High diesel price slashes trips, fares may rise to raise revenue
By Jeph Ajobaju, Chief Copy Editor
Trips have reduced on the flagship Lagos-Ibadan rail route because of the high price of diesel, the consequence of a fuel crisis raising costs and fares and the prices of all goods and services in a country hitherto the sixth largest producer of oil in the world.
The Nigeria Railway Corporation (NRC) said trips per day have reduced 67 per cent but recommendation has been forwarded to Abuja seeking hikes in fares to cover overheads and stay afloat.
NRC Managing Director Fidet Okhiria confirmed that although the service is still running, trips have been reduced to two because of the price of diesel which has risen more than 300 per cent in a few months.
“The Lagos-Ibadan train service is running but we have reduced the number of trips on that route because of the diesel problem. We reduced the number of trips we are running because of the hike in diesel price,” Okhiria told The PUNCH.
“We just can’t increase fare by ourselves. The government has to do that. We have made some recommendations. But even the recommendations we made, the new price of diesel has overshot our workings as contained in the recommendations.
“However, we don’t want to price ourselves out of market too, because the price of petrol is not increasing as such, rather the increase is little when compared to diesel price. And you know we are competing with transporters on roads.
“We are now doing two return trips as against six, which by now should have gone to 10. So we run just two trips now due diesel problem.”
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Inflation spiral
Analysts at Financial Derivatives Company (FDC) said in their latest economic bulletin that headline inflation is set to rise to 19.7 per cent because of high diesel price and other factors.
“The official headline inflation for July will be released on August 15. Our Lagos market survey and econometric model are indicating that there will be another surge of 1.1 per cent in headline inflation to 19.7 per cent,” they alerted, per The PUNCH.
“If our projections are correct, it will be the 6th consecutive monthly increase and the highest inflation rate since 2006.
“Apart from the annual inflation rate, month-on-month inflation, which is a more current measure of price movements, is also expected to follow a similar trend, rising to 1.84 per cent (24.52 per cent annualised).
“The most potent causative factors for price inflation in Nigeria today are exchange rate pass through (N667/$), the knock-on effect of the sharp increase in the price of diesel (N780/litre) and to a limited extent the impact of money supply growth and saturation (N48.8trn).”
FDC analysts explained that exchange rate weakness appears to be more potent than other causative factors.
“It has had a 76 per cent impact on the price level compared to diesel (11.6 per cent).”