Petrol price hike: Manufacturers warn of higher inflation figures

Following the increase in price of Premium Motor Spirit (PMS), the Manufacturers As­sociation of Nigeria (MAN), said there is a high possibility of a rise in inflation figures, impacting household budgets.

Reacting on the increase in the price of petrol from about N568 per litre to N855 per litre, which has been implemented across NNPC filling stations, MAN’s Director-General, Se­gun Ajayi-Kadir, said the Small and Medium-sized Enterprises (SMEs) which often operate on thin margins, could be hard-hit by the development, reports Sunday Independent.

He said the decrease in purchasing power may lead to reduced demand for non-essen­tial goods and services, affect­ing businesses across various sectors, adding that “these are pointers to the high possibility of a rise in inflation figures, impacting household budgets,

“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.”

He expressed worry about further impact on the “already lackluster performance of the manufacturing sector”.

“In particular, there is no doubt that it will add to produc­tion input and logistics costs.

“These will lead to higher prices and in the face of dwin­dling disposable income of the average Nigerian,” he said.

Ajayi-Kadir, also pointed out that the manufacturing perfor­mance would be negatively impacted as a “further deep in consumer demand will see manufacturers’ unplanned in­ventory rising and reduction in capacity utilisation”.

He said businesses may need to adjust their pricing strategies, and this could “lead to reduced profit margins if consumer demand weakens”.

“Small and medium-sized enterprises (SMEs), which of­ten operate on thin margins, could be particularly hard-hit.

“The 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 said.