Assessment of the Impact of Fuel Subsidy Removal on Transportation Costs and Market Prices in Ibadan

The 2023 fuel subsidy removal created an immediate cost shock for transportation-dependent activities, and examining its effects on transportation costs and market prices in Ibadan provides evidence for understanding the real economy transmission of this major policy change. This study assessed the impact of the fuel subsidy removal announced in May 2023 on transportation costs and selected market prices in Ibadan North, Egbeda, and Ona-Ara Local Government Areas, Oyo State. A before-after survey design was employed, comparing transportation fares and food market prices between April 2023 (pre-removal) and August 2023 (post-removal) for a panel of 200 market price observations and 80 transport operators. Paired t-tests and percentage change analysis were applied. Results showed that intra-city transportation fares increased by an average of 124 percent within three months of the policy change. Prices of staple food items including rice, maize, and tomatoes increased by an average of 61.4 percent in the same period. Transport operators reported fuel cost increases averaging 187 percent. Lower-income households, which spend a larger share of income on food and transportation, bore disproportionately higher real burdens. Business operating costs rose by an estimated 34 percent for market traders. The study concludes that the fuel subsidy removal transmitted rapidly and severely to transportation and food prices in Ibadan. Recommendations include complementary demand-side support for low-income households, investment in mass transit infrastructure to reduce transport cost vulnerability, and food supply chain investment to moderate pass-through effects.

Keywords: fuel subsidy removal, transportation costs, market prices, Ibadan, inflation pass-through