Tuesday’s petrol price shock has heightened fears of further increases in inflation numbers, inflicting more pain on citizens and businesses.
The NNPC Ltd. raised pump prices to N855 and N897 per litre, up from N617/l, a few days after admitting it was in dire financial straits. Independent marketers adjusted their prices to between N930 and N1,200/l.
This price hike will have a cascading effect on prices, especially transportation, food, and other life essentials.
Transporters in major cities have hiked fares by up to 50%. Commuters now trek long distances to work or are not showing up at all. Business owners fear lower patronage.
Nigerians have had no respite from significant and continuous price increases affecting all goods and services since President Bola Tinubu cancelled petrol subsidies in May 2023.
Prices jumped from N195 upwards to N600 following the naira devaluation.
The Presidential spokesman, Bayo Onanuga, insisted the NNPC risked collapse if it continued to subsidize petrol.
Nigerians are disappointed that the price hike coincided with the announcement that the Dangote Refinery had started petrol production without the anticipated price reductions.
Hopes that Nigeria’s inflation rate had started to trend downwards have now been dashed. Inflation dipped marginally in August to 33.4%, down from 34.19% a month earlier.
The latest 66.4% petrol price hike will return that metric on a sky-bound trajectory. The development has effectively derailed the CBN’s year-end inflation target of 21.4%.
Inflation rose from 22.4% in May 2023 to 33.95% a year later following petrol subsidy removal and naira devaluation.
The Manufacturers Association of Nigeria warned that expected higher inflation could spell doom for companies, especially MSMEs, which have been limping along on thin margins.
MAN said the price hike would translate into increased production and logistics costs for manufacturers and other businesses that could force some to scale down operations or even shut down.
These grim prospects pose a huge challenge for the government as it tries to find a balance between easing the fuel subsidy burden on the economy.
Over the past 15 months, Nigerians have endured a cost-of-living crisis. Food inflation surged to 40.9% in June, up from 25.3% a year earlier.
While the NNPC price adjustment suggests that the petrol subsidy has been removed or reduced much more significantly, the Federal Government must prepare to intervene to cushion the inevitable fallout.
This should go well beyond the tokenism associated with the distribution of so-called palliatives.
MSMEs need to be supported with more incentives, especially tax relief.
The risk of further social unrest with labour unions, students, and civil society warming up to challenge the petrol price hike means that the government must engage meaningfully with all stakeholders.
The government must ensure that fuel prices are tamed in the short term with sustained supply from local refineries.
The naira crude sales arrangement with Dangote Refinery must be extended to all domestic refiners.
The NNPC refineries should be sold outright.
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