Fuel Price Reduction Sparks Optimism For Easing Inflationary Pressures In Nigeria.
Economists in Nigeria have expressed optimism about the recent drop in petrol prices following a direct fuel purchase agreement between Dangote Refinery and the Independent Petroleum Marketers Association of Nigeria (IPMAN). Experts suggest this development could help ease the country’s inflationary pressures in the coming months.
Nigeria has been grappling with rising inflation, with the National Bureau of Statistics reporting a headline inflation rate of 33.88% and food inflation at 39.16% in October 2024. These figures mark a steady climb, placing additional strain on citizens and businesses.
Prominent economist Prof. Segun Ajibola, a former President of the Council of the Chartered Institute of Bankers, described the fuel price drop as a positive step. He noted that the agreement between Dangote Refinery and IPMAN could significantly reduce operational costs for businesses.
“Good enough, the prices of petrol are reducing now because of the direct PMS purchase agreement between Dangote Refinery and IPMAN. This will have a ripple effect on the cost of doing business in the country,” he stated.
Similarly, Mr. Idakolo Gbolade, CEO of SD & D Capital Management, hailed the deal as a potential turning point. He emphasised that sourcing locally refined fuel through such agreements could discourage importation, thereby cutting costs associated with foreign exchange and imports.
“The federal government’s concession to sell crude to local refineries in Naira is another way of sourcing locally refined crude at a lower cost. These measures will go a long way to ease inflation in the long run if they are consistent,” he remarked.
Despite the promising outlook, experts highlighted persistent challenges. Prof. Ajibola argued that the Central Bank of Nigeria’s (CBN) monetary policies, including interest rate hikes, have done little to address the underlying causes of inflation, which he described as cost-induced.
“The CBN has been fighting a battle it cannot defeat because the country’s inflation pressures are cost-induced. Unless issues like rising energy costs and foreign exchange instability are tackled, inflationary pressures will persist,” he explained.
The Executive Director of the Centre for the Promotion of Private Enterprise, Muda Yusuf, also linked inflation to shocks from recent economic reforms, including the removal of fuel subsidies and the floating of the Naira. Yusuf suggested that government policies such as temporary import duty waivers could help stabilise prices.
The agreement between Dangote Refinery and IPMAN involves the supply of 60 million litres of fuel weekly, with petrol prices dropping by as much as ₦50 per litre in recent days. Analysts believe the effects of this initiative will become more evident during the festive period and into early 2025.
While challenges such as foreign exchange fluctuations remain, economists are hopeful that consistent implementation of local production initiatives and government policies could pave the way for long-term economic stability.
The reduction in petrol prices, though modest, offers a glimmer of hope for Nigerians burdened by inflation, as it could ease the cost of living and stimulate economic activities across the nation.
