Rising oil prices may reverse disinflation trend, CPPE warns

.Says unreliable electricity cost economy N10trn

The Centre for Promotion of Public Enterprise (CPPE) has warned that the current rise in oil prices may reverse the disinflation trend in the economy unless urgent and coordinated policy measures are put in place to sustain the fragile disinflation gains.

The centre, in a statement by its Chief Executive Officer, Dr Muda Yusuf, on Sunday, identified the escalation of tensions in the Middle East as the most immediate threat to the inflation outlook.

It noted that in Nigeria, rising global oil prices have already begun to result in higher petrol and diesel prices, increased transportation and logistics costs, rising production costs across sectors, renewed exchange rate pressure and escalating food prices driven by input and distribution costs.

The centre added that the country’s exposure to energy-driven inflation is intensified by structural weaknesses in the domestic economy, noting that the heavy reliance on petrol and diesel for power generation, due to unreliable electricity supply, has created a strong and immediate pass-through from global oil prices to domestic inflation.

“Estimates indicate that unreliable electricity imposes annual economic losses of between ₦7 trillion and ₦10 trillion, while spending on generators exceeds ₦3.7 trillion annually.

READ ALSO: US-Israeli-Iran war: Escalation may lead to rising fuel pump prices, higher manufacturing costs, CPPE warns

“This structural dependence means that energy price shocks quickly translate into higher production costs, transport costs and general price levels across the economy.

“There is therefore a high likelihood that the current disinflation trend could be reversed if these external pressures persist,” it stated.

The centre called on the government to give priority to strengthening domestic refining capacity through the provision of stable and reliable crude oil supply to local refineries, including the Dangote refinery, under supportive, predictable and, where feasible, concessionary terms.

This, it added, has become imperative for moderating domestic fuel prices, easing pressure on foreign exchange demand and enhancing the country’s energy security.

It urged governments at all levels to also scale up investment in efficient and affordable public transportation systems as a key social protection measure.