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The Manufacturers Association of Nigeria (MAN) has enumerated how the increase in price of Premium Motor Spirit (PMS), popularly known as petrol will affect Nigerians and ultimately, the productive sector of the economy.
MAN gave the analysis in a statement signed by its Director-General, Segun Ajayi-Kadir in reaction to the hike in price of petrol to nearly N900 by the Nigeria National Petroleum Company, NNPCL on Tuesday.
MAN, in the statement released on Wednesday, listed many potential impacts of the hike in petrol price on the different segments of the national life and the productive sectors of the economy.
According to MAN, based on past experience, the cost of transportation as well as goods and services are bound to go up with the new increase in petrol price.
The manufacturing body said 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.
“These will lead to higher prices and in the face of dwindling disposable income of the average Nigerian,” Ajayi-Kadir said.
The MAN DG also noted 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.”
According to him, 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.
But the MAN DG said the reasons for the increase of petrol price are not difficult to fathom.
“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.
