• Monday, July 15, 2024
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Diesel prices rise 188% in one year on Russia-Ukraine war

Tax on diesel imports seen piling pressure on firms

The average retail price of Automotive Gas Oil, also called diesel, paid by consumers in Nigeria rose by 187.69 percent in 12 months due to supply challenges caused by the Russia-Ukraine war, foreign exchange shortages and global energy crisis, experts say.

According to the National Bureau of Statistics (NBS), the price rose from N288.09 per litre in January 2022 to N828.82 per litre last month. On a month-on-month basis, the average price rose by 1.34 percent from N817.86 in December last year.

Chinedu Onyegbula, an energy expert and director of Bullox Resources Limited, said the combination of foreign exchange shortages, global energy crisis importation, and cost of logistics makes the product expensive.

In Nigeria, as the price of diesel is not regulated by the government, marketers, acting like a cartel, decide prices.

Despite Brent crude, the international oil benchmark price, has declined by 32 percent from $122 per barrel when the Russia-Ukraine war intensified to $82.5 last month, marketers in Nigeria still sell diesel at an average of N800 to N820 per litre.

Joshua Olorunmaiye, team lead/executive associate, energy and natural resources at Bloomfield LP, said that from a global point of view, there has been worry about weakening demand for oil, mainly due to slow global economic growth.

“Thus, in response, the Organization of the Petroleum Exporting Countries recently decided to reduce its target amount of oil production by 2 million barrels a day, and raise the price of the available oil,” Olorunmaiye said.

“This reduction in availability and increase in price of oil has contributed to the surge in diesel prices, particularly because the global demand for diesel is getting higher.”

According to Olorunmaiye, another culprit is the sanctions imposed on Russia by many western countries after the invasion of Ukraine, which has cut Russian exports and exposed the fact that there are not enough global refineries to meet the demand for diesel.

He said: “This is coupled with the fact that in the past two years, some refineries have closed or scaled back capacity because of the collapse in energy demand in the early months of the coronavirus pandemic. And also, some were closed due to their conversion to produce biofuels made from plants, waste and other organic material.

Read also: Manufacturing firms can save 80% diesel cost by switching to gas – Clarke Energy

“As it is also known, Nigerian refineries cannot meet the demand, and therefore reliance remains on imports from such countries. Therefore, this creates a scarcity problem, leading to other problems such as increased cost in refining, retailing and distribution, which affects the final consumer’s price.”

In Abuja, Glorylanders International School switched to using petrol-fuelled buses as diesel pump price bites. Oluwakemi Ajagbe, the proprietress of the school, said the school is facing difficulty accessing diesel at a lower price.

According to the NBS, the highest average diesel price in January 2023 was recorded in Bauchi (N900), Benue (N886), and Adamawa with (N867). On the other hand, the lowest price was recorded in Bayelsa (N769), followed by Edo (N788) and Akwa Ibom (N789).

Onyegbula said access to some areas in these states in terms of transportations was poor, thereby increasing the price of diesel.

Analysis by zone showed that the South-West had the highest price (N846), while the South-South recorded the lowest price (N800).