26/07/2022
CONSUMERS , FIRMS BRACE FOR HIGHER PRICES AMID ENERGY CRISIS
By Femi Adekoya, Adeyemi Adepetun,
• OPS says production costs up by almost 100%
• Manufacturers cite dwindling capacity utilisation, inventory and profitability
• Telcos, Towercos groan as diesel costs gulp N141.5b in five months
• MNOs already spent six times what was expended on diesel in 2021
• Diesel hike forces companies to review workforce, says food union
• Lingering fuel shortage undermining listed firms’ growth, will impact half-year financials
For consumers optimistic of lower diesel prices or drop in inflation rate anytime soon, they may be disappointed, as oil price outlook remains volatile, alongside challenges of inflation, hiked interest rates, supply constraints and expected cold winter.
With fears of another recession, there are concerns that many developing economies may be unable to bear the shock from rising energy prices, therefore, spiking inflation further. Many analysts have projected a volatile outlook for oil prices.
Locally, businesses are beginning to adjust expectations for the 2022 fiscal year, considering that energy prices will remain elevated alongside higher inflation levels, which are expected to affect consumer spending and production costs. At over N800 per litre, there are concerns that further rise in oil prices will spell doom for those dependent on diesel.
While the cost of PMS is still moderately tolerable because of the subsisting subsidy regime, the Federal Government has denied plans to subsidise the price of diesel, considering the present high fiscal deficit in its account.
Latest statistical review of world energy, by BP, show that global coal-fired electricity generators are producing more power than before in response to booming electricity demand after the pandemic and the surging price of gas following Russia’s invasion of Ukraine. Indeed, the price of gas and diesel is pushing the world to other alternatives.