Petrol price hike to drive inflation, business costs

An economist, Prof. Kenneth Ife, says the latest increase in Dangote Refinery’s petrol gantry price could raise transportation and business costs while further weakening household purchasing power.

Ife, President of the Institute of Professional Economists and Policy Management (IPEPM), said the increase could also put pressure on food prices and inflation as higher energy costs spread across the economy.

Dangote Refinery increased its petrol gantry price from N1,265 to N1,350 per litre on Sept. 12, marking its fourth increase since Aug. 21.

The cumulative increase has raised the refinery’s gantry price by N185, representing a 15.9 per cent rise in 22 days.

Ife said petrol prices could rise further if international crude oil prices remained elevated amid disruptions to global oil supplies.

He said the price of Bonny Light had risen to 112 dollars per barrel before falling to about 108 dollars.

According to him, crude prices could rise further if tensions around major oil-producing countries and key shipping routes intensify.

He added that further escalation of tensions in the Middle East could put additional pressure on crude oil and refined petroleum product prices.

Ife said recent attacks on Saudi energy infrastructure and disruptions around major shipping routes had increased concerns over global oil supplies.

He explained that higher petrol prices would directly reduce household purchasing power by increasing transportation and energy costs.

“The petrol price increase transmits directly to shrinkage in household purchasing power,” he said.

Ife said higher transportation costs could also push up food prices and worsen energy and food insecurity.

“Cost-push inflation will be aided by the rising input cost,” he said.

The economist added that higher costs of imported goods and industrial raw materials would increase the cost of doing business and could reduce the competitiveness of Nigerian businesses in regional and global markets.

Ife urged the Federal Government not to return to petrol subsidies but to adopt measures that could reduce domestic fuel costs.

He called for full implementation of the Petroleum Industry Act (PIA) and increased domestic crude supply to local refineries.

“The government can get Nigerian National Petroleum Company Ltd. to supply the full complement of crude required by local refining capacities,” he said.

“Under the PIA, domestic crude supply operates on a willing-supplier, willing-buyer basis, with the regulator empowered to establish a Domestic Crude Supply Obligation,” he added.

Ife also urged the government to accelerate the deployment of Compressed Natural Gas (CNG) as an alternative to petrol in the transport sector.

He proposed partnerships with filling station operators to expand CNG infrastructure and vehicle conversion.

“The government can rapidly accelerate the CNG gas expansion and capacity utilisation by taking CNG to the mass market,” he said.

Ife said wider adoption of CNG could reduce dependence on petrol and help lower energy costs for households and businesses.

He said the government could pursue these measures while allowing market forces to determine petrol prices.

The Presidential Initiative on CNG and Electric Vehicles currently reports more than 400 certified conversion centres and over 90 CNG refuelling stations nationwide.

The initiative aims to expand CNG infrastructure and reduce transportation costs following the removal of petrol subsidies.

As of Sept. 20, petrol was selling for between N1,400 and N1,500 per litre at some filling stations in parts of Lagos.