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 said this in an interview with the News Agency of Nigeria (NAN) on Tuesday in Abuja.
He said this was in view of the closure of the Strait of Hormuz, an important waterway between Iran and Oman through which approximately one-fifth of global crude oil supply transited daily.
The International Maritime Organisation (IMO) recently said that no fewer than 3,000 vessels and 20,000 seafarers were stranded in Middle East over the ongoing war by the U.S. and Israel against Iran.
It said that the crucial Strait of Hormuz global shipping corridor marking the entrance to the Persian Gulf was closed due to the threat of strikes from Iran and elsewhere.
The lecturer said that Nigeria, as a major oil exporter stood to benefit from higher oil prices, with Brent crude surging to over 90 dollars per barrel which could boost national income and improve the country’s foreign reserves earnings.
He however, said that there were also dangerous implications as Nigeria imports refined petroleum products and higher global oil prices could lead to increased PMS costs, inflation, and pressure on the naira.
According to him, the country’s economy is vulnerable to oil price volatility and the government may face renewed pressure to subsidise fuel prices.
”The closure also affects international trade, with 20 per cent of the world’s daily oil supply affected.
”This could lead to higher transportation costs, impacting negatively on Nigeria’s imports and exports. The International Energy Agency (IEA) is monitoring the situation and is prepared to release emergency oil reserves if needed.
”While Nigeria may benefit from higher oil prices, the closure of the Strait of Hormuz also poses significant risks to the country’s economy, including inflation, currency pressure and disrupted trade.
‘Although, Nigerian government is taking steps to mitigate the negative consequences of the Strait of Hormuz closure, given the country’s reliance on oil exports, the government is likely to benefit from higher oil prices, which can boost revenue and strengthen foreign exchange reserves.”
Eche therefore urged the government to consider implementing stabilisation measures to cushion the impact of rising petrol prices such as drawing down on strategic reserves or providing subsidies to consumers.
He said that the Central Bank of Nigeria should also consider adjusting monetary policies to manage inflationary pressures.
“Additionally, Nigeria is exploring ways to increase oil production and exports, having recently exceeded its OPEC production quota.
“The government is also working to diversify the economy, reducing dependence on oil and developing other sectors,” he said.
NAN reports that the Nigerian National Petroleum Company Limited (NNPCL) is presently selling PMS at N960, while other Petrol outlets are selling between N960, N1,250 and above. (NAN)(
