The relentless surge in diesel prices, now exceeding N1,700 per litre, is delivering a crippling blow to Nigerian businesses already struggling with chronic power outages, according to findings by BusinessDay.
The unreliable power supply from the national grid has forced companies across Nigeria to rely heavily on diesel-powered generators to keep their operations running.
However, the exorbitant price of diesel is now making this alternative power source unsustainable for many businesses.
Finding across filling stations along Ikorodu Road, Lagos showed marketers sold at various prices between N1,690 and N1,710 per litre. At Conoil, it was sold for N1,710; AP, N1,690; and MRS, N1,700 at the time of visit.
In Abuja, filling stations along Katampe Road sold at various prices between N1,500 and N1,710 per litre on Friday. At 11Plc, it was sold for N1,400; Enyo, N1,600; Mobil, N1,750; and Fairmout, N1,700. NNPC at Central Area sold the product for N1,600 while another in Garki put its price at N1,740.
Kayode Olaniyi, a filling station manager, attributed the price increase to the difficulty marketers face accessing the product from the depot.
“The importers have been complaining about the exchange rate and if care is not taken it will further increase,” Abdulkadir Mustapha, the spokesperson of the Independent Petroleum Marketers Association of Nigeria in Borno State, told BusinessDay.
Hassan Audu, a commercial diesel supplier in Lagos, said marketers were complaining about the rising cost of purchasing and distributing diesel.
“As at last week, it used to cost between N1,400 and N1,500 but now the price has increased and we have no choice but to buy,” he said.
The impact on businesses is devastating. “This exorbitant diesel price makes business planning a nightmare. It’s enough to deter investors,” a business owner who wished to remain anonymous said. “Many businesses like mine are on the brink of collapse.”
“The situation is unsustainable,” said Adeola Yusuf, owner of a medium-sized manufacturing firm in Lagos. “We spend more on diesel than any other input cost. With prices this high, we’re barely keeping our heads above water.”
An official of the Manufacturers Association of Nigeria, who spoke on condition of anonymity, described the diesel price hike as “a serious problem”.
He said: “It is going to be terrible for manufacturers. I just don’t know how they will cope because every source of energy for their production has increased.
“With all the sources of energy hitting the roof, how much will they sell or produce? A lot of our members have unsold inventory of finished goods. So how will they solve their overhead problem, make profit or buy raw materials. I think the government should declare a state of emergency on the economy now.”
Segun Kuti-George, national vice president of the Nigerian Association of Small-Scale Industrialists, said the high cost of diesel has posed a threat to his business.
“It is only those with essential products and services that may survive. A lot of businesses will go under now. And the irony is that whatever goes up in Nigeria never comes down,” Kuti-George said.
Nigeria is currently suffering from low power supply because many gas suppliers have reduced, while others stopped supplying the commodity to power-generating companies due to the indebtedness of the Gencos to gas-producing firms.
Adebayo Adelabu, minister of power, recently revealed that the crash in power generation and attendant poor supply since January was because gas suppliers stopped supplying gas for the generation of electricity due to the indebtedness of the sector to gas producers.
Nigeria gets more than 70 per cent of its electricity from thermal power plants that run on gas. The remaining amount of electricity comes from hydropower-generating plants.
Speaking at the 7th Nigeria International Energy Summit in Abuja, Ed Ubong, director at Decade of Gas Secretariat, expressed excitement that the Federal Government had cleared $120m out of the $1.3bn gas debts.
“As of last year, that (gas debts) was about $1.3 billion, depending on how you add up the numbers. But I am pleased that between October and the end of January, the government has paid over $120m to offset some of that money,” Ubong said.
