Abuja: Dr Emmanuel Eche, Senior Lecturer, Department of Economics, Federal University, Wukari, Taraba, says the Federal Government might face renewed pressure to subsidise pump prices of Premium Motor Spirit (PMS). Eche made this statement during an interview with the News Agency of Nigeria in Abuja, highlighting significant economic implications.
According to News Agency of Nigeria, the pressure arises due to the recent closure of the Strait of Hormuz, a crucial maritime passage between Iran and Oman. This waterway is vital as it facilitates the transit of approximately one-fifth of the world’s daily crude oil supply. The International Maritime Organisation (IMO) has reported that the ongoing conflict involving the U.S. and Israel against Iran has resulted in the stranding of over 3,000 vessels and 20,000 seafarers in the Middle East due to the closure.
As a major oil exporter, Nigeria stands to gain from the surge in Brent crude prices, which have exceeded 90 dollars per barrel. This increase could potentially boost national revenue and enhance the country’s foreign reserves. However, as Eche warns, Nigeria’s reliance on imported refined petroleum products could lead to higher PMS costs and inflation, thereby exerting pressure on the naira.
Eche elaborated on the broader economic impacts, noting that the closure impacts 20% of the world’s daily oil supply, which could escalate transportation costs and negatively affect Nigeria’s trade. The International Energy Agency (IEA) is closely monitoring the situation and is ready to deploy emergency oil reserves if necessary.
Despite potential benefits from higher oil prices, the closure of the Strait of Hormuz poses risks including inflation, currency pressure, and trade disruption. While Nigeria is taking steps to mitigate these effects, there is an urgent need for stabilisation measures. Eche suggested that the government consider strategies such as using strategic reserves or offering subsidies to consumers. Additionally, he recommended that the Central Bank of Nigeria adjust monetary policies to address inflationary pressures.
Nigeria is also exploring options to boost oil production and exports, having surpassed its OPEC production quota. The government is actively working towards diversifying the economy to reduce dependence on oil, thereby fostering growth in other sectors.
The News Agency of Nigeria reports that the Nigerian National Petroleum Company Limited (NNPCL) is currently selling PMS at N960, with other retailers pricing it between N960 and N1,250 and above.