Many Nigerians are bracing up for another round of increased cost of essential items as a new hike in petrol price and its scarcity are poised to further worsen their living conditions, analysts have said.
BusinessDay’s analysis shows that the fuel price soared from an average N238 in May, 2023 to almost a thousand naira in September 2024, rising by 276 per cent in less than two years.
Our correspondent gathered that the pump price has been officially changed from about N575 per litre it stood some months ago at the state-owned Nigeria National Petroleum Corporation outlet to now N897, fueling a new cost-of-living crisis.
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Samuel Sule, chief executive officer of Renaissance Capital Africa, said the almost 40 percent increase in fuel price at the state-owned outlet may stoke prices, especially that of transportation, explaining that “the passthrough effect of transportation costs will reduce the effects of the base effect.”
“Over time, this should normalise subject to further fuel price increases and FX rates,” the Harvard Business School-trained executive said.
“Prices of basic things are already going up in less than 24 hours of the increment while cash balances are going down,” Assore Fatai, a netizen said on X Wednesday, lamenting the high cost of commodities.
Ayo FBI, another X user, said Nigerians may be thrown into abject poverty with the official hike in petrol prices, especially with income being static and lower spending power.
“Tinubu met fuel at N184/litre. It is Now N897/litre. 388 percent increase in 15 months,” he said.
“If your income hasn’t increased by at least half of that (194%) in the last 15 months you are not only living from hand to mouth but now in abject poverty”.
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The World Bank most recent data shows that 104 million Nigerians are extremely poor for a country with a little above 220 million people.
The multilateral lender also ranked it as the second largest poor population in the world after India, with one of the highest number of food insecurity.
Nigeria has just heaved a sigh of relief from a near three-decade high inflation which has sparked a cost of living crisis and led to multiple social unrest as citizens demand an end to their economic maladies.
According to the National Bureau of Statistics (NBS), the July annual inflation rate declined to 33.40 percent up from 34.19 percent in June, 2024 on high base effect and lower food prices due to bumper harvest, analysts said.
Food inflation, which accounts for over 50 percent of Nigeria’s headline inflation, also decelerated to 39.58 percent in the same month under review, fanning hopes of respite to households who have endured the worst economic crisis in a generation.
But with an inevitable hike in pump price, Nigeria might not be out of the woods yet in its fight to combat rising prices and weakening purchasing power.
“Fuel prices now are between N900 and N1,500. Plan your journey wisely. If you have worked in a particular job for more than 5 years and you are not leaving that location soon, you need to relocate to somewhere close to work,” a LinkedIn user identified as Mr Edison advised.
Tobi Ehinmosan, macroeconomic and fixed income analyst at Lagos-based FBNQuest Capital said the new pump price, though could not be avoided, may eventually erode the gains seen in the recent inflation data as transport fare doubles.
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“The recent increase in fuel prices will exert a significant upward pressure on Nigeria’s inflation basket,” he said, adding that while July’s inflation moderated due to high base effect, “Nigeria’s headline inflation remains high”.
The research analyst said that the increase in fuel prices does not bode well for the Central Bank of Nigeria’s monetary policy committee which has remained hawkish in its fight against rising inflationary pressures.
The Abuja-based bank under Olayemi Cardoso has through the MPC, raised the benchmark interest rate by a combined 800 basis points to 26.75 percent in less than a year. This is in a bid to rein in inflationary levels.
But a lingering fuel scarcity and hike in pump prices may frustrate the CBN’s target to beat down prices to 21 percent by the end of the year.
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“Increase in fuel prices will translate to higher transportation costs, and this has a negative pass through effect on food prices,” Ehinmosan said, noting that farmers will have to pay more to transport or move their farm produce from farmlands to other consuming states or markets.
He added that the transportation index, although insignificant to the components of the country’s inflation pressure, will increase due to high intercity and intra-city passenger fares.
“This recent development will likely offset the positive base effect from last year and the recent suspension of import tax duty on essential goods”.
