As anticipated, the Manufacturers Association of Nigeria (MAN) has described the hike of petrol pump price by the Nigerian National Petroleum Company Limited (NNPCL) and other marketers in the country on Tuesday as undesirable for the nation’s economic growth, especially given its negative implications for manufacturing and the entire industrial sector.
The organized private sector group warned about possible escalation of prices of goods and services as a result of the upward adjustment of the price of petrol by the Federal Government.
Reacting to the fuel pump price hike, Director-General of the association, Mr. Segun Ajayi-Kadir, expressed worries about the impact of the increased price of the commodity on the unimpressive performance of the real sector and others.
The industrialist pointed out that there was no doubt that the measure would increase production input and logistics costs with the attendant implications for higher prices of goods and services, and manufacturers’ unplanned inventory rising and reduction in capacity utilization in the face of dwindling disposable income of average Nigerians.
According to him, the Manufacturing performance would also be negatively impacted and businesses may need to adjust their pricing strategies, which could lead to reduced profit margins if consumer demand weakens.
Ajayi-Kadir further projected that small and medium-sized enterprises (SMEs), which often operate on thin margins, could be particularly hard-hit just as he warned that 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 further clarified: “From what I can glean, the reasons for the increase are not far-fetched. 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 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.
“So, in terms of what the impact might be and judging from what we have witnessed in the past, the cost of transportation may increase, and so would the prices of goods and services.
“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 Director-General stressed.
