Petrol price hike stokes inflationary concern

The recent adjustments in the pump price of petrol in Nigeria have raised fresh concerns about the potential economic impact of such shocks. Analysts are forecasting that the country may lose recent gains in inflation slowdown as a result of the spike in petrol prices. In addition to this, the Presidential Committee on Fiscal Policy and Tax Reforms has recommended an increase in the Value Added Tax (VAT) from the current 7.5 percent to 10 percent by the year 2025. To delve deeper into these issues, Abiodun Kayode-Alli, Senior Manager of Tax and Regulatory Services at PwC Nigeria, shared insights in an exclusive interview with CNBC Africa. Kayode-Alli highlighted the expected effects of the petrol price increase, emphasizing that the hike is likely to lead to widespread increases in the prices of transportation, food, and overall cost of living. He noted that the essential nature of petrol, particularly for transportation and powering businesses, will result in businesses passing on the increased costs to consumers. This passing on of costs from one sector to another is expected to lead to a ripple effect in the economy, impacting various segments ranging from individual sellers like the banana vendor to small businesses like roadside barbers. The rising prices are likely to be reflected in the inflation numbers in the coming months, with the spike expected to show as early as next month's inflation report. In discussing the role of the Nigerian Central Bank's Monetary Policy Committee (NPC) in addressing the current economic challenges, Kayode-Alli expressed skepticism about the committee's ability to significantly impact the situation. He explained that the NPC's focus on managing the cost and availability of credit, coupled with existing challenges such as excess money supply in the economy, limits their options for addressing inflationary pressures. Kayode-Alli suggested that the ultimate solution to the economic issues, particularly those related to inflation and rising prices, lies more within the realm of fiscal policy rather than monetary policy interventions. Therefore, while the NPC may aim to maintain stability in interest rates, the broader economic challenges would require more coordinated efforts on the fiscal front. As Nigeria grapples with the potential inflationary implications of the petrol price hike and contemplates future tax reforms, the economic landscape remains uncertain. The recommendations put forth by the Presidential Committee and the discussions around the role of the NPC in addressing these challenges underscore the complexity of the issues at hand. With consumers and businesses bracing for potential price hikes and economic adjustments, the need for proactive and coordinated policy measures becomes increasingly apparent.