Rising petrol prices threat to local manufacturing – Economist

 ​‌⁠‌‌‍⁠⁠‌⁠‌​​‌​⁠‍‌​

Rising petrol and energy costs can undermine Nigeria’s local manufacturing drive by increasing production costs and making locally produced goods less competitive.

Dr Nathaniel Oladunjoye, an economist and Senior Lecturer, Department of Economics, Obafemi Awolowo University, Ile-Ife, said this in an interview with the News Agency of Nigeria (NAN) on Sunday.

Oladunjoye said reducing production costs was critical if Nigerian manufacturers were to compete effectively with imported products.

“Manufacturers using diesel or petrol will inevitably factor higher energy costs into the prices of their products.

“If the government wants to improve local manufacturing so as to reduce over-dependence on importation, one of the major indicators is the cost of production,” he said.

Oladunjoye said unreliable electricity supply further increased production costs because businesses were forced to rely on expensive alternative power sources.

According to him, the combined impact of high fuel, diesel and electricity costs can make locally manufactured goods more expensive than imports.

“For all producers who are producing, possibly using PMS or using diesel, they will definitely factor in the cost of production.

“Consumers will naturally favour cheaper imported products when locally manufactured alternatives become more expensive. Once locally produced goods are much more expensive than imported goods, it means that the cost of production is high.

“Government must deliberately reduce production costs to improve the competitiveness of Nigerian businesses and strengthen domestic manufacturing,” he said.

The economist said that petrol prices had a ripple effect across the economy because transportation and production costs influenced prices of goods and services.

He urged the government to address the structural factors driving production costs while ensuring that Nigerians benefited more from the country’s oil resources.

He said that lowering energy costs would help manufacturers expand production, compete with imports and contribute more effectively to economic growth.

“This is because once the cost of PMS goes down, other macroeconomic variables will automatically adjust to it,” said.