The recent surge in petrol prices, skyrocketing from ₦568 to ₦855 per litre at NNPC filling stations, has sent shockwaves through the nation. As the cost of fuel rises, Segun Ajayi-Kadir, mni, Director-General of the Manufacturers Association of Nigeria (MAN), has voiced deep concerns over the potential economic fallout.
Ajayi-Kadir explained that the price hike is a result of several interrelated factors. Globally, crude oil prices have been on an upward trajectory. Unfortunately, with Nigeria’s refineries largely inactive, the country remains heavily reliant on fuel imports. This dependency, coupled with the rising costs of crude oil, has inevitably led to adjustments in domestic fuel prices by the NNPC. The removal or reduction of fuel subsidies has also contributed to this inevitable price increase.
Moreover, Ajayi-Kadir highlighted the sharp decline in the value of the Naira, further exacerbating the situation. The depreciation of the currency increases the cost of importing fuel, which in turn pressures domestic prices to rise.
Discussing the ripple effects of this price hike, Ajayi-Kadir warned that the cost of transportation would inevitably increase, triggering a rise in the prices of goods and services across the board. As consumers are forced to allocate more of their income to transportation and energy costs, their disposable income will shrink. This reduction in purchasing power is likely to dampen demand for non-essential goods and services, impacting businesses across various sectors.
MAN DG further emphasized that this scenario points to a likely surge in inflation, straining household budgets even further. For the already struggling manufacturing sector, the impact could be devastating. The hike in petrol prices will increase production and logistics costs, leading to higher prices for goods. In an environment where the average Nigerian’s disposable income is dwindling, manufacturers are likely to see a decline in consumer demand, leading to unplanned inventory accumulation and reduced capacity utilization.
He expressed concern that the performance of the manufacturing sector would be severely affected, with businesses possibly needing to adjust their pricing strategies to cope with the rising costs. However, this could result in reduced profit margins, particularly if consumer demand weakens. Small and medium-sized enterprises (SMEs), which often operate on razor-thin margins, could be the hardest hit, with some possibly being forced to scale down operations or even shut down if they cannot pass on the additional costs to consumers.
Ajayi-Kadir’s warning underscores the precarious situation facing Nigeria’s economy as the nation grapples with the consequences of this significant petrol price hike. The potential for widespread economic disruption is high, with both businesses and consumers bracing for the challenging times ahead.
