A popular, large modern grocery in Surulere Lagos shut down for days because it couldn’t find diesel to power generators, leaving fresh food to rot.
An Indian business owner in Nigeria travels to Mumbai for medical checks and the cause of his high-blood pressure was traced to his constant worry about diesel.
The surge in diesel prices is taking a toll on homes and businesses across Nigeria, roiling operating budgets, household expenses and democratising anxiety along every social class in Nigeria.
Diesel prices, which are deregulated in Nigeria, have jumped from about N288 per litre in January to over N700 by the end of March, tracking crises across Europe.
Diesel stocks were already tight globally when Russia invaded Ukraine and the West responded with sanctions that, though not targeted its energy industry, had a crippling effect. Europe’s shift from petrol to diesel further exacerbated the problem.
Commodity traders were shunning Russian diesel because of the sanctions as well as payment headaches and transportation challenges, as many European ports have banned Russian vessels from docking. These actions have ripple effects across the world, and Nigeria is not immune to them.
The impact locally has been higher costs of energy, pushing up prices of commodities and food as producers find it increasingly difficult to power factories, storage facilities and transport both raw materials and finished goods.
Recently, a bakers association in Lagos said the hike in diesel price and exchange rate volatility has caused many of their members across the country to shut down operations.
Some small businesses have begun to ration supply, cutting into work hours. Business owners waste valuable hours monitoring consumption. Serviced apartments that once forbade personal generators are issuing notices that they cannot afford to keep up with the cost of diesel.
On Thursday, telecommunications companies (telcos) said their network planning, operational expense, and projection plans, which are based on diesel prices, had gone off the rails, with the high cost of the product.
“Today, you know the implication of that, cost has gone up.” said Gbenga Adebayo, president of the Association of Licensed Telecoms Operators of Nigeria at a press conference.
Adebayo said the telcos “will be approaching the government for some kind of intervention to cushion the effect of these changes on us as an industry.”
The misery across the land is restraining businesses from implementing price increases because there is just nothing left for many consumers.
However, more pains are yet to come. The Lagos Chamber of Commerce and Industry (LCCI), last month, warned Nigerians to brace for an imminent increase in the prices of products as the increase in the cost of production and logistics would translate to higher prices of products.
“Government needs to focus on resolving the supply-side challenges that are pushing prices upward. We have issues like exchange rate pressures due to a weakening naira, insecurity in production bases, high cost of logistics due to rising energy costs,” the statement added.
The government instead is digging in. Dollar shortages that came in response to Central Bank of Nigeria’s foreign currency intervention has led to the suspension of naira-denominated debit cards for international transactions by some banks. Debts have reached what some experts described as unsustainable heights and subsidies are proceeding apace.
Though the price of petrol has remained largely stable rising above N170 per litre last month, high diesel prices are raising the cost for transporters who move petrol across the country, causing petrol queues in major cities across Nigeria.
Read also: Fresh petrol scarcity as transporters hike fares on rising diesel price
The energy situation was worsened by prolonged power outages occasioned by gas constraints in some power plants. The national grid collapsed twice last month.
Supply has begun to return to the pre-collapse levels, with average supply now at 4,000 megawatts, but frequent outages occur and diesel prices are yet to moderate.
This situation has only worsened poverty across the country. A new World Bank report assessing poverty in Nigeria found that just prior to the outbreak of COVID-19, around four in 10 Nigerians were living in poverty.
Poverty was more concentrated in rural areas, where 52.1 percent of the population were poor, than urban areas, where 18.0 percent of the population were poor.
In 2018/19, around 40.1 percent of Nigerians lived on less than the national poverty line of N137,430 per person per year. This means that some 82.9 million Nigerians were living in poverty, with some 84.1 percent of poor Nigerians living in rural areas.
“The poverty gap index for Nigeria is 0.129; so vast resources are required to eliminate poverty in the country, especially in rural areas. Multiplying the poverty gap index by the poverty line and by Nigeria’s population shows that eliminating poverty in Nigeria would take almost N3.7 trillion per year,” said the World Bank report.
And this is just a little over the N3 trillion the Nigerian National Petroleum Company is asking for to subsidise petrol in 2022.
