Businesses and manufacturing concerns are facing the prospects of collapse as diesel, the fuel for powering their generators in the face of failed electricity supply from the national grid, has disappeared from the market. Price has since hit over N124 per litre.
The soaring price of crude oil in the international market is said to be partly responsible as oil marketing companies are reluctant to import the product into the country unsure how the local market would react if they sell at price dictated by high landing costs.
Diesel, also known as automotive Gas Oil (AGO) is a deregulated product and is often imported into the country by both major and independent oil marketing companies.
With the price of crude oil crossing the $100 per barrel mark more than two weeks ago, the costs of its bye products (refined products) at the international market, have also gone up.
Production from the Port Harcourt, Warri and Kaduna refineries are insufficient and cannot meet local demand, prompting massive importation of petroleum products, including diesel.
According to marketers, the landing cost of diesel is now N130 as against the official price of between N105 and N108, a situation they blame for their reluctance to import.
Sam Ohuabunwa, president, Nigerian Employers Consultative Association (NECA) told Business Day that the situation was putting enormous pressure on the operating cost of industries.
“Most of us have been looking for diesel to buy even at the going prices but to no avail,” Ohuabunwa said. He expressed fear that most industries would close down if the situation persists. “The implication is that it will lead to further decline on economic growth,” the Nigeria Economic Summit Group (NESG) chairman noted, wondering how the nation could achieve 11 � 12 percent growth when production and capacity utilisation is decreasing
He urged government to hasten action towards power stabilisation. Similarly, the chairman, Nigerian Association of Small Scale Industrialists (NASSI), Lagos, Duro Kuteyi, urged government to take immediate steps to normalise the situation.
He said his members, considering the scale at which they operate, had lost an estimated N3 billion over the past three days.
“Our generators are down. We are not producing. Just as government is putting money down for rice importation, it should also take immediate steps to resolve this situation,” Kuteyi said.
To Agbor Ndoma, chief executive officer of Centre for Sustainable Agricultural Development (CSAD), “diesel scarcity is death knell for small and medium enterprises.” He said his cassava processing plant is run on diesel and he has to purchase diesel at prices as high as N150 per litre.
“This high cost will worsen the current food prices,” adding that many other food processors that have shut down their processing plants as a result of the high cost and scarcity of diesel. “Some of these people employ 30 to 40 people daily when their plants are operating at full capacity. For the past one week, they have not engaged labourers and there is a ripple effect on employment especially in semi-rural areas where the processors operate,” he said.
Edobong Akpabio of Visionage Agrotech Farms Limited said with the failure of public power supply system, fuel scarcity is simply death penalty to industries in Nigeria. “A business like ours cannot survive under these harsh conditions if the scarcity is allowed to linger.”
Michelle Ukoh, director, First New Generation Study Centre, which runs Internet-based overseas courses, said: “I have to pay 75 percent higher for diesel, its affecting the cost of doing business and would eventually lead to increase in my fees. The fact that fuel is scarce in Nigeria even sounds crazy, it�s simply a problem of mismanagement.”
Last week when the scarcity became more pronounced, the price of the product is now obtained at over N124 per litre while consumers have to pay even higher in other parts of the country depending on the location In recent weeks, independent marketers that control the bulk of the market were said to have placed order for the product at prices they thought were good enough to for the local market. But as the price of crude oil continued its upward swing in the international market, suppliers correspondingly increased theirs�.