Fuel subsidy removal will fuel inflation, MAN warns FG

Abiola Seun

The Manufacturers Association of Nigeria (MAN) has raised concerns that the proposed fuel subsidy removal by the Federal Government will lead to inflation occasioned by increase in production costs which may translate to higher prices of goods.

MAN however agreed to the need for deregulation to enable competition and efficiency in the downstream oil sector, and ensure adequacy of supply, adding that the government must take necessary measures to address the possible fallouts.

The Director General, MAN, Mr Segun Ajayi-Kadir, stated the position of the manufacturers in a chat with with newsmen in Lagos.

His words: “It is a matter of concern that we may be faced with fuel induced inflation. Manufacturers are yet to come to terms with the astronomical increase in the cost of electricity. Not to mention that the unnerving increase is not accompanied with appreciable improvement in supply.

“Our bottom-line will be further eroded by the heavy cost the potential increase portends as we are forced to generate our own electricity for long hours due to poor supply inadequacy.

“The small and medium scale industries will be particularly impacted as they use PMS to power their machines.
The logistics chain, especially the delivery of finished products to wholesalers and retailers, will witness increased cost which may translate to higher prices of goods.

“The increase in cost of transportation (and the multiplier effect on other costs) that will accompany the move will erode the disposable income of the average Nigerian, especially with the minimum wage at N30,000 and still in contention in most states of the federation.”

Ajayi-Kadir further stated: “MAN’s position has always been that, in order for us to have competition and efficiency in the sector and adequacy of supply, we need to deregulate.
You cannot remove the pricing from the equation, consequently the removal of Government subsidy on the pump price is a major component.

“Regardless of the arguments back and forth on the issue, PMS remains a commercial product.

It should therefore not be insulated from the laws of demand and supply.
My thinking is that we are mostly united on this front.

“What appears to be the issue is how to deal with the possible fallouts, in terms of the increase in cost of transportation and its multiplier effects on price of goods and services, etc.”

The MAN DG however noted with comfort the rising price of oil in the international market.

“We should apply the surplus to directly countermand the negative impact of the potential rise in the price of fuel.
It should promote inclusive economic growth.

“It should fund productivity, job creation and increased investments,” he added.

MAN also noted the mitigating measures initiated by the government, “starting with the N5,000 naira monthly transport grant to 40 million most vulnerable citizens.

“The Minister for Finance, Budget and National Planning has also promised that other measures will follow.
I expect that the states and local governments will follow suit.”