Ride-Hailing Is Facing A Bumpy Road As Fuel Trouble Grips Nigeria

Anthony, a 36-year-old who has earned a livelihood the last two years by helping people get around Port Harcourt, a major city in Southern Nigeria, has had his Toyota Corolla parked since Tuesday this week.

As an individual who swings between Bolt and Uber—the two main ride-hailing apps used in the city—seeking passengers, being on the road has ceased to make sense following an abrupt shakeup in Nigeria that has seen the pump price of petrol more than double overnight; such that a full tank of fuel for a regular sedan now costs around NGN 35 K (~USD 76.00) on average, higher than the country’s monthly minimum wage.

“As it stands, there have not been any price adjustments on Bolt rides and it’s affecting the drivers, most of us are not even on the road,” he told WT over a phone call. “It’s difficult for me to work because filling stations are currently selling between NGN 511.00 (USD 1.11) to NGN 520.00 (USD 1.13) per litre but the fares are still as before. That’s why I parked my car till further notice.”

On Monday, May 29, Bola Tinubu, a divisive figure whose victory in the January 25 Presidential elections is still being contested in court, was sworn in as Nigeria’s 16th Head of State and his inaugural speech contained utterances about his intention to immediately discontinue a contentious petrol subsidy regime.

The Nigerian government had long subsidised the price of petrol such that the fuel retails in the country at significantly lower than international market prices. But calls for the withdrawal of the subsidy—which had become very expensive as it cost a reported USD 10 B in 2022—got louder over the past decade as the government became increasingly cash-strapped. Maladministration, corruption, as well as malfeasance within the subsidy programme itself, are often cited as the main destructive forces in the continent’s largest albeit ailing economy troubled by rising poverty.

By the time Monday’s inauguration ceremony came to an end, the price at the pump had spiked across the country and it would more than double the following day, even before the confirmation of the price adjustment [from NGN 185 (USD 0.40) per litre to NGN 488-511 (USD 1.06-1.11) per litre] by the Nigeria National Petroleum Corporation Limited.

ICYMI:

🔎 Q: Why is there a price adjustment when the budget provision for PMS subsidy extends until the end of June 2023?

🗣️ A: @MKKyari, Group CEO: “The burden of subsidy must be financed… You have the budget, absolutely, there is a provision, but you do not have the cash… pic.twitter.com/iNL2GpKViV

— NNPC Limited (@nnpclimited) June 1, 2023

The effects of the hike have quickly spread across industries in the form of steep cost increments and consequent price surges on goods and services, with e-hailing taking an immediate blow among other segments in Nigeria’s burgeoning digital economy.

“We are aware that the news of the recent fuel hikes and fuel subsidy removal is affecting drivers on our platform and we are taking an in-depth look into this,” Tope Akinwumi, Country Manager for Uber in Nigeria, told WT. “As a global business that operates locally, we are constantly monitoring local dynamics to see what changes can be implemented and when. We are keen to ensure that the Uber app remains a platform where drivers can earn sustainably and provide a reliable mobility option for riders.”

E-hailing apps have over the years become an important commute option in many Nigerian cities, with prominent players like Bolt and Uber making in-roads across the country, while newer entrants—such as InDriver, Rida, LagRide, Pickmeup, etc—look to compete. In the face of deficient public transport infrastructure, the appeal of relatively inexpensive private commute services available on demand via apps has proved attractive for many in Africa’s most populous country. Last year, ride-hailing apps facilitated millions of trips for around 8 million users in Nigeria while estimated to have employed hundreds of thousands.

But the recent upheaval means the ride-hailing (or cab-hailing) business—now something of a fixture in Nigeria having survived a previously frenetic e-hailing frenzy that saw a wave of bike-hailing flameouts—faces its latest challenge, adding to a series of past run-ins with local transport unions and tax machineries, and disagreements with drivers over fees.

“Last year, we had a number of fare increases to help drivers with the spike in operating costs. We also lowered the service fee in February 2022 from 25 percent to 20 percent to help enable better-earning opportunities for drivers,” Akinwumi noted.

Following the alarming fuel price hike, some Bolt users in Nigeria’s commercial hotspot, Lagos, have taken to social media to lament a 100 percent surge in fares in some cases, even as there has been no official statement from the company on price adjustment at this time.

A trip from Ogba in the Lagos capital, Ikeja, to Lagos Island, which usually costs between NGN 8 K to NGN 9 K on Bolt, was quoted at between NGN 17 K (USD 36.84) to NGN 18 K (USD 39.01) on the app on Wednesday, according to one Joy Ogedengbe who said she restored to public transport. One other commuter, Samuel Iyinola, claims he baulked at a quote of NGN 17.3 K (USD 37.49) on the Bolt app for a trip to Opebi from Victoria Island earlier this week and ultimately took the trip on a different app where the fare was considerably less.

Lmaoooo. The trip in question, Bolt put 3000-3500 for the price o. pic.twitter.com/WlP60PU1Rp

— Nonye Billions (@TheNonye) June 2, 2023

Other users have narrated accounts of drivers on the Bolt platform attempting to negotiate higher fares than what is quoted on the app in cases where they feel the fee is not good enough, citing the high cost of fuelling their vehicles. “Some of my colleagues are doing it, it depends on the individual,” said Anthony, who asked to go by only his first name to eschew potential blowbacks. Bolt did not respond to requests for comment.

A formal response from ride-hailing companies in the face of the altered landscape in Nigeria is expected and it is likely to spell out a jump in fares, in keeping with sentiments in adjacent segments like on-demand logistics and food delivery where industry players have hinted that fees could go up by as much as 50 percent.

Additionally, there has been some talk of possibilities around tweaking the service to introduce and encourage carpooling options to split bigger fares into smaller bits among multiple people sharing a ride. Nevertheless, ride-hailing firms have their work cut out for them finding a balance in carrying out the unavoidable price reviews, especially within a notably price-sensitive market where inflation is galloping and basic essentials claim the majority of household income on average.

“It is important to note the current economic climate. Where price options are made too high there could be a risk of fewer or no requests from riders, meaning fewer or no earning opportunities for drivers. We recognise the pressures drivers are under, including the increasing cost of living. It’s important to understand that fares do fluctuate as a normal part of any business based on various factors such as seasonality and the macroeconomic environment,” Akinwumi reiterated.