Petrol Price Hike: ‘Businesses May Need to Adjust their Pricing Strategies’, MAN Raises Concern

By Azeez Disu

 

The Manufacturers Association of Nigeria (MAN) has hinted that businesses and manufacturers may have to increase the cost of their goods or consider scaling down or even shut down operations if the increase in the price of petrol persists.

 

The association in a statement titled “MAN Enumerates Impacts of Petrol Price Hike on Economy” signed by its Director General, Segun Ajayi-Kadir, disclosed this. It said the petrol price hike is impacting the economy negatively and has also increased manufacturers’ cost of production.

 

It explained that the cost of transportation has skyrocketed and consumer purchasing power is declining and manufacturers on their part have to spend more money on logistics, energy, and other production cost.

 

The statement reads,” Manufacturing performance would be negatively impacted. Businesses may need to adjust their pricing strategies, which 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.”

 

Explaining what it believes led to the petrol hike and its impact on the economy,  MAN said “The recent increase in the price of petrol from about ₦568 per litre to ₦855 per litre, being implemented across NNPC filling stations, has expectedly attracted a lot of comments across the nation.

From what I can glean, the reasons for the increase are not far-fetched. Globally, there is an increase in crude oil prices. Our refineries are not producing and we import fuel. The increase in the cost of crude oil will have a direct impact on the cost of importing fuel into Nigeria and expectedly, the NNPC would at some point, adjust domestic prices. Also, right from the time fuel subsidy was either reduced or removed, it became inevitable that the price may rise. You will also note the sharp decline in the value of the Naira and the impact it is bound to have on the importation of fuel.

 

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

 

It stated that “One is naturally worried about the 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.

 

“A further deep in consumer demand will see manufacturers’ unplanned inventory rising and reduction in capacity utilization.”

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