Petrol Price Hike: Poverty Rate Increase Looms

As the furore that greeted the initial increase in petrol price is yet to settle, Nigerians are again bracing up for another increase which will significantly affect foodstuff, transportation amongst others; BENJAMIN UMUTEME reports.

As Nigerians were still smarting from effect of the small increase in pump price of Premium Motor Spirit (PMS) popularly known petrol in September 2020, the Minister of State for Petroleum Resources, Timipre Sylva, two weeks ago, dropped the bombshell again telling Nigerians to prepare their minds for another increase in petrol price given the new fortunes of crude oil in the international market.

Sylva explained that with the price of Brent crude oil climbing above $60 per barrel, it was inevitable that the cost of petrol would increase. He therefore employed Nigerians to be ready to bear the impending new price regime.

Blueprint Weekend’s checks showed that crude price continued its marginal increase with WTI crude trading for $60.07 per barrel while Brent crude rallied by 0.38 per cent to trade at $63.59 per barrel as at Wednesday.

Analysts are of the view that the September increase drove up inflation as price of foodstuff further rose causing many Nigerians to celebrate the yuletide in a small way devoid of the usual fanfare. With Nigeria’s refineries moribund, it continues to rely on imported petroleum products to meet its domestic needs. Meanwhile, the landing cost of the product has now risen to N180 per litre from N151. This again is due to the rising price of crude oil in the international market.

With the price of crude dancing close to $64 per barrel, refiners are saddled with additional cost in the process of procuring, refining and supplying petrol to consumers, thus causing marketers to also incur additional cost, especially as a bulk of the product is currently imported into the nation.


Further checks by this reporter revealed that the present pump price of petrol which ranges from N160 – N165 was set when crude traded just above $43 per barrel four months ago. However, with a steady climb in price, it is expected to rise further from its present $63.59 as at Wednesday.

Speaking at a public forum recently, the petroleum minister had insisted that the proposed increase was necessary, saying while the government revenue has improved by the rise in crude oil price, the money realised therefrom would not be frittered away in subsidy payments.

“Since we are optimising everything, NNPC needs to also think about optimisation of product cost because as we all know, oil prices are where they are today, $60,” he said.

However, the president of the Nigeria Labour Congress (NLC), Ayuba Wabba, has warned that Nigerians and businesses in the country would not be able to cope with another hike in the pump price of petrol.

“I am not sure Nigerians would be ready to bear any more pain at this time because of the fact that a lot of factors have affected the economic, social and even the well-being of Nigerians. So, any additional pain at this point in time certainly will not be taken lightly; it’s a thing that we cannot swallow,” he said.

For his part, the president, Trade Unions Congress of Nigeria (TUC), Quadri Olaleye, said: “The question is why is the government always quick to tell us about the rise in the price of crude in the international market and the need to increase the price of PMS here when it always takes them weeks, if not months, to implement agreements reached with the Organised Labour?

“Nigeria is among the six oil-producing countries in the world. Reports have it that our oil is one of the best, thus giving us an edge over others. Unfortunately, we have not taken advantage of that. We have four refineries that are not functional.

“Why are they not functional and why is the government closing its eyes to it? Their refusal to attend to them is the reason the country is subjected to the vagaries and volatility of the price of crude in the international market.”

Sylva was not spared by civil society groups, who lampooned the minister for announcing plans to raise the retail price of PMS.

The executive director, Civil Society Legislative Advocacy Centre (CISLAC), Auwal Musa Rafsanjani, said: “When you have officials that seem to be celebrating the suffering of Nigerians, there is nothing surprising from such official comment.

“One wonders what benefits the people get from Nigeria being an oil-producing country. Nigeria’s oil is a big opportunity for institutional corruption because in the name of fuel subsidy and fuel and importation. Why is this that if oil is cheap in the global market, Nigerians do not enjoy any drop in the price of the refined petrol? That is to tell you something is fishy with the planned hike.”

In the same vein, the convener, Free Nigeria Movement, Mr. Raphael Adebayo, urged the federal government to seek ways to cushion the effects of the rise in global oil price on Nigerians rather than impose austerity on the people.

“This does not come as a surprise. Another increase in fuel price will only make the living reality of ordinary Nigerians unbearably pathetic. We are still dealing with over 100% increase in electricity tariff, inflation, economic recession and the sudden move to prohibit crypto-transactions in the country,” he said.

Also speaking, a rights activist, Deji Adeyanju, said the proposed hike will inflict further hardship on Nigerians.

“What will Nigerians use to buy the fuel at the hiked price? Is it their blood? Have Nigerians not had enough of the maladministration? Why is it always hardship upon hardship for the people of Nigeria? We believe the hardship in the country is more severe than Covid-19 and other pandemics,” he said.

NBS report

The National Bureau of Statistics (NBS) reported on Tuesday that Nigeria’s inflation rate rose to 16.47 per cent in January this year from 15.75 per cent in December 2020, which represents the highest rate in the past 33 months.

The report published by the Bureau on its website indicated that food inflation rose to 20.57 per cent in the month under review, from 19.56 per cent in the previous month, while core inflation increased to 11.85 per cent from 11.37 per cent in December 2020.

According to the agency, the January’s rate represented the 17th consecutive month of rising inflation in the country. It attributed the increase in food inflation to increases in prices of bread and cereals, potatoes, yam and other tubers, meat, fruits, vegetables, fish, and oils, and fats.

The NBS clarified further that: “The consumer price index (CPI) which measures inflation increased by 16.47 per cent (year-on-year) in January 2021. This is 0.71 per cent points higher than the rate recorded in December 2020 (15.75 percent).

“On a month-on-month basis, the headline index increased by 1.49 per cent in January 2021; this is 0.12 percentage points lower than the rate recorded in December 2020 (1.61 per cent),” it stated. On food inflation, the agency reported that the composite food index rose by 20.57 per cent in January 2021 compared to 19.56 per cent in December 2020.

Giving the state-by-state general price trend on food items, the NBS reported that during the month under review, food inflation on a year-on-year basis (YoY) was highest in Kogi (26.64%), Oyo (23.69%) and River (23.49%), while Ondo (17.20%), Abuja (16.73%) and Bauchi (16.37%) recorded the slowest rise.

“On month-on-month basis, however, January 2021 food inflation was highest in Oyo (4.47%), Lagos (3.86%) and River (3.11%), while Akwa Ibom (0.25%) and Bayelsa (0.13%) recorded the slowest rise with Edo recording price deflation or negative inflation (general decrease in the general price level of food or a negative food inflation rate),” it added.

‘Fuel pump price, others driving inflation’

The lingering effects of increases in VAT, pump price of fuel, electricity tariffs as well as insecurity and transport bottlenecks, continues to drive inflation, Uche Uwaleke, a Capital Market Professor at the Nasarawa State University, told Blueprint Weekend in a chat inflationary pressures are coming more from the food component which has now exceeded 20 per cent.

“Inflationary pressure is coming more from the food component which has now exceeded 20 per cent. This reflects the lingering effects of increases in VAT, pump price of fuel and electricity tariffs as well as insecurity and transport bottlenecks.

“The inflationary pressure has refused to abate despite border reopening and reduction in levy on imported cars,” the former Imo finance commissioner noted.

The Chief Operating Officer (COO) of Financial Derivatives Company (FDC), Bismarck Rewane, said the inflation figures were not “surprising, given the increase in demand for transport, as more businesses and schools have reopened. We expect an increase in the landing cost of refined petroleum products. This will lead to a further increase in petrol prices,” he said in a latest FDC report.

In the same vein, Emerging Markets Economist at Capital Economics, Virag Forizs, said, “Currency weakness and foreign exchange restrictions will continue to put upward pressure on inflation of imported goods. We think that inflation is probably close to a peak, but it will probably take until the second half of the year before the headline rate drops back markedly.”

Also, the director-general of MAN, Segun Ajayi-Kadir, lamented the negative effect of rising inflation on manufacturers in the country. He said the increase in food inflation rate at 20.57 per cent, from 19.56 per cent in December 2020, would compound the already high cost of living and the disposable income of the average Nigerian.

“The manufacturing sector has been struggling, particularly in the past four quarters, from the combined effect of Covid-19, deteriorating infrastructure, high regulatory compliance cost and tax obligations. So, rising and high inflation, perennially high interest rates and scarce/high rate of forex has compounded the downturn in the sector in terms of the envisaged recovery.

‘Traders feeling the pinch’

Even traders in the various markets are singing the same song. In a couple of the markets visited, many said the continuous increase in fuel is bad for business as they have lost so many loyal customers.

At the Karu market, mummy Praise, as she is known, told this reporter that three of her most loyal customers no longer patronise her, citing increasing cost of goods as the reason.

“Towards the end of last year, three of my customers stopped coming to my shop and when I saw one of them in Nyanya, she told me that the family has seriously adjusted their expenses; that is why I have not been seeing her,” she said.

For a distributor and wholesaler in Jikwoyi, a suburb of the federal capital territory, Nwoye Azubuike, the proposed increase will further worsen a bad situation.

He told Blueprint Weekend that at the moment sales have dropped significantly, “and if the government now goes ahead to increase petrol price, it means people will be spending all their money on transportation. It means food prices will shoot-up again.”

“So, how do they want the average man to survive especially in this Covid-19 period,” he said.

A father of three, Harrison Ikechukwe, said at the rate that the prices of foodstuff are rising, “Imagine when fuel price increase is announced, what the price of goods will be. It’s not going to be funny for many families, I must say.”

Way forward

Uwaleke said despite the inflationary pressure refusing to abate in spite of border re-opening and reduction in levy on imported cars, the CBN should scale up interventions in agriculture.

“The CBN should equally consider increasing forex supply to bring down exchange rate, especially now that crude oil prices are relatively high. The new service chiefs should roll up their sleeves and confront the seemingly intractable insecurity,” the President of Association of Capital Market Academics of Nigeria, said.

“The concerted efforts of the government to recover the economy will have to address the aforementioned challenges,” the MAN president suggeste

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