Harder times loom as fuel crisis lingers
16 February 2022 |
3:53 am
The near-term inflation outlook appears increasingly unpredictable, as the petrol shortage crisis and the rising cost of diesel have added to other challenges driving up prices of essential commodities...
• Inflation decelerates slightly to 15.6 per cent
• ‘Data is a mockery of market reality’
• Food crisis not reflecting govt’s ‘investment’ in agric, says farmers’ association
• NNPC imports 2.3b litres as queues persist nationwide
The near-term inflation outlook appears increasingly unpredictable, as the petrol shortage crisis and the rising cost of diesel have added to other challenges driving up prices of essential commodities in the country.
Efforts to rein in fuel supply shock have failed, leading to endless queues at many retail outlets in Lagos, Abuja, Port Harcourt and other cities. The crisis has worsened gridlocks in the metropolis with thousands of commuters stranded at bus stops.
The January Consumer Price Index (CPI) released by the National Bureau of Statistics (NBS), yesterday, points to a slight moderation in the headline inflation, from 15.63 per cent in December to 15.6 per cent.
But there are fears that the direction of the inflationary trend could change significantly this month.
Triggered by the shortage of Premium Motor Spirit (PMS), the cost of transportation, a key driver of inflation, has doubled or tripled in different cities.
Faced with the rising cost of diesel, which currently sells for about N450/per litre, and increasing insecurity on highways, haulage companies review their pricing on a regular basis, leading to consistent high urban food inflation.
Long queues persist across the country as the black market price of petrol hovers around N500 per litre in Abuja and N350 in Lagos, while motorists spend hours in queues.
Amid prolonged crisis, the Nigerian National Petroleum Company Limited, yesterday, said 2.3 billion litres of additional PMS is being imported into the country to complement the existing one billion litres supply, as part of measures to address the scarcity.
Group Executive Director, NNPC Downstream, Adeyemi Adetunji, said the company understands the current fuel supply disruptions in many parts of the country, which was caused by the discovery and subsequent quarantine of methanol-blended cargoes of PMS.
“To address the situation, over 2.3 billion litres will arrive in the country between now and the end of February 2022. This will restore the sufficiency level above the national target of 30 days,” Adetunji said at a briefing in Abuja.
He noted that NNPC currently has over one billion litres of petrol in stock, as the product being dispensed at the various filling stations in the country is safe.
In a move to accelerate PMS distribution across the country, Adetunji said NNPC has commenced 24-hour operations at its depots and retail outlets, while the Major Oil Marketers Association of Nigeria (MOMAN), Depot Owners and Petroleum Products Marketers Association of Nigeria (DAPPMAN) and the Independent Petroleum Marketers Association of Nigeria (IPMAN) have commenced 24-hour loading and dispensing activities in some of their designated outlets.
The company, according to him, has equally constituted a monitoring team, with the support of the Authority (NMDPRA) and other security agencies to ensure smooth distribution of PMS nationwide.
Adetunji assured that the ongoing efforts would be sustained to restore normalcy and urged Nigerians to avoid panic buying.
At the Federal Capital Territory, petrol-induced traffic gridlock was at its peak as some motorists now perpetually abandon their cars at petrol stations waiting for when the stations would have products to dispense.
Although most fuel stations are out of supply, motorists still form long queues with the hope that they can get products when the stations eventually receive a supply.
The development, which is already undermining economic activities as transportation costs continue to soar, may worsen the rising cost of food items.
At yesterday’s media briefing on January CPI, the Statistician-General of the Federation, Simon Harry, warned that the current fuel crisis could have adverse effects on the inflation rate going forward.
He said the crisis has made February inflation unpredictable. According to him, “That gives us a negative signal that is capable of affecting not just inflation rate, but also other macroeconomic variables such as the Gross Domestic Product (GDP) and even the unemployment rate… It is not the best for the economy and if we must maintain a stable macroeconomic environment, this kind of crisis certainly is not the best, for it is not needed.”
Also, the President of the Abuja Chamber of Commerce and Industry Young Chief Executive Officers (CEOs), Fife Banks, said the figures did not add up or reflect market reality.
He said: “If things continue the way they are today, the country faces a very harsh reality. The current, sudden increase in the cost of fuel means the prices of goods and services will skyrocket significantly due to an increase in production cost.
“Also, with the kind of wages an average Nigerian earns, the number of layoffs in the economy and issues of insecurity, if nothing drastic is done, Nigeria may be reaching another harsh economic point in 2022.”
Banks suggested that a strategic engagement of the private sector could help the government gain fresh perspectives in creating new policies that could move the nation from the place of “potential” to a journey of shared and sustainable prosperity.
The Chief Executive Officer of Centre for Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, said the inflationary pressure remained a major challenge facing the economy. The economist observed that the food price crisis has not abated despite the expected positive impact of harvest.
“Food inflation, which has a significant impact on poverty and the poor, remained elevated at 17.13 per cent. Food prices further increased by 1.62 per cent between December 2021 and January 2022, indicating that the uptrend in food prices is yet to abate.
“The core inflation, driven largely by imports, maintained an upward trend. It accelerated by 13.87 per cent in January 2022 as against 11.85 per cent in the corresponding period of 2021. Between December 2021 and January 2022, there was a 1.25 per cent increase in prices, driven largely by core components of inflation. This was largely a reflection of the impact of the depreciation in the naira exchange rate and the liquidity issues in the forex market,” Yusuf said.
He listed the impact of the high inflation rate as an escalation of production and operating costs for businesses leading to weak manufacturing capacity utilisation, an increase in the poverty rate, low aggregate demand and weak investors’ confidence.
To ease the pressure, Muda charged the government to address security concerns, reform the foreign exchange (FX) market to stabilise the rate and stimulate FX inflows, address high transportation and logistics costs and reduce the cost of doing business.
Notwithstanding the challenges, the President of Abuja Chamber of Commerce and Industry (ACCI), Dr. Al-Mujtaba Abubakar, said the slight drop in the headline inflation is a welcome development and a result of renewed efforts by the government to address economic threats more frontally.
He, however, noted: “As much as the report is a positive signal from the economy, most Nigerians expect that the inflation rate should come down to a single digit. Such an outcome will help to stabilise the volatility within the economy, reduce the cost of production and bring down the cost of living.
“The lower rate of inflation is no doubt an early indication of recovery. It is, however, a fact that many other indices combined to give effect to early recovery. So, what we have is a positive signal, which when sustained would help to jumpstart the economy.”
Abubakar said to achieve a single-digit inflation rate and fast-track growth, the government must be ready to reduce the cost of funds, address challenges of multiple taxation, reduce the cost of governance, transform regulatory agencies to facilitating agencies and enhance private sector participation, among others.
Also speaking, President of the Association of National Accountants of Nigeria (ANAN), Prof. Benjamin Osisioma, said the ease is in line with the normal cause of economic movement.
“Otherwise, I really can’t see much of what the government is doing that led to the deceleration. Look at the different sectors of the economy – manufacturing, agriculture as well as oil and gas. I can’t see where the government has done anything spectacular that could be driving economic recovery,” he said.
On food inflation, which is at 17.13 per cent, President of the All Farmers Association of Nigeria (AFAN), Kabir Ibrahim, said Nigeria has no reason to have a food crisis if the government invested what it claimed it put into agriculture.
“The food inflation is still high. That is where we should focus; people are hungry. Whatever grammar you speak, if the people cannot get food to eat, you are just making a noise.
“It is not enough to do the so-called rice pyramids. How can you be building pyramids when people cannot buy rice in the market? Those pyramids, for me, are a mockery of reality. How can we put N900 billion into agriculture and we are still grappling with food crisis? It shows that somebody is not telling us the truth,” he said.
According to the NBS report, January headline inflation was 15.6 per cent year-on-year (YoY), which was 0.03 percentage points lower than the December figure.
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