Avoiding lower profits, transporters push rising diesel price to consumers

The upsurge in the price of crude oil, on account of the Ukraine-Russia crisis, which has in turn led to an increase in diesel price in Nigeria is putting transporters and haulage operators at a loss. The alternative is increasing costs of haulage, which some are already doing, and end users having these costs passed on to them.

Automotive Gas Oil, popularly known as diesel is predominantly used in trains, boats, barges and especially trucks that help transport most products consumed in Nigeria. It is also used by manufacturers in generating power for the production of their goods and services delivery.

According to Mike Osatuyi, national operations controller, Independent Petroleum Marketers Association of Nigeria, “Our selling price is based on the crude price and the cost of dollars in the black market which is N575 because marketers source dollars from the black market.”

As a result of this, companies engaged in logistics and transportation of goods are likely to increase the costs of offering services, otherwise, absorbing the higher cost of operation as a loss.

“At the current pace, any business using diesel will be forced to increase its price which will have an effect on the inflation rate,” Martins, a business owner told BusinessDay.

Itunuoluwa Shonibare, a haulage operator, told BusinessDay that while her business is still able to move consignments for clients, it has impacted the profit on each trip. For instance, if from Apapa to a particular destination, the profit was N150,000, now the business is seeing less than N30,000 profit.

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“It’s that bad. A lot of things are affecting our transport and there’s no availability of consignment that much. The competition is tight, so we take any job even if it is just to break even,” she said. “There are other factors affecting our profit but diesel is surely part of. Even with the price of diesel, we can still manage but there are other factors eating up the profit.”

The other factors are extortion from the security agencies and extortion from hoodlums. And at the end of the day, it’s the end-user that will pay from these experiences by the truckers.

The increase in haulage cost (and even production cost), which is passed on to consumers getting the final goods, will have an impact on customer demand for goods, as higher costs could mean less demand.

To cope with the new reality, Shonibare emphasised that “we can push it down to the final consumers. There’s no scarcity, it’s just increment, so our work is still fine as far as there is no scarcity.

“We still deliver the (usual) number of trips each day but the price increases and it is pushed down to the final users. So if a trip is to cost one million naira, we will just push it up to a 1.3million naira or more to cover all costs.”

The increment is already impacting at the very least, food prices, as tuckers increased costs on account of diesel, as reported by BusinessDay.

“The recent increase in diesel prices is responsible for the current spike in food prices. The cost of transporting the food items from where they are produced to the markets have almost doubled,” said Muhammed Abdul, general secretary, Arewa Perishable Food Stuff Market Association, Mile 12.

“Last two weeks we transported a bag of potatoes from Jos to Lagos for N2,500 now it is N5,000. The truck drivers are saying it’s because of the high cost of diesel,” he added.