Fuel Price Hikes: Nigeria Struggles For Economic Stability

The recent hike in fuel prices across Nigeria has once again placed a heavy burden on millions of households, businesses, and industries.

With petrol prices now hovering between N617 and N700 per litre, the shockwaves of this development are reverberating through every corner of the economy. The government’s decision to continue with the deregulation of the petroleum sector, while intended to foster market efficiency, is creating a dire situation for the average Nigerian, who now finds it even more challenging to afford daily necessities.

At the heart of this crisis is Nigeria’s over-reliance on imported refined petroleum products. Despite being Africa’s largest oil producer, the country lacks sufficient refining capacity to meet its domestic fuel demand. This gap in infrastructure leaves the country vulnerable to international oil market fluctuations, currency devaluation, and global supply chain disruptions.

The deregulation policy, which ended years of subsidizing fuel prices, was intended to allow for more accurate reflection of global market prices. Yet, the reality for Nigerians has been far from ideal. As global crude oil prices rise, so does the cost of petrol, exacerbated by exchange rate volatility. Recent figures reveal that the landing cost of petrol now exceeds N1,100 per litre, a price that far surpasses the amount paid at the pump, creating concerns about further hikes.

The effects of these fuel price increases have been catastrophic for the average Nigerian. Transportation costs have skyrocketed, as buses, motorcycles, and even logistics companies pass on the additional fuel costs to consumers. In some cities, fares have doubled, leaving commuters with few affordable options. These rising costs have had a cascading effect on food prices, as the cost of transporting agricultural products from rural areas to urban markets has spiked dramatically.

Businesses, particularly small and medium-sized enterprises (SMEs), are also reeling from the impact. Many of these businesses rely heavily on petrol-powered generators due to the country’s erratic electricity supply. The spike in fuel costs has therefore increased their operational expenses, forcing some to reduce production, lay off workers, or shut down entirely. In sectors like manufacturing and retail, where profit margins are already thin, this fuel price hike has further stifled growth, threatening the livelihood of millions.

In the agriculture sector, farmers who depend on fuel for irrigation, processing, and transportation are struggling to keep up with the inflated costs. This threatens food security, as the increased expenses are driving up food prices, with inflation further eroding the purchasing power of ordinary citizens.

Broader Socio-Economic Implications

Fuel price hikes in Nigeria tend to hit the poorest households the hardest, as they allocate a larger percentage of their income to energy-related expenses. The removal of fuel subsidies, a long-standing component of Nigeria’s social welfare strategy, has stripped many families of a buffer against inflation. As a result, there is growing unrest among citizens who feel they are being left to bear the brunt of government policies without corresponding safety nets.

This policy, when coupled with the effects of high inflation and the volatile exchange rate, has resulted in a steep rise in the cost of living. In Lagos, Abuja, and other major cities, there has been an upsurge in housing and utility bills, driven by higher fuel costs. For instance, the prices of cooking gas, public transport, and even school fees have risen sharply. According to the National Bureau of Statistics (NBS), inflation in Nigeria hit a two-decade high of over 24% in mid-2024, a figure largely attributed to the surge in fuel prices and other energy-related costs.

While the federal government argues that the removal of subsidies was necessary to ease fiscal pressure, more needs to be done to cushion the adverse effects on citizens. Immediate interventions should focus on expanding Nigeria’s domestic refining capacity. The operationalization of the Dangote Refinery, along with other planned modular refineries, is a crucial step in this direction. If Nigeria can refine its crude locally, it would reduce the cost of importing fuel and stabilize domestic petrol prices, shielding the economy from external shocks.

In the short term, the government must also explore policies that directly mitigate the impact on the most vulnerable. Targeted subsidies for public transportation systems, the provision of subsidized cooking gas for low-income households, and social protection programs for SMEs could serve as immediate palliatives. The newly inaugurated National Social Safety Net Program (NASSP), for example, should be expanded to include more beneficiaries who are disproportionately affected by rising energy costs.

Furthermore, structural reforms in the energy sector are long overdue. Reducing corruption and inefficiencies in fuel distribution, upgrading storage facilities, and addressing pipeline vandalism are critical to maintaining a stable supply of petrol. These reforms would reduce the artificial scarcity and price hikes that have plagued the sector for decades.

As Nigeria grapples with the painful realities of fuel price hikes, the long-term solution must involve a comprehensive review of the nation’s energy policy. Renewable energy alternatives, such as solar and wind power, should be aggressively promoted, especially in rural areas. Expanding the use of cleaner, more affordable energy sources can reduce the country’s over-dependence on petrol and diesel, helping to diversify its energy mix and reduce exposure to global oil price fluctuations.

Ultimately, Nigeria’s fuel crisis is emblematic of deeper structural challenges within the economy. It calls for bold leadership and a willingness to break from the status quo. While the removal of subsidies may have been necessary, the current policy implementation lacks the cushioning measures needed to prevent widespread hardship. By addressing the underlying issues of inefficiency, corruption, and lack of infrastructure, the government can build a more resilient and self-sufficient energy sector that benefits all Nigerians.

The nation stands at a crossroads. Only decisive, well-considered action will lead Nigeria towards a future where its vast oil wealth is truly an asset for the many, not just the few.

By Sir Divramredje Lawrence Efeturi, KSJI, ASCIEPUK.

An affected Nigerian and public affairs commentator from Delta State

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