The reduction in price of fuel by N5, from N168 to N163 per litre may lead to a downward trend in the inflation rate which has been rising since early this year, analysts said.
The economic experts specifically said the fuel price cut could force down food and headline inflations.
The federal government on Tuesday morning succumbed to the pressure from organised labour and reduced present price of Premium Motor Spirit popularly known as Petrol by N5.
The Minister of Labour and Employment, Chris Ngige, had announced after a meeting with leadership of Nigeria Labour Congress (NLC) and Trade Union Congress (TUC) at the Presidential Villa.
He said the reduction would be from N168 to N162.44 per litre with effect from December 14.
Daily Trust reports that the product is presently sold at N168, following the decision of the Petroleum Products Marketing Company to increase the ex-depot price of petrol from N147.67 per litre to N155.17 per litre in November.
The ex-depot price is the price at which the product is sold by the PPMC to marketers at the depots.
Reacting to the agreed pump price reduction, some experts explained that Nigerians would witness a slight reduction in prices of foods, goods and services across all sectors of the economy.
An Abuja-based economist and financial expert, Mr Simon Galadima, said every other sector of Nigeria’s economy rests on the oil sector, and as such, any positive or negative news in the sector reflects on other sectors.
“The reduction will exert downward pressure on food and headline inflation. That is certain,” Galadima said.
However, he said it needs to be sustained for the effects to eventually show.
The economist said: “So, for food stuff this price cut can dent it a bit. Because fuel is one of the inputs of production, and since it has been reduced, it will force down prices of foods, goods and services.”
Galadima said to cushion the effect of high prices during this Christmas, the government should bring out foods from its food reserves across the country.
He also said youths should be motivated to go into agriculture and mining to help in the diversification effort of the government.
“In the long term, we should be encouraged to be independent at producing our staple foods”, he said.
A Lagos based financial expert, Dr Ajibola Nurudeen, said N5 reduction in fuel price would go a long way in reducing Nigerians’ suffering.
He called for more palliatives to the poor as they bear the most brunt of the economic hardship.