As the latest increase in the pump price of petrol in Nigeria begins to take a toll on homes and businesses, Festus Akanbi, in this report captures the fear expressed by economic analysts and members of the organised private sector
Last week, a groundswell of condemnations continued to trail the latest increase in the pump price of premium motor spirit (petrol) as announced by the Nigerian National Petroleum Company Limited (NNPCL) two weeks ago, with analysts saying Nigerians have indeed reached the breaking point.
Although this administration has courted public anger many times with its anti-people policies, this time, it stirred up a hornets’ nest when the NNPCL raised the pump price of petrol to over N855 across its retail outlets amid long queues at filling stations but sold above N1,000 per litre in other stations. And characteristic of the government’s tactics in times of crisis, the Minister of State (Oil) Petroleum Resources, Heineken Lokpobiri said the federal government was not responsible for the recent petrol price increase across the country.
Nigerians woke up on Tuesday to see a change in the pump prices from around N600 to N855/litre, N918/litre, and above, depending on the area of the purchase at NNPC stations nationwide. As expected, prices of goods and services jumped in an unprecedented manner, thus worsening the state of poverty in the country. This increase was felt in the transport sector, particularly in goods and services costs.
While Lokpobiri and NNPCL were busy playing with words on the latest petrol price hike and saying it was all about market forces, President BolaTinubu was saying in faraway China that the increase was because he had to take “hard decisions” for the sake of Nigeria’s development.
In a statement, the Nigeria Labour Congress (NLC) alleged that the federal government had undertaken, during the N70,000 minimum wage deal with organised labour, not to approve further hikes in the price of petrol. It called the recent price hike a betrayal by the government.
But the presidency denied making any undertaking not to increase fuel prices. The drama, however, took a new turn with the arrest of the NLC President Joe Ajaero on Monday morning. He was released later after the NLC threatened to shut down the nation’s economy.
Fuelling Social Unrest
The fear from many quarters is that the latest price hike could trigger social unrest as indices are showing a consistent widening of the gap between the rich and the poor. This is perhaps why a frontline economist and Chief Executive Officer of Financial Derivatives Company Limited (FDC), Mr. Bismarck Rewane projected that the latest increase in the pump price of petrol by 50.1 per cent, from N568 to N855 per litre, would take N5 trillion from Nigerian consumers to the government and heighten energy poverty.
In his monthly presentation at the Lagos Business School (LBS) Breakfast, titled, “All That Glitters are Not Gold,” Rewane said although the price hike could strengthen the exchange rate of the naira, as liquidity decreased, he insisted that the development “may instigate social unrest as citizens react in frustration.”
Pushing Many Nigerians into Energy Poverty
He also predicted that the new price of petrol would increase the number of Nigerian citizens trapped in energy poverty to 168 million in 2025, from 161 million in 2023.
As he explained, “The macroeconomic and welfare impact of the new price of petrol, now adjusted to N855 per litre from N568 per litre, implies that N5 trillion is withdrawn from consumers and transferred to the government.”
According to him, this can lead to re-inflation in September as logistics cost escalates and consumer demand suffers a decline due to income squeeze, while “energy poverty could quicken to 76.3 per cent (168 million) in 2025 from 71 per cent (161 million) in 2023.
Rewane said the commencement of petrol production by the Dangote Refinery “will offer relief to consumers by addressing the supply challenges, guarantee the quantity and quality of refined products, but not the price, as no producer will sell below its production cost.”
Therefore, the “domestic price of petrol depends on the global price of oil”, but “smuggling of petrol to the ECOWAS region will reduce as Dangote Refinery can sell directly to those countries”, he said. Unfortunately, the federal government has yet to finalise plans with the Dangote Refinery and up till now, Nigerians are still kept in the dark on what becomes of the anticipated sale of Dangote oil in the country.
A Trigger for Inflationary Pressure
Warning of the potential of the latest price hike to worsen the nation’s inflation, Rewane stated that analysts expectation of an end to monetary tightening after 850bps increase in the Monetary Policy Rate (MPR) might be unrealised, as the new increase in petrol price and its inflationary pressure might hinder the Central Bank of Nigeria (CBN) from reducing rate.
Despite the crackdown on labour and civil societies, the fact is that the current administration is not winning its battles to trade blame for the shoddiness in the handling of the latest fuel price hike. The sheer intensity of the opposition to the policy is a clear signal that more protests are in the offing.
On its part, the Trade Union Congress (TUC) asked the federal government to reverse the decision and take steps to rebuild confidence among the citizens.
In a statement signed by its President, Festus Osifo, the union stressed that the sudden price hike represented “a blatant disregard for the welfare of the Nigerian people, particularly the working class who bear the brunt of such decisions.
Similarly, ActionAid Nigeria condemned the hike in the pump price of petroleum products, demanding immediate action from the government on economic reform
The non-governmental organisation said increasing the minimum wage from N30,000 to N70,000 would never bring succour from economic hardship to Nigerians as it only amounted to treating eczema instead of leprosy.
ActionAid, in a statement, signed by its Country Director, Andrew Mamedu, said “Since President Bola Ahmed Tinubu assumed office in May 2023, the removal of fuel subsidies has led to a harsh economic reality for many Nigerians. Despite efforts to recover, the federal government’s decision to allow fuel prices to surge again has worsened the situation, leading to a ripple effect on the economy.
“Since then, fuel prices have continued to rise steadily. By August 2023, it reached N626.70 and continued to fluctuate, rising to N668.3 in January 2024 and N770.54 in July 2024. As of September 2024, it has increased again to a staggering N897 per litre, which greatly worsens the situation for many Nigerians.”
Capturing the fears of the organised private sector, the Lagos Chamber of Commerce and Industry (LCCI) warned that the impact of the hike in petrol price on businesses “will be severe, with fuel 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.”
In the same vein, the National Association of Chambers of Commerce Industry and Agriculture (NACCIMA), in a statement by its National President, Dele Oye, called on the federal government to engage in constructive dialogue with relevant stakeholders, including the organised private sector and labour unions, to address the concerns raised about the price increase and its potential effect on the economy.
“While we understand the complex factors that can influence fuel prices, such as global oil market dynamics and exchange rate fluctuations, we are troubled by the lack of prior notice and clear explanations provided by the government and the NNPC regarding this development.
“The timing of this price hike is particularly concerning, as it has the potential to further exacerbate the impact on businesses and consumers, especially the vulnerable segments of the population and those on fixed incomes, who are still adjusting to the recent increase in the national minimum wage.”
At this point, the current administration should realise that a steep price hike is bound to trigger widespread price increases, potentially reversing the recent easing in inflation seen in July and leading to another surge in inflation rates. Whatever President Tinubu opts for will make or mar the Nigerian economy.
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