The Manufacturers Association of Nigeria (MAN) has warned that the recent hike in the prices of premium motor Spirit PMS popularly known as petrol may lead to a fresh surge in inflation figures in the country.
This, in turn may affect the new purchasing powers of many households further deepening poverty.
The association further warned that the Small and Medium-sized Enterprises (SMEs), which often operate on thin margins, could be hard-hit by the development.
Naomisophyblog reports that Nigerians have been battling biting fuel scarcity for a while now and just yesterday, the state oil company Nigeria National Petroleum Company Ltd (NNPCL) hiked the price of the product from about ₦568 per litre to ₦855 per liter.
Reacting to the hike in a statement on Wednesday, MAN’s Director-General, Segun Ajayi-Kadir, highlighted impacts of the petrol price hike.
“So, in terms of what the impact might be and judging from what we have witnessed in the past, the cost of transportation may increase, and so would the prices of goods and services. As the cost of petrol rises, consumers will spend more on transportation and energy, leaving them with less disposable income.
“This decrease in purchasing power may lead to reduced demand for non-essential goods and services, affecting businesses across various sectors. These are pointers to the high possibility of a rise in inflation figures, impacting household budgets,” the DG said.
He expressed worry about further impact on the “already lackluster performance of the manufacturing sector.”
“In particular, there is no doubt that it will add to production input and logistics costs.
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“These will lead to higher prices and in the face of dwindling disposable income of the average Nigerian,” Ajayi-Kadir said.
He also pointed out that the manufacturing performance would be negatively impacted as a “further deep in consumer demand will see manufacturers’ unplanned inventory rising and reduction in capacity utilization.”
The DG said businesses may need to adjust their pricing strategies, and this could “lead to reduced profit margins if consumer demand weakens.”
“Small and medium-sized enterprises (SMEs), which often operate on thin margins, could be particularly hard-hit.
“The increased costs could force some to scale down operations or even shut down if they are unable to pass on the additional costs to consumers,” he said.
He, however, explained that the reasons for the increase of petrol price “are not far-fetched.”
“Globally, there is an increase in crude oil prices. Our refineries are not producing and we import fuel. The increase in cost of crude oil will have a direct impact on the cost of importing fuel into Nigeria and expectedly, the NNPC would at some point, adjust domestic prices.
“Also, right from the time fuel subsidy was either reduced or removed, it became inevitable that the price may rise. You will also note the sharp decline in the value of the Naira and the impact it is bound to have on the importation of fuel,” he said.
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