Rising Energy Costs Capable Of Worsening Nigeria’s Inflation – Experts

Economic experts have attributed Nigeria’s latest rise in inflation to increasing fuel and energy costs, warning that the trend could worsen in the coming months if structural issues are not addressed.

Speaking with the News Agency of Nigeria in Abuja on Sunday, the experts noted that higher petrol and diesel prices have significantly increased transport fares, logistics expenses and the cost of distributing goods across the country, with direct consequences for consumer prices.

A development economist, Ken Ife, said the recent uptick in inflation reflects not only rising energy costs but also deep-rooted inefficiencies in the oil and gas sector. He called for urgent policy measures to stabilise prices and ease pressure on households.

According to him, Nigeria’s inflation rate, which rose slightly to 15.38 per cent in March after 12 consecutive months of decline, was largely driven by increases in fuel and energy prices. He explained that energy remains central to inflation dynamics because of its role in transportation, production and distribution.

“When energy prices go up, petrol and diesel prices rise, and these drive the entire transportation system. The cost of moving food, goods and people increases, which translates directly into higher prices across all sectors,” he said.

He warned that the situation could deteriorate further on a month-on-month basis. “You will see month-on-month inflation going dramatically up,” he added.

Mr Ife also pointed to rising gas prices, which are tied to international benchmarks, as another factor pushing up electricity tariffs and production costs.

“As gas prices increase, the cost of power generation rises, and consumers feel it in their electricity bills. Manufacturers also face higher costs due to increased energy and logistics expenses, leading to a general price increase,” he said.

While acknowledging the impact of global factors such as tensions in the Middle East, he stressed that Nigeria’s inflationary pressure is compounded by domestic structural challenges. He criticised the handling of crude oil allocation, arguing that local refining capacity is not being prioritised in line with existing laws.

Referencing operations at the Dangote Refinery, he said inadequate crude supply continues to hinder optimal production.

“Local refiners require sufficient crude to operate efficiently, but current allocations fall short. This forces them to source crude externally at higher costs, including additional shipping and insurance charges, which ultimately push up domestic fuel prices,” he said.

He urged authorities to prioritise crude supply to domestic refineries and ensure compliance with policies that allow transactions in naira, noting that such steps would help reduce costs and ease inflationary pressure.

Mr Ife cautioned against returning to fuel subsidies or relying on increased borrowing to cushion economic hardship, describing both options as unsustainable. “The focus should be on fixing structural issues in the energy sector to ensure long-term stability,” he said.

Another economist, Chidi Nwanze, linked the inflation increase to renewed pressures on transportation and service costs. He said that although the rise was marginal, it highlights the continued influence of logistics costs, exchange rate fluctuations and energy prices on inflation trends.

A financial analyst, Segun Ibikunle, expressed concern over the sharp increase in month-on-month inflation, describing it as a more immediate risk indicator.

“The jump to 4.18 per cent month-on-month shows that price increases are accelerating in the short term. If sustained, it could reverse the gains recorded over the past year,” he said.

Data released by the National Bureau of Statistics showed that Nigeria’s headline inflation rose to 15.38 per cent in March, up from 15.06 per cent recorded in February. On a month-on-month basis, inflation stood at 4.18 per cent, compared with 2.01 per cent in the previous month.

The bureau identified food and non-alcoholic beverages, restaurants, accommodation services and transport as the major contributors to both year-on-year and month-on-month inflation increases.