Petrol price hike may worsen inflation, hurt businesses, say MAN, LCCI

The Manufacturers Association of Nigeria (MAN) says the recent petrol price hike may result in an increase in the prices of goods and transport fares.

Segun Ajayi-Kadir, director-general (DG) of MAN, spoke in an interview with NAN on Wednesday in Lagos.

He expressed concern about the potential impacts the policy could have on Nigeria’s economy, particularly the manufacturing sector.

On September 3, the Nigerian National Petroleum Company (NNPC) Limited raised the price of premium motor spirit (PMS), also known as petrol, across its retail outlets.

Reacting to the development, Ajayi-Kadir warned that the increase could lead to higher transport fares and inflated prices for goods and services, reducing disposable income for Nigerians.

He said a decline in purchasing power could reduce demand for non-essential goods and services, affecting businesses across various sectors.

“One is naturally worried about the impact on the already lackluster performance of the manufacturing sector,” Ajayi-Kadir said.

“In particular, there is no doubt that it will add to production inputs and logistics costs.

“These will lead to higher prices and dwindling disposable income of the average Nigerian.”

Ajayi-Kadir said while the manufacturing sector would be negatively impacted, businesses might be forced to adjust pricing, potentially resulting in reduced profit margins if consumer demand weakens.

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

He noted that said increased costs could force some SMEs to scale down operations or even shut down if they are unable to pass on the additional costs to consumers.

‘IMPACT OF PETROL PRICE HIKE ON BUSINESSES WILL BE SEVERE’

In a separate statement, Chinyere Almona, the director-general of the Lagos Chamber of Commerce and Industry (LCCI), said the increase in petrol price would hurt businesses.

Almona said the new price indicates a reduction in the gap between the landing cost and the former price level previously charged by the NNPC.

She said eliminating the gap and subjecting Nigerians to a sharp price increase poses significant challenges.

“A steep price hike would likely trigger widespread price increases, potentially reversing the recent ease in inflation seen in July and leading to another surge in inflation rates,” Almona said.

“Balancing the need for fiscal responsibility with the economic impact on citizens is a complex task for the government.

“The impact on businesses will be severe, with petrol prices affecting supply and logistics, power generation, transportation, and factory operations.

“The cost of doing business will skyrocket, prices of goods will rise, and some firms may shut down due to low demand in the face of weakening consumer purchasing power. Of course, this will be followed by job losses.”

However, the LCCI DG said the Dangote refinery, which now produces petrol and diesel, offers a glimmer of hope.

She described the refinery as a “game-changing intervention” that could restore stability to the oil and gas sector, which has been grappling with significant distortions throughout 2024.

Almona advocated for a more sustainable approach to support the development of additional local refineries to process crude for local consumption and potential export across Africa.

This, she said, is crucial for the stability and growth of Nigeria’s economy in the long term.

“As an immediate intervention, it would be beneficial for the Port Harcourt refinery to commence operations alongside production from the Dangote refinery,” the LCCI DG said.

“Given the current challenges with importing refined fuel, relying on local production may be the most viable option at this time.”

The LCCI boss recommended sustaining local supplies, with the expectation that demand would eventually align with supply — leading to equilibrium pricing across various sources.