Nigerians, especially the low and middle class have found commuting a challenge since the new President, Bola Tinubu implemented the removal of the fuel subsidy on Monday, May 29, 2023.
Petroleum subsidies are federal government interventions that aim to provide direct financial aid to oil marketing corporations while also reducing the price of the commodity for users.
The removal of fuel subsidies is not a new topic among both past and aspiring presidents. Fuel subsidies have long been a source of contention in Nigeria. If we tell ourselves the truth, these subsidies were created to cut the cost of fuel for users, but they have also resulted in severe economic issues and bottlenecks.
In recent times, the Nigerian government has attempted to overhaul the subsidy system, including the elimination or reduction of fuel subsidies.
The elimination of gasoline subsidies can have an influence on the economy and numerous industries, including transportation services such as ride-hailing.
Let’s consider the following potential outcomes:
First, the withdrawal of gasoline subsidies usually results in an instant spike in fuel costs, as we have all seen.
Ride-hailing services rely significantly on vehicles that operate on gasoline or diesel, this might have an influence on their operational costs. Higher petrol prices may result in higher fees for customers or lower profitability for ride-hailing companies.
Furthermore, the elimination of fuel subsidies may promote the use of alternative energy sources for transportation, such as electric vehicles (EVs), which Nigeria, of course, is not prepared for.
Ride-hailing services should encourage the usage of electric vehicles (EVs) to offset the impact of rising gasoline prices and minimize their carbon footprint.
The availability and cost of EV infrastructure in Nigeria, on the other hand, would be critical in this shift.
Remember that reallocating funds from fuel subsidies to other sectors can help to foster economic diversification.
This could result in investments in infrastructure development, renewable energy projects, and technological improvements, which could benefit the ride-hailing industry indirectly by enhancing the overall business climate, but the question today is, are these plans in place?
What about the future of Tech-Driven Ride-Hailing Services:
Uber, Bolt, Rida, InDrive, and other tech-driven ride-hailing services have grown in prominence in Nigeria over the last decade and have become some people’s preferred modes of transportation.
These services use smartphone apps to connect clients with drivers, providing a simple and efficient transportation solution; but, with the repeal of fuel subsidies, these rides have also been impacted.
The removal of fuel subsidies has led to a hike in fuel prices, which directly affects the operational expenses of ride-hailing services.
Since fuel is a significant component of their operational costs, the removal of subsidies has resulted in higher expenses for commercial buses and so ride-hailing is not left out.
Also, fuel subsidy removal has led ride-hailing platforms to adjust their fare structures to compensate for the increased fuel costs.
This has led to higher prices for passengers, which might impact the demand for these services. If the fares become less affordable, some customers may opt for alternative transportation options.
To mitigate the impact of increased fuel costs as a result of fuel subsidy repeal, ride-hailing platforms may concentrate more on optimizing operational efficiency.
This can involve implementing advanced algorithms and technologies to optimize routes, reduce idle time, and improve overall productivity.
Additionally, companies may invest in developing or partnering with electric vehicle charging infrastructure to support their transition to EVs.
The removal of fuel subsidies can lead to economic changes and potential market volatility in Nigeria.
This can impact the overall business environment, consumer purchasing power, and investor sentiment.
Uncertainty in the market can influence the growth and investment decisions of ride-hailing services.
The repeal of fuel subsidies in Nigeria can have implications for ride-hailing services, primarily due to potential changes in fuel prices and a shift towards alternative energy sources.
As the fuel subsidy effect lingers and ride-hailing services in Nigeria find ways around the challenges, one can’t underestimate the potential of technology in driving growth and transformation.
Technology is at a meeting point with entrepreneurship, thus evolving consumer demands present a unique opportunity for these companies to reshape Nigeria’s transportation landscape.
However, the future of tech-driven ride-hailing services beyond fuel subsidy removal will still depend on factors like supportive regulations, infrastructure development, and market competition.
Don’t miss important articles during the week. Subscribe to techbuild weekly digest for updates
