The Influence Of PMS On The Nigerian Economy And The Impact Of Nearly 200% Price Hike.

Influence Of PMS On The
 Nigerian Economy Cover 

 

Premium Motor Spirit (PMS), commonly referred to as petrol, is a crucial commodity in the Nigerian economy. It is the primary source of fuel for most vehicles and generators, which are essential for transportation, power generation, and many other economic activities. As a result, any significant change in the price of PMS can have a significant impact on the Nigerian economy.

The Nigerian government has been subsidizing the price of PMS for many years to make it affordable for Nigerians. However, the cost of this subsidy has been enormous, and there have been calls for its removal to reduce the burden on the government's finances. 

On the 29th of May 2023, President Tinubu in his inaugural address announced that his administration will put an end to the subsidy regime. The announcement triggered a chain reaction. Panic buying by motorists started, some fuel stations locked up and by Tuesday 30th May 2023 fuel queues were seen in all cities across Nigeria as motorists jostle to buy fuel.

As the public was still grappling with the fallout from the President's announcement The Nigerian National Petroleum Company Limited (NNPCL) on Wednesday approved an upward review of nearly 200% in the pump price of petroleum nationwide.

According to the circular published by NNPCL, the petroleum pump price adjustment for Plateau increased from "N189 to N537 per liter, while Kwara increased from N189 to N515 per liter. Abuja pump price was increased from N194 to N537 per liter, while Nassarawa moved from N189 to N537 per Litre.

The pump price in Kogi was increased from N189 to N537, Benue increased from N189 to N537, Niger state was increased from N189 to N537, Adamawa was increased from N199 to N550 per liter, and Taraba was increased from N199 to N550 per liter, etc"

The Impact Of Nearly 200 Percent Hike In PMS Price

Despite the laudable gesture of removing the fuel subsidy, the nearly 200 percent hike in the price of PMS is a crushing blow to the poor and struggling middle-class Nigerians. The increase in the price of PMS will have a severe impact on minimum wage earners, the unemployed, micro, small, and medium-sized enterprises (SMEs), and petty market traders.

Minimum Wage Earners

The current minimum wage in Nigeria is N30,000.00 NGN/Month (64.861 USD/Month) and is already overburdened by an inflation rate of 22.04%.

Minimum wage earners in Nigeria already struggle to make ends meet, and the nearly 200 percent increase in PMS price will further exacerbate their financial difficulties. The increase in PMS price will increase the cost of transportation, which will ultimately lead to an increase in the cost of living. This situation will make it challenging for minimum-wage earners to meet their basic needs and provide for their families.

The Unemployed

Currently, there is a 41% unemployment rate in Nigeria. The unemployed in Nigeria will suffer more from the hike in PMS prices. For those who have job interviews or need to travel to search for jobs, the increase in transportation costs will make it even harder for them to find employment. Moreover, the hike in PMS price will also lead to an increase in the cost of goods and services, leading to inflation. This situation will make it even more difficult for the unemployed to survive without a steady income. This situation could lead to more crimes or increase the number of petty thieves in many neighborhoods.

Micro, Small, and Medium-Sized Enterprises (MSMEs)

According to International Labour Organization (ILO), report published six months ago by https://www.thisdaylive Nigeria MSMEs employ; a large proportion of the workforce. “In Nigeria, MSMEs contribute 48 percent of national GDP, account for 96 percent of businesses and 84 percent of employment"

However, they have been struggling due to the economic downturn caused by the COVID-19 pandemic and the poor leadership run of President Buhari. The hike in PMS price will further increase their operational costs, making it even more difficult for them to stay afloat. For a sector that contributes 48 percent to the national GDP proper approach must be considered before implementing policies that impact their activities.

 MSMEs that rely on transportation for the delivery of goods and services will be particularly hard hit by the increase in PMS price. The increased costs may force some MSMEs to shut down, leading to job losses and further economic decline.

Petty Market Traders

Although they are covered by the Micro sector it is important to stress the impact on this particular set of people who rely on daily trade for their survival. They are also the people many Nigerians buy from in public market place. For these petty traders in Nigeria, who form a significant part of the informal sector, the impact of the PMS hike on them will cause instant inflation in all localities across the country. 

Most petty traders rely on generators to power their businesses and transportation of their purchased goods. The increase in the price of PMS will lead to an increase in the cost of running generators and transportation. This situation will lead to a decrease in profits for petty traders, an increase in the cost of food products sold in the local markets, and possibly lead to some of them shutting down their businesses.

The untold hardship this hike will cause is just beginning. While the removal of the fuel subsidy may have a positive impact on Nigeria's economy by channeling the funds to other important sectors, an almost 200 percent hike in PMS price, on the other hand, would lead to massive economic setbacks for the poorest and struggling middle-class Nigerians. 

The Nigerian government should seek a more sustainable approach to address fuel pricing that does not overburden the populace. Nigerians deserve a good standard of living that enables economic development, and the current price hike in fuel prices isn't bringing that closer.