The Nigerian National Petroleum Company (NNPC) increased fuel prices to between ₦998 and ₦1,030 per litre on October 9. By mid-October, they had gone up to ₦1,050 in some places. The NNPC’s decision to cease acting as a middleman for petrol from the Dangote Refinery is the cause of this spike, which will pose serious difficulties for businesses, schools, transportation operators, and other sectors. Lagos schools have increased transport fees, however they are unable to maintain the cost increases because of parents’ limited financial resources.
In order to reduce fuel expenses, several parents think about switching schools. Fuel-dependent mobility still plagues Kano’s solar-powered schools, and instructors frequently have trouble getting to class on time. The cost of running a business has increased dramatically for Nigerian business owners. A CEO in Abuja claims that daily fluctuations in fuel prices result in unmanageable costs. In order to reduce these expenses, several companies have switched to gas-powered motors or solar energy. Although many hotels are afraid of losing patrons, the hospitality sector has responded to rising energy costs by reducing staff and raising fees.
Nigeria’s inadequate capacity for local refining is challenging.
Small businesses like laundry services and phone charging stations have had to increase their prices or use charcoal irons or petrol engines as alternatives in order to remain in business. The mix of domestic refinery problems, international oil price swings, and government policy is the main cause of Nigeria’s fuel price increase. The Nigerian government eliminated its long-standing fuel subsidy in 2023, which had been responsible for decades of artificially low fuel prices. Reducing the government’s financial burden was the goal of the removal.
Previously, the government spent billions of dollars per year on subsidies, but this left the nation vulnerable to the entire turbulence of global oil markets. In addition, the Organization of Petroleum Exporting Countries (OPEC) production cuts, post-pandemic recovery, and geopolitical concerns have all contributed to the surge in global crude oil prices. Nigeria’s inadequate capacity for local refining is another important factor. Nigeria is the biggest producer of crude oil in Africa, but because of the inefficiency of its refineries, it imports the majority of its refined petroleum products.
Economic impact of fuel hike differs in different parts of Nigeria.
There have been delays at the Dangote Refinery, which was supposed to help with this problem by supplying refined petrol locally. In order to meet demand, the Nigerian National Petroleum Company (NNPC) has had to rely on pricey imports, which has further increased local costs. In response, there have been talks of increasing the capacity of domestic refineries and the government has promoted the use of other energy sources like solar power. But things have moved slowly.
Various coping measures have been implemented by businesses and people to reduce rising fuel prices, such as limiting services, utilising gas-powered generators, or switching to solar power. Small businesses in Kano, for instance, have switched from fuel-powered generators to petrol engines, while hotels in other areas are embracing Solar Energy despite the steep installation costs. The economic impact differs in different parts of Nigeria. It is different in northern states like Kano and Bauchi due to the underdeveloped infrastructure.
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Transportation and small companies have been significantly disrupted by the high cost of fuel. The price increases have increased the cost of products and services in Lagos, a commercial centre, further burdening the urban populace. People in oil-producing areas, like the Niger Delta, are frustrated because they have to deal with fuel shortages even if they live there. These regional differences show how the spike in fuel prices has affected Nigeria’s varied Economy in different ways.