• Friday, February 23, 2024
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Retailers, small businesses groan under rising diesel price

Manufacturers cut costs by 25% with switch from diesel to gas

Retailers in Nigeria are distressed as the sudden spike in the price of diesel is affecting their businesses in terms of operations and sales, according to a BusinessDay survey.

Findings from the survey made across major parts in Lagos state showed that most retailers are being forced to manage their diesel consumption to cope with the high cost.

Titi Olatunde, a manager at Lagos Fries restaurant said they now buy 50 litres diesel for N32,000 which is about 121 percent higher from N14,500 two weeks ago.

“We are not coping at all. We hardly have light here so we try to manage by switching off the generator for a while. If the diesel price continues to go up, we will have no choice but to include it in our food cost,” Olatunde further said.

Likewise, Victor Ikem, a Lagos-based wine retailer complained that the price has affected logistics cost.

“The high cost of diesel has doubled the cost of transporting our wines across the states thereby affecting our distribution chain. Just recently, a customer complained about the cost when he made orders from Lagos to Abuja,” Ikem told BusinessDay.

Diesel is mostly used by businesses, especially manufacturers, to power their generators amid a lack of reliable power supply from the national grid. Many vehicles transporting goods and people across the country also use diesel.

The skyrocketing price in the cost of energy prices is as a result of the ongoing war between Russia and Ukraine. Currently, the price of one litre of diesel costs around N700 from about N190, last month.

“It is so frustrating because we hardly have light here. My business runs for almost 24 hours. The most annoying part is that we just updated our prices based on the current inflation before this diesel issue started. So, we can’t think of passing that cost to our customers right now,” Wole Akeju, the executive director at RedBox Deluxe Café told BusinessDay

Kudirat Abubakara, a manager at Mart Supermarket noted that despite the price, they had no choice but to still buy diesel so as to maintain the best service and atmosphere for their customers. “They cannot come to the store and everywhere is dark. It will affect our customer service.”

Read also: Manufacturers seek FG’s intervention, as diesel hits N720 per litre

On the manufacturers’ part, Olusola Babatunde, the managing director of Onestop celebration Limited (OSC), a garment mass production factory complained that the diesel cost has increased her cost of production making products less competitive with the cheap products from China. “Also the higher prices are making customers complain hence we are not operating at full capacity which makes overhead cost even higher,” he said.

Similarly, Jenniez School of African Interior Design which also has a factory had to stop production at the moment till they can get a generator that is only powered by petrol.

“Before the hike we were planning to get a diesel generator for the school but now it is a no go area,” Memuna Falade, its administrative manager said.

While some businesses are yet to pass the high cost to consumers, if it continues to increase further, they may be forced to do so.

“The five-litre fuel we get around N800 – N900 is now sold to us at N2000 in the black market as getting fuel in stations becomes difficult,” Samuel, owner of a small business in Apapa told BusinessDay.

Apart from generating power for operations, the price increase is also affecting the cost of raw materials and other inputs used by small manufacturing businesses. This is leading to higher production costs and putting pressure on the price of products.

“We use generators most times for our production as NEPA supply is poor, making our cost of production high,” Bolarinwa, owner of Bolarique bread, told BusinessDay. “Even the price of other materials we use in production is also increasing due to the rise in cost of fuel.”

As earlier stated, although some business owners are yet to increase the prices of their product and services, they threaten that if things continue this way, they will need to increase the prices of their products.

“If the fuel price situation continues like this, our service charge will definitely increase”, Durosomo, owner of GINARAB venture told BusinessDay.