The rising cost of transportation and other commodities occasioned by the recent hike in fuel price have continued to generate mixed reactions among Lagos residents.

While the costs of food items have gone up by some percentages; the cost of commuting around the metropolis, which initially sky-rocketed, has also increased from last year’s charges.

Last week, manufacturers of table and sachet water in Lagos (popularly known as pure water) increased the cost of their products. 

For instance, a bag of sachet water (containing 20 sachets) was increased from the previous N60 per bag to N80. As a result, the previously retailed N5 sachet water now sells for N10 all over the city.

Ayo Olurin, a mobile salesman at Oshodi, said that with sachet water now selling at N10, the purchasing power of the N5 note may have been dealt a huge blow.

“If N5 cannot buy an ordinary pure water, then I wonder what else it could buy. It would become valueless,” Mr. Olurin said.

Rising production cost

Some manufacturers in Lagos attributed the rising costs of their products to an increased cost in running their businesses.

A manufacturer of sachet water in Festac Town said that his staff’s salaries have shot up in the aftermath of the fuel price hike.

“I used to pay them N2.50k per bag, now it is N3.50k,” said the manufacturer who preferred not to be named.

“The cost of my raw materials has also increased. For example, the packing nylon that sold for N2,600 per 1,000 pieces now sells for N3,500,” he added.

‘Zero Effect’

Despite the price increases as a result of the fuel price hike from N65 per litre to N97 per litre; the net effect on the country’s inflation rate is zero, according to Ayo Teriba, a Lagos-based economist.

“There is no reason why the (partial) removal of subsidy on fuel should increase the rate of inflation,” said Mr. Teriba, the Chief Executive Officer of Economic Associates.

“As a matter of fact, there are more reasons why the subsidy removal should be deflationary.

“The removal is more like an increase in tax because people will have less purchasing power. Some people think that paying more for P.M.S (fuel) would lead to inflation but those people are looking at the partial picture,” he added.

Nigeria’s inflation rate edged down slightly to 10.3 percent in December, 2011, as against November’s 10.5 percent, according to the Nigeria Bureau of Statistics.

However, analyst fear that the hike in fuel price and its attendant increases in the prices of goods and services may raise inflation yet higher.

But Mr. Teriba argued that the increase in the pump price of fuel will affect only products “sensitive” to fuel increases “but the average rate effect on inflation will be the same.”

“If people spend more on transportation and fuel, they will have less money to spend on other items,” said Mr. Teriba.

“As a result, there will be a fall in the demand of the other items as well as a fall in their prices.

“Once income remains the same…the people who now have to buy fuel at N97 with the same monthly salary will have to buy less of other goods. So the average price will not increase,” he said.