Nigeria faces economic strain as fuel prices surge

The Nigerian manufacturing sector is bracing for significant economic repercussions following a dramatic increase in fuel prices. Segun Ajayi-Kadir, Director General of the Manufacturers Association of Nigeria (MAN), has warned that the recent surge from 568 naira to 855 naira per litre will exacerbate existing challenges faced by the real economy.

Ajayi-Kadir’s concerns were outlined in a recent statement, where he highlighted the potential negative impact on the manufacturing sector, which is already grappling with difficulties.

The steep rise in fuel prices, he noted, will likely lead to increased costs for a wide range of goods and services, further straining the financial capabilities of the average Nigerian.

He acknowledged that some level of price increase was inevitable due to the global rise in crude oil prices and Nigeria’s reliance on imported fuels, given the current non-operational state of local refineries.

“The increase in crude oil prices will directly affect the cost of fuel imports into Nigeria, and the Nigerian National Petroleum Corporation (NNPC) will, at some point, need to adjust domestic prices,” Ajayi-Kadir said. “Furthermore, with the reduction or removal of fuel subsidies, price hikes were inevitable.”

Ajayi-Kadir also pointed out that the sharp depreciation of the naira would exacerbate the situation by making oil imports more expensive.

He warned that as Nigerians spend a larger portion of their income on transportation and energy, their disposable income for other essential goods will diminish, potentially leading to reduced demand for non-essential items.

This economic scenario, according to Ajayi-Kadir, is expected to contribute to a further rise in inflation, adding additional strain to household budgets.

The manufacturing sector, already vulnerable, faces increased production and logistics costs, which could force manufacturers to raise prices.

This could lead to unsold inventory and reduced capacity utilization, potentially slowing down the manufacturing sector’s performance.

As Nigeria navigates these economic challenges, the implications of rising fuel prices are expected to ripple through various sectors, affecting both consumers and businesses alike.