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Diesel price hits N600 per litre as businesses, manufacturers groan

Rising diesel cost chokes businesses

From haulage to consumer goods, retail outlets, small businesses, manufacturers all are coming under pressure as the retail cost of diesel at various filling stations is expected to spike to between N540 to N550 per litre, BusinessDay findings have revealed.

This rising price of diesel, which is not regulated by the government, is on the back of the war between Russia and Ukraine which has led to significant increase in the price of Brent crude, the gauge of Nigeria’s crude oil soars to a 13 year high of $130 per litre on Monday.

Observers believe that, while businesses are feeling the pinch, the government is powerless because the downstream diesel sector is deregulated.

“Unlike petrol, diesel is deregulated, which means the increase in the international price of crude oil is responsible for what we see across Nigerian filling stations,” Mike Osatuyi, national operations controller of Independent Petroleum Marketers Association of Nigeria (IPMAN), said.

According to the Lagos Chamber of Commerce and Industry (LCCI), the increase in diesel price is expected to triple the cost of production and accelerate the inflationary pressure on the country.

“It is unfortunate that the price of the product keeps increasing and nothing is being done about it. The high inflation rate in the country means that people have less money to buy things, and when prices are going up and the masses have less money to buy those products, we are going to have a lot of joblessness in the country,” the President, Association of Small Business Owners of Nigeria, Femi Egbesola said.

Crude oil price accounts for a large chunk of the final cost of petroleum products such as diesel, kerosene, and such associated products.

Reviewing challenges faced by manufacturers at a luncheon held in Lagos, Mansur Ahmed, president of Manufacturers Association of Nigeria (MAN), said high costs of energy, funds and logistics were key issues hurting the growth of manufacturing companies in the country.

Read also: Nigeria’s external reserves dip amid record-high oil prices

“The implication of these challenges highlighted is that it impedes the growth and development of the manufacturing sector, thereby affecting the attainment of the sector’s full potential of massive job and wealth creation,” Ahmed told journalists at an event.

Bank branches rely on generators, with diesel often accounting for 20-30 percent of banks’ operating expenses, according to Temi Popoola, the Chief Executive Officer, Nigerian Exchange (NGX) Ltd.

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.

More than 70 percent of Nigerian firms rely heavily on diesel-powered generators. The machines guzzle cash and spew pollution, but they are reliable in a nation where nearly 85 million people – some 40 percent of the population – have no access to grid power.

While many Nigerian households and small business generators are powered by price-capped petrol, the big generators for larger firms, apartment complexes and more substantial homes can run on diesel.

Abayomi Awe, Chief operating officer at a Bakery has said they use cheaper grid power when they can but rely on generators for around 20 hours per day. Grid power can be down for days.

“It becomes difficult for us to expand if the price of diesel goes up,” he said as bakers scrambled to pull finished loaves from steaming ovens. “It might result in some companies, some bakeries like ours, shutting down.”

Many businesses are already searching for solutions. The Lagos Chamber of Commerce has advised that to solve the problems, there is a need to ensure the country is adding value to our crude oil here and stop depending on imported refined products.

“That is the solution and can be met by the government showing commitment to ensure that our existing refineries are maintained and made to work.” The organised private group said.

A survey conducted by BusinessDay revealed that most filing stations now sell diesel between N550 and N600 across Lagos up from an average of N550 per litre in late January.

Diesel prices closed the year (2021) at under N300 per litre. This time last year, Diesel sold for under N250/litre. The price is also as high as N600 per litre in the Federal Capital City Abuja.

Data from the National Bureau of Statistics (NBS) indicate average diesel price in Lagos was N303 in January 2022, a 24percent rise when compared to the price of N243 in December, The NBS data also indicate diesel price was N131.47 in June 2015 when the Buhari-led administration came into power.