Fuel price hike: MAN warns Nigerians to brace for new inflation spike

The Manufacturers Association of Nigeria (MAN) has warned that the recent increase in the price of premium Spirit PMS petrol could lead to a fresh spike in inflation figures in the country.

This in turn may affect the new purchasing power of many households further deepening poverty.

The association further warned that Small and Medium Enterprises (SMEs), which often operate on thin margins, could be hit hard by the development.

Ripples Nigeria reports that Nigerians have been battling severe fuel shortages for some time now and just yesterday, the state-owned oil company Nigeria National Petroleum Company Ltd (NNPCL) increased the price of the product from about ₦568 per litre to ₦855 per litre.

Responding to the increase in a statement on Wednesday, MAN Director General, Segun Ajayi-Kadir, highlighted the impact of the increase in petrol prices.

“So, in terms of the potential impacts and based on what we’ve seen in the past, transport costs are likely to increase, as are prices of goods and services. As fuel prices rise, consumers will spend more on transport and energy, so disposable income will decrease.

“This decline in purchasing power can lead to reduced demand for non-essential goods and services, which will affect businesses in various sectors. This is an indication of the high possibility of rising inflation rates, which will affect household budgets,” said the Director General.

He expressed concern about the further impact on “the already sluggish performance of the manufacturing sector.”

“In particular, there is no doubt that it will increase the costs of production inputs and logistics.

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“This will lead to higher prices and will lead to a reduction in the average disposable income of Nigerians,” Ajayi-Kadir said.

He also pointed out that manufacturing performance would be negatively impacted as “higher consumer demand would lead to unexpected inventory builds from manufacturers and lower capacity utilization.”

DG said that businesses may need to adjust their pricing strategies, and this could “result in reduced profit margins if consumer demand weakens.”

“Small and medium-sized enterprises (SMEs), which often operate on razor-thin margins, could be hit particularly hard.

“Increased costs could force some companies to scale back operations or even close if they are unable to pass on the additional costs to consumers,” he said.

However, he explained that the reasons for the fuel price increase were “not far-fetched.”

“Globally, there is an increase in the price of crude oil. Our refineries are not producing and we are importing fuel. The increase in the cost of crude oil will have a direct impact on the cost of fuel imports into Nigeria and hopefully, NNPC will eventually adjust the domestic price.

“Also, since fuel subsidies have been reduced or removed, price increases are inevitable. You will also see a sharp decline in the value of the Naira and its impact on fuel imports,” he said.

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