April 27, 2023/CSL Research

According to a report from the Nigerian Bureau of Statistics (NBS), the retail prices of diesel and petrol increased significantly by 55.9% and 42.6% respectively in March 2023 compared with March 2022. The average retail price of diesel also called Automotive Gas Oil (AGO) paid by consumers rose from N539.32 per litre in March 2022 to N836.81 per litre in March 2023.

Nigeria’s rising energy costs have contributed significantly to the country’s rising inflation rate and contributes significantly to the operating costs borne by manufacturers in the country. Nigeria’s headline inflation rate increased to 22.04% in March 2023, with energy costs such as electricity, gas, and other fuels contributing significantly. Bauchi had the highest average price of the product in March 2023, while Bayelsa (N768.04) recorded the least.

The average retail price paid by consumers for Premium Motor Spirit (PMS) or petrol in March 2023 was N264.29, indicating an increase of 42.63% from N185.30 in March 2022. Analysis by regions showed that the South-east recorded the highest average retail price at N306.00, while the North-central had the lowest with N205.10. Though subsidies still exist, and the pump price of petrol remains fixed, the recent and persistent scarcity of the product has led to arbitrary increases in price above the government’s approved price of N185 per litre.

The pump price of petrol, which was between N162 and about N170 per litre prior to last year, suddenly started moving up when the first disruption in the petrol supply occurred in the first quarter of 2022. Since then, product scarcity and racketeering have persisted. Oil marketers have consistently blamed the shortages and price hike on the unavailability of the product, the high cost of renting daughter vessels and the cost of trucking products to many parts of the country, particularly the far north and east.

Rising energy costs has significantly impacted the manufacturing sector, forcing manufacturers to cut jobs, curb operations and raise prices. Power is largely unstable and normally accounts for as much as 40% of factories’ costs in Nigeria according to the Manufacturers Association of Nigeria (MAN). The manufacturing sector grew modestly by 2.45% in 2022, reflecting the negative impact of high energy costs on its operating expenses especially in the second half of the year.

In fact, the sector contracted by 1.91% in Q3 2022, the first contraction since covid hit in 2020. Manufacturing accounts for about 13% of output in Nigeria. Aside from manufacturing and small businesses, the increase in prices of diesel and petrol also impacted individual transport costs, contributing to an increase in the cost of living. The NBS noted that the average fare paid by commuters for bus journeys within the city on a year-on-year basis rose by 26.07% from February 2022.