Nigeria’s generator economy shaken by rapid surge in diesel price

Surging diesel prices are threatening to slow Nigeria’s generator economy as the war in the Middle East pressures supplies of both the industrial fuel and the type of crude oil most ‌suited to produce it, traders and analysts said.

Analysts wonder how a country the size and population of Nigeria can afford to be dependent for its economic productivity on off-grid electricity from generators.

Economists at BusinessDay have continued to make the point that the failure to assure the country of grid a availability and reliability has exacted over the past 30+ years an incalculable socio-economic cost and has continued to do so at a further incalculable cost to productivity, competitiveness and our image abroad.
In the period since the war against Iran began, the price of diesel has shot up to as high as N1,650 a litre in parts of the country.

Traders say diesel has been in tight supply for years due to disruptions from Ukrainian attacks on Russian refineries and Western sanctions on Moscow’s exports.

The Israel-U.S. war with Iran worsens supply worries as Tehran has been disrupting shipping in the Strait of Hormuz, through which between 10% and 20% of global seaborne diesel supplies flow.

“Diesel is the most exposed product to this conflict structurally,” Shohruh Zukhritdinov, founder of Dubai-based Nitrol Trading, said. “Diesel underpins freight, agriculture, mining and industrial activity, making it the most macro-sensitive barrel in the system.”

The diesel supply loss associated with the Strait of Hormuz disruptions is about 3 to 4 million barrels per ⁠day, or roughly 5% to 12% of total global consumption, energy economist Philip Verleger estimated.

Another 500,000 bpd of diesel will be lost due to blocked exports from Middle East refiners, he added.