A sudden rise in the price of diesel, the fuel that powers a large part of the industrial and commercial activities in the Nigerian economy, has had its ripples felt throughout the economy, from manufacturing giants through medium-sized enterprises to small-scale organisations.
From gigantic diesel generating plants that turn the industrial machines in Nigeria, to the trucks used for long-distance haulage of both industrial and finished goods, to small machines used by small-scale enterprises, diesel has a stronghold on Africa’s largest economy.
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This has put an unprecedented stress on the economy, threatening its ability to produce goods and services, as the nation battles the scourge of diesel price hike.
The price of diesel rose from N300 at the beginning of the year to over N700 per litre, putting the cost beyond the reach of producers.
The impact of the price hike has been worsened by the collapse of electricity supply in the country. Within two days, the national grid collapsed three times, throwing almost the entire country into darkness.
Should this continue, experts said most goods and services in the country will either disappear from the suppliers or get out of reach for the ordinary people as the producers pass the rising costs to consumers.
A handful of them who spoke to Daily Trust yesterday complained that the hike in diesel price had increased their operating cost and with no option left, they may pass such cost to the consumers.
The average price of diesel was N260 in December 2021 before it rose to N300 in January and N400 in February. However, by March, the price had hit a record N700 per litre with claims of reaching N850/l in some quarters.
‘Production not sustainable’
Speaking in Abuja, a sachet water producer, Obed Ukong said he had to buy diesel for N730 per litre on Tuesday. “It is beginning to bite deeper and we may soon begin to adjust our unit price,” he noted.
A trucker, Adamu Yusuf said he had bought diesel for N670/l last week but said it rose to N700 on Wednesday.
He said: “We are pleading with the government to come to the rescue of Nigerians with this high diesel cost, transport will be very expensive.”
An industrialist and sachet water manufacturer, Onuoha Okorie, said if the price hike continues, the association of table water producers (ATWAP) may be forced to raise the unit cost from N200 per bag, which he said rose in August 2021 from N100.
Bread producers threaten shutdown
President of Premium Bread Makers Association of Nigeria, Emmanuel Onuorah who spoke in Lagos, has also urged the government to reverse the price of diesel or face a shutdown.
Onuorah said all their machines such as the mixer, oven and other machines are powered by diesel.
“Diesel is what we use in running our generators, diesel is what we use in running our oven. What we were buying N350 is now about N850 in less than a week,” he noted.
On Monday, grain grinders at Oja Oke, a market in Oshodi increased their rates from N200 to N300 as they cited the rising diesel price.
In Kano, it was observed that many filling stations either do not have the product or are not selling as a few stations were only seen to be dispensing diesel between N650 and N700/l.
A business owner, who asked not to be mentioned, said they get diesel only if the filling station considers you a regular customer.
“You have to be a frequent customer in order to be able to book with them and later get it,” he said.
Abubakar Abdullahi, the Manager of BBY Aluminium Investment in Kano, lamented how the inflation in the price of diesel has resulted in the high price of raw materials.
The company deals in the production of roofing sheets and sachet water.
“This issue of the high price of diesel is so alarming that we have to re-strategise to survive it,” he said.
Also speaking, Suleiman Lurwan, Manager of Maroosh Bakery and Snacks in Kano lamented the impact of the high cost of diesel on the confectionery business.
“What is happening to our business right now is moving towards disaster as we are not getting desired profit.
“Firstly, there is the challenge of electricity. There is also the problem of no price control on raw materials used in production.
“You cannot go to the market to buy goods today at this price and meet the same price tomorrow,” he said.
Abdullahi Umar, a rice miller faired that there would be job losses soon.
“We have no option but to ask some of our workers to leave because we no longer produce 24 hours. It is terrible and I am afraid the cost of foodstuff and other basic necessities would keep going up,” he said.
Address supply chain disruptions, FG urged
An economist, Prof. Ndubisi Nwokoma attributed the high cost of diesel to what he called “supply chain disruptions,” saying the government should address the causative factors.
He dismissed the insinuation that the increment was a result of the Russian-Ukraine crisis, saying the problem was essentially a Nigerian problem.
He said, “There are disruptions in the supply chain. It was there before. So why did it suddenly change? Let them look at the supply chain.
“The diesel we were buying before, where was it coming from? Were there obstacles in the supply chain? It is when the supply goes down that the prices will go up.
“So, those disruptions should be addressed so that the price will go back to normal. I am sure it is not only Nigeria that will suffer from the Ukraine crisis or war.
“This is a largely Nigerian problem even though there could be some foreign implications or foreign problems,” he noted.
Another economist and CEO of Centre for Promotion of Private Enterprise (CPPE), Dr Muda Yusuf had earlier said the way out of the continuous rise in the price of refined petroleum products in Nigeria is to revisit the reforms of the oil and gas sector, stressing the need for a complete liberalisation of the petroleum downstream sector.
According to Yusuf, the NNPC cannot continue to attempt to provide the fuel needs of the entire country as it is not sustainable.
“This approach would consume the entire revenue of the government,” he said.
The expert pointed out the high and increasing cost of diesel is compounding an already difficult situation for many investors as most firms still depend on diesel generators to power their operations in the face of epileptic electricity supply.
This according to Dr Yusuf will lead to an escalation in production and operating costs, mounting inflationary pressures, erosion of profit margins and risk to business continuity, especially for SMEs in the real sector. “It has implications for poverty as well.”
Diesel cost adding to our burden – MAN
The Manufacturers Association of Nigeria (MAN) has warned that the current diesel price challenge could spell doom for many companies that have been struggling to survive under the burden of high energy cost.
The astronomical hike in the price of diesel is a major cause of concern for the manufacturing sector of the Nigerian economy, said Frank Onyebu, Apapa branch of MAN.
“This problem would not be very critical if we have stable power supplies to industries. Unfortunately, the power supply situation is getting worse rather than getting better,” he said.
“The only way manufacturers could survive this diesel price regime is for a major improvement in electric power supply to industries.
“There is a need for a deliberate government policy to ensure that manufacturers receive adequate and stable supply of electricity to be able to compete with manufacturers from countries with more stable power supplies,” he said.
Supply will adjust in few weeks – Oil marketers
But the members of the Major Oil Marketers Association of Nigeria (MOMAN) say the market will correct the current high price of diesel, blaming it on the ongoing war between Russia and Ukraine.
They also blame the hike on other forces from the market, including the high exchange rate for the dollars and the cost of production.
“Diesel is mainly refined by countries in the old Soviet Union. Buyers go there to buy diesel. The war between Russia and Ukraine has disrupted this supply chain,” Executive Secretary of MOMAN, Clement Isong, told Daily Trust by phone.
He said that the embargo placed on Russia by the European Union and America has grossly affected the supply chain.
“Aside, crude is now sold for between 130-135 dollars. Diesel has been deregulated for a long. Marketers are left to source for dollars, which they (marketers) buy from the black market. You know the rate at which dollars are sold in the black market.
“Against all these odds, I am hopeful that the pump price of diesel will eventually go down in a few weeks. The market will definitely adjust itself,” said Isong.
By Vincent Nwamma, Christiana T. Alabi, Abdullateef Aliyu, Eugene Agha & Risikat Ramoni (Lagos); Simon E. Sunday (Abuja) & Salim U. Ibrahim (Kano)
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