How increasing diesel price will impact manufacturing, product costs in Nigeria ─Report

*The price of diesel, a petroleum product not regulated by the Nigerian Government, has surged by over 40 percent from an average price of N225 per litre January 2022

Alexander Davis | ConsumerConnect

The price of Automotive Gas Oil (AGO), also known as diesel, has increased further to N350 per litre in some petrol stations in Lagos.

It was learnt that fuel marketers had increased diesel price to N320 per litre October 2021, as the further rise in global crude oil prices and Naira depreciation have pushed up the cost of importing fuel into the country.

The price of diesel, which is not regulated by the government, has surged by over 40 per cent so far this year from an average price of N225 per litre in January.

Diesel is mostly used by businesses, especially manufacturers, to power their generators amid a lack of reliable power supply from the national grid. Many vehicles transporting goods and people across the country also use diesel.

Subseqently, checks at several filling stations Thursday, January 13, 2022, in Lagos, indicated that marketers had jacked up the AGO price to N350 per litre, up from a high of N340 last year, Economic Confidential report said.

The report also showed the visits to Mobil, along the Lagos-Ibadan Expressway, and Northwest Petroleum, along the Oshodi-Apapa Road Thursday showed the product was sold for N350 per litre, while Heyden filling station, along Third Axial Road, Ogudu, sold it for N345.

Oando and Enyo filling stations, all along the Lagos-Ibadan Expressway, sold the product for N340 and N335 per litre respectively.

Crude oil price accounts for a large chunk of the final cost of petroleum products, and changes in oil prices affect the landing cost of imported fuel.

Mr. Mike Osatuyi, National Operations Controller, Independent Petroleum Marketers Association of Nigeria, in a telephone interview noted that the recent increase in oil prices led to the further hike in diesel prices in the country, report stated.

Osatuyi said: “If crude oil prices continue to rise, diesel price will also go up. This is coupled with the depreciation of the Naira. Naira is around 570-575 to a dollar at the parallel market.”

Brent crude, the international oil benchmark, climbed above $85 per barrel on Wednesday to its highest in more than two months.

It stood at $84.72 per barrel as of 7:59p.m. Nigerian time as of Thursday.

Amb. Ayo Olukanni, Director-General, Nigeria Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), was quoted to have said recently, that the private sector had already raised the alarm on the increasing difficulties of obtaining the required foreign exchange for raw materials for industry.

The Director-General of NACCIMA said the high cost of obtaining foreign exchange (Forex) was reflected in the high cost of goods and inflationary trend in the country.

Amb. Olukanni stated: “Perhaps most embarrassing is the energy crisis, with our low generation and distribution problems.

“We can only boast of combined install generation capacity for of about 12,000MW, distribution of just 4000MW and abysmal 114kwh per capita for a population of over 200 million and running our industries on generators.”

Likewise, Mr. Femi Egbesola, President, Association of Small Business Owners of Nigeria, recently said that the surge in diesel price would increase the average cost of manufacturing in the country.

The expert said: “All Nigerians depend on diesel. The reason is that manufacturers produce with diesel-powered generators; so, whatever they spend on diesel is added to the prices of their products.

“As far as Nigerians are buying those products, they are also paying part of the diesel price.

“It is unfortunate that the price of the product keeps increasing and nothing is being done about it.

The high inflation rate in the country means that people have less money to buy things, and when prices are going up and the masses have less money to buy those products, we are going to have a lot of joblessness in the country.”

It is as well noted that Nigeria as Africa’s largest oil producer, largely relies on importation for petrol, and other refined products as its refineries have remained in a state of disrepair for many years.

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