Increase in prices of petroleum products in Nigeria: recounting the costs and benefits

Abstract

Frequent changes in prices of petroleum products in Nigeria have been experienced over the past two and a half decades. The crucial position of energy in both production and consumption process in an economy implies that this act of intermittent changes would have some effects on both welfare and macro-economic variables like general price level and output level in the economy. This study investigates the effects of increased prices of petroleum products, namely, premium motor spirit (PMS), household kerosene (HHK), and automotive gas oil (AGO) in Nigeria, relying on aftermath analysis of previous price increases. These price increases have positive influences on some major price indices with concomitant negative impacts on the welfare and standard of living of Nigerians. These price hikes also have negative correlation with the levels of production activities in the manufacturing sector, which require some energy inputs for successful operation.