Dangote's Fuel Deal Could Help Ease Nigeria's Inflationary Pressures, Says Economists

Nigerian economists and financial analysts are optimistic that the recent reduction in petrol prices could help ease the country's persistent inflationary pressures.

This optimism follows a direct fuel purchase agreement between Dangote Refinery and the Independent Petroleum Marketers Association of Nigeria (IPMAN), which has led to a noticeable drop in the price of Premium Motor Spirit (Petrol).

The deal is seen as a potential game-changer for Nigeria's economy, which has been grappling with high inflation rates.

As of October, the country's headline and food inflation rates stood at 33.88% and 39.16%, respectively, according to the National Bureau of Statistics.

The reduction in petrol prices is expected to lower business costs and provide some economic relief.

Prof. Segun Ajibola, former President of the Council of the Chartered Institute of Bankers, expressed hope that the agreement would have a "ripple effect on the cost of doing business in the country."

He noted that the direct purchase agreement between Dangote Refinery and IPMAN could lead to a decrease in inflationary pressures in the coming months.

However, challenges remain. Fluctuations in foreign exchange rates and energy costs continue to pose significant hurdles.

Ajibola highlighted that "foreign exchange has been so tough," emphasizing the need for reliance on local production and reduced import duties to achieve gradual improvements.

Mr. Idakolo Gbolade, CEO of SD & D Capital Management, also welcomed the deal, stating that it "will discourage importation of petroleum products and eliminate the cost associated with importation."

He added that the federal government's concession to sell crude to local refineries in Naira could further support these efforts.

Despite the positive outlook, both economists criticized the Central Bank of Nigeria's past monetary policies, such as interest rate hikes, for failing to effectively curb inflation over the last decade.

They argue that these policies have not addressed the underlying cost-induced nature of Nigeria's inflationary pressures.