The latest surge in diesel prices as a result of the war between Russia and Ukraine will hit states like Ebonyi, Edo and Osun, which pay the highest for diesel in the country, the hardest.
That will bring pain to various sectors within the states from Transportation and Agriculture to industries and enterprises.
Diesel prices in Nigeria jumped to an all-time high of over N500 on Monday after the US said it was considering a ban on Russian oil imports.
Data from the National Bureau of Statistics (NBS), indicated that the average retail price of diesel paid by consumers in January was only N288.09. As of Tuesday, March 8, diesel was already being sold for nearly N600 per litre in Lagos. Further analysis of the average retail prices from the report indicated that the top three states with the highest average price per litre in January 2022 were Ebonyi, Edo and Osun with ₦343.00, ₦331.64, and ₦328.89 respectively.
According to the Lagos Chamber of Commerce and Industry, the increase in diesel price is expected to triple the cost of production and accelerate inflationary pressures in the country.
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Ayodeji Ebo, head, of retail investment at Chapel Hill Denham stated that one of the first sectors to witness a spike in inflationary pressures in most states would be the transport and commercial sectors.
“For starters transportation costs in these states would definitely increase as most buses used for transport services run on diesel.
“To make matters worse, the cost of diesel in these states were already high before the current record high. So the cost of transportation in these states would likely double if not triple the cost obtainable in other states, Ebo said.
Omobola Adu, senior investment officer at Afriinvest stated that increased production costs should also be expected in these states in the coming months.
“Production companies usually employ generators that run on diesel to dampen production costs considering its cost-efficient implications. However, with this current spike in price of diesel which is envisaged to still soar higher, production costs are bound to increase as the transferred cost from the prices of diesel would have to be channelled to customers’ in order to break even,” Adu said.
“My greatest fear is for those in these 3 states (Ebonyi, Edo and Osun). If the price increment is ‘pinching’ us that are in Lagos, then it definitely must be ‘biting’ harder for people in those states, he added.
Temi Popoola, CEO, Nigeria Exchange (NXG) stated that diesel usually accounts for 20-30 percent of banks’ operating expenses.
With diesel prices rising above 60% of its former cost, the implications would be most reflective in increased transaction rates as well as interest rates in the near term.
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If not controlled sooner, it might begin to have transferred consequences on medium-term economic growth beginning with states with very high diesel prices.
The Lagos Chamber of Commerce advised that if the country is to solve this current problem, the country should ensure it adds value to our crude domestically and detaches itself from dependence on imported refined petroleum products.
