Nigerian government blames Middle East crisis for fuel price hike 

The Nigerian government has distanced itself from the recent increase in petrol prices, asserting that it bears no responsibility for the hike.

The Nigerian National Petroleum Company Limited (NNPCL) had raised the pump price of fuel from N897 per litre to N1,030 in Abuja; from N855 to N998 in Lagos; N1,070 in North-East; N1,025 in other South-West states; N1,045 in South-East; and N1,075 in South-South.

This decision has led to widespread criticism from Nigerians, who have urged President Bola Tinubu to reverse the price increase.

In an interview, Minister of Information and National Orientation, Mohammed Idris, clarified that the government should not be blamed for the petrol price hike.

Idris explained that the NNPCL made this decision due to prevailing circumstances in the energy sector, emphasizing that the company acted independently of government directives.

He noted that the federal government can no longer control the prices of petroleum products, in accordance with the Petroleum Industry Act (PIA).

Since the subsidy regime ended in May 2023, the NNPCL had been paying differentials to maintain stable prices, but the company stated it could no longer bear the financial losses.

“The differential you’re seeing is a result of different factors. One of them is the crisis in the Middle East. There’s volatility in the market. Therefore, the prices of petroleum products are going up, consistent with what is happening with other operators in the industry globally.

“Secondly, NNPC cannot continue to absorb these losses for Nigeria because as a limited liability company, it would be operating at a loss,” he said.

Idris urged Nigerians to be understanding towards the NNPCL and the government, assuring that prices would eventually reduce.

He reiterated the government’s commitment to investing the savings from the removal of subsidies into critical sectors such as healthcare, education, infrastructure, and security.

He added that initial government investments in Compressed Natural Gas (CNG) would help mitigate the impact of rising prices as more operators enter the market.

How the Middle East crisis is affecting global oil prices

The Middle East crisis is putting significant pressure on global oil prices. Since the conflict began, oil prices have risen by about 6%.

This increase may seem modest, but experts warn that if the conflict escalates, oil prices could skyrocket.

The World Bank has outlined three risk scenarios, predicting price hikes of 3-13%, 21-35%, or even 56-75% depending on the level of disruption to oil supplies.

The crisis is also exacerbating food insecurity, as higher oil prices inevitably lead to higher food prices.

This is particularly concerning, as over 700 million people worldwide were already undernourished at the end of 2022.

To mitigate these effects, policymakers are advised to improve social safety nets, diversify food sources, and increase efficiency in food production and trade.

It’s worth noting that the global economy is better equipped to handle oil price shocks than it was in the 1970s, thanks to reduced dependence on oil and increased energy diversification.

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