October 18, 2024/CSL Research
According to a recent report from the Nigerian Bureau of Statistics (NBS), the average retail price of Premium Motor Spirit (PMS), commonly known as petrol, surpassed the ₦1,000/litre mark for the first time in September 2024, reflecting a 24.08% increase from ₦830.46/litre recorded in August. The average national price for petrol stood at ₦1,030.46/litre during the month, representing a 64.55% jump compared to ₦626.21/litre in September 2023. The report highlights significant regional disparities in fuel prices. Katsina State recorded the highest average retail price of ₦1,096.15/litre, while Yobe State had the lowest average at ₦939.38/litre. On a zonal level, the North-West Zone recorded the highest average price of ₦1,036.52/litre while the North-East Zone recorded the lowest average of ₦1,014.55, demonstrating variations in petrol costs across geopolitical zones.
The surge in energy costs, particularly driven by rising petrol and diesel prices, has significantly fueled inflation and increased operating expenses for manufacturers across Nigeria. The Manufacturers Association of Nigeria (MAN) has repeatedly warned that the sharp rise in diesel prices is forcing companies to cut jobs, scale back operations, and raise product prices. Power instability remains a major issue, with energy expenses accounting for as much as 40% of production costs. The spike in petrol prices is largely attributed to the removal of the fuel subsidy by the federal government, announced by President Bola Tinubu in May 2023. Since the subsidy phase-out, fuel prices have continued to climb steadily. By mid-2024, persistent fuel shortages due to supply constraints further worsened the situation. In September 2024, the Nigerian National Petroleum Corporation (NNPC) adjusted retail fuel prices, releasing a cost-reflective pricing template based on its procurement from Dangote Refinery Limited.
Core inflation, which excludes volatile food and energy prices, stood at 27.43% y/y in September 2024, slightly lower than the 27.58% recorded in August. We are of the opinion that the moderation in core inflation was due to the delayed effects of fuel shortages and the recent surge in PMS prices in September 2024. This is expected to exert upward pressure on core inflation in October 2024 and will likely contribute to an increase in headline inflation, compounding the economic challenges faced by businesses and consumers alike.
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