Financial Derivatives Company (FDC) has warned that the recent increase in the price of Premium Motor Spirit (PMS), could lead to, “reinflation in September as logistics cost escalates.”

With the latest Consumer Price Index (CPI) report released by the National Bureau of Statistics (NBS), showing a decline in Nigeria’s headline inflation rate to 33.40 per cent in July 2024 from 34.19 per cent in June 2024, the first deceleration in the last 19 months, the FDC is cautioning against “reflation” which refers to inflation rising from a below-average level back toward its long-term trend.

The firm stated: “Inflation is likely to renew as the price of petrol spikes to N900/litres,” thus making it more difficult for inflation to come down as projected.

The firm also said that the fuel price hike will lead to an increase the cost of transportation for both individuals and businesses, which, “will drive up the prices of goods and services across the economy as businesses pass on the higher costs to consumers,” adding that, “the cost of producing, distributing, and selling these goods will rise significantly.”

Further commenting on the likely impact of the latest increase in the price of fuel, the FDC said that with official petrol prices now adjusted to N855 per litre from N568 per litre, “this implies that N5 trn is withdrawn from consumers and transferred to government.”

According to the firm, the fuel price hike could lead to a decline in consumer demand due to income squeeze and also result in energy poverty quickening “to 76.3 per cent (168mn) in 2025 from 71 per cent (161mn) in 2023.”

In addition, the firm warned that the increase in the price of petrol, “may instigate social unrest as citizens reacts in frustration.”