The Nigerian federal government has partially lifted controls in the oil sector and in what they designated ‘Guided deregulation’ the band price of fuel will be from N135 to N145. The development, as explained by the authorities, is to ensure that there is competition that will eventually force the price of the commodity down while guaranteeing constant supply. It is a long process that could take years to materialize.
But what does it mean to your personal income?
To start with, when there is a hike in oil price there is an immediate effect on the price of commodities. The cost of food for instance rises partly because oil is used in many ways in growing and transporting food and partly because of the demand pressure on other sources of energy such as charcoal, gas etc.
Most food processing industry in Nigeria requires fuel-powered generators to produce. An increase in the price of fuel with no alternate source of power will translate to upward review of price of products. Currently the price of a sachet of pure water has increased so is the price of other basic materials.
Since oil is used in nearly all methods of transports, road, air, water and rail, the cost of shipping or moving goods and people will spike. Already, commercial transportation has already witnessed the transformation. A bus fare from Ijesha to Apapa Wharf which used to cost N100 to N150 is now fixed at N200. From Ojuelegba to Ikeja used to be N200 but now it is N300. 30 litres of fuel which cost a little above N2000 a month back will now go for more than N4000. It is the same across the country.
The hike also affects cost of living in the household, in terms of generating electricity, buying food, water, paying school fees and school buses. In the long run, if the price persists, it might also affect rents.
From personal experience, rise in fuel price does not necessarily translate to increase in salaries. This is partly because many of the organisations also have to grapple with negative impact of the price review. It also puts businesses in a cautionary mode; holding off hiring because they are uncertain about the economy’s health. Less discretionary spending results in decreased sales both of which can adversely affect a company’s ability to hire.
So how should you respond?
It is time to review and prioritize your spending. Make a list of the needs that are primary like food, health, education, clothing and so on. Take note of the areas where you are overspending. Do the same with the secondary needs.
Restructure your movement on a daily basis. If you may need to make three drops, find a way to reduce it to two. Use emails, the internet and calls for communication. Fix phone interviews, chat using any of the social media platforms, and just minimize having to drive from one place to another. If you own your business, try working from home on some days in the week. You can create a small office for yourself at home.
You can also share the cost of transport by leveraging on innovations such as GoMyWay. GoMyWay is a ride-sharing platform that ensures that brings together a car owner and a passenger in a mutually beneficial relationship. Both parties have the opportunity to save money by agreeing to share a ride. Check the website www.gomyway.com.
Saving is good, but investment is the ultimate. Putting your money in the bank and leaving it there for a long time at this time does not really make economic sense. The money you have saved should provide you with the capital for your investment. There is the risk of investments, but the joy of making significant returns far outweighs that. The longer-term you invest the better because inflation can seriously affect the value of cash savings over the medium and long term.
FRANK ELEANYA
