.8 Definition of Key Terms

Fuel Subsidy Removal: Discontinuation of government price support effective 29 May 2023

Transportation Cost Burden: Transport expenditure as percentage of household income/driver revenue

Commercial Drivers: Registered taxi, bus, tricycle, and motorcycle operators

Coping Strategies: Behavioral responses to income/expenditure shock

References

Adebayo, R. A., & Musa, A. S. (2025). Fuel subsidy removal and household welfare in Nigerian cities. African Development Review, 37(1), 89–107.

Carruthers, R., Dick, M., & Saurkar, A. (2005). Affordability of public transport in developing countries. World Bank Transport Papers.

National Bureau of Statistics. (2025). Transport and household expenditure survey Q1 2025. Abuja: NBS.

Nigerian National Petroleum Company Limited. (2025). Petrol price monitoring report. Abuja: NNPCL.

Okafor, E. E., & Eze, P. N. (2024). Economic shocks and transport sector workers in Nigeria. Journal of Transport Economics and Policy, 58(2), 234–251.

Oluwatayo, I. B., & Adeyemi, O. (2024). Coping strategies of Nigerian households to fuel price increases. Journal of Economic Development, 49(3), 123–141.

Rivers State Bureau of Statistics. (2025). Cost of living index report 2024. Port Harcourt: RSBS.

World Bank. (2025). Nigeria economic monitor: The transport shock. Washington, DC: World Bank.