Fuel subsidy emerged as a significant focal point during Nigeria’s presidential race in anticipation of the country’s upcoming 2023 general elections. Despite their disagreements on various policies, the three major presidential candidates found common ground on this issue, and for good reason.
According to the Nigerian National Petroleum Corporation (NNPC), the Nigerian government allocated a staggering $10 billion to fuel subsidy in 2022, surpassing the combined expenditure on education and healthcare. Given these figures, it was not entirely surprising when the newly elected president, in his inaugural address, announced the discontinuation of fuel subsidy. However, the timing of the announcement drew criticism from certain quarters, and its immediate consequence was a sharp increase in fuel prices. As of the time of writing, petrol was being sold nationwide for between ₦500 and ₦600, a significant surge from the previous ₦185 per litre price.
Industries heavily reliant on fuel, such as transportation and logistics, were immediately impacted by this development. Bolt, a prominent ride-hailing platform, recently raised its minimum fare across the nine cities it operates in. However, ride-hailing drivers have resisted this increase, demanding a 200% surge in ride-hailing tariffs. A food vendor who utilizes a delivery bike explained that after implementing a price hike earlier in the year, she is cautious about adding additional costs that may alienate her customers. Consequently, she has limited her delivery services to nearby locations.
While some logistics services swiftly responded to the fuel price hike by increasing their prices, quick-delivery service provider Glovo has chosen to evaluate the impact of higher fuel prices on their operations before making any decisions. Lorenzo Mayol, General Manager for Glovo Nigeria, explains, “Overall, our operations have remained unchanged, but we anticipate an increase in delivery costs and the cost of goods from our partners due to the overall escalation in operating costs. We have yet to officially increase prices, and since it has only been a few days, we are still assessing the precise impact on our customers.” Mayol further notes a minor two-minute increase in delivery times, which, albeit insignificant, can compound concerns regarding the cost of logistics services. Customers may desire swift delivery, but it may be one of the first expenses they eliminate as they grapple with rising prices and stagnant incomes.
Nonetheless, Mayol remains optimistic, asserting that on-demand delivery is here to stay. Over the past year, the Glovo app has witnessed a remarkable 76% surge in the number of individuals ordering groceries, while businesses have recorded increased revenue through the platform. “Despite mounting inflation and the challenges of a higher cost of living, there remains strong demand from both partners and customers, as people have grown accustomed to the convenience of ordering from the comfort of their homes. Irrespective of scarcity and rising costs, Nigeria has substantial potential for this trend to persist,” affirms Mayol.
Couriers play a vital role in Glovo’s operations, and Mayol reveals that the company is actively working on initiatives to ensure couriers reap the maximum benefits of working with Glovo. Currently, the startup is rolling out “The Couriers Pledge,” a program designed to enhance working conditions for couriers and increase the advantages of collaborating with Glovo. The Couriers Pledge, launched in 2017, has already been implemented in 17 countries, with plans to expand its presence to all countries where Glovo operates by December 2023.
This June, The Couriers Pledge will be launched in Nigeria, adding the country to the list of five African nations benefitting from the program, alongside Kenya, Morocco, Ghana, and Uganda. Mayol asserts that countries where the program has been implemented have witnessed a ten percent increase in wages.
While acknowledging that the fuel subsidy removal will result in higher operational costs, Mayol remains confident that businesses relying on logistics services will devise innovative strategies to cater to their customers’ needs.