The price of diesel is going up again and at a time when homes and businesses in Nigeria are experiencing perhaps the most miserable time yet in the hands of Power Holding Company (PHCN).
According to investigations by our reporters, ex-depot price of diesel has risen from between N85 and N90 a litre by last Friday to between N95 and N98 per litre by last night.
Our reporters learnt that while Obat Petroleum was selling a litre of diesel to dealers at N90, Conoil on the other hand has an ex-deport price of N95 per litre while at Ascon it goes for N97 per litre.
Dealers blamed the increase on the rise in the price oil in the international market as well as adjustment of the naira exchange rate.
One other dealer hinted that supply to the market may also have fallen following the declining fortunes of a major dealer who is said to have taken in orders from dealers without discharging the contract.
BusinessDay learnt that there has also been a drastic reduction in NNPC’s supply of diesel to the market because of the near collapse of the nation’s refineries.
The rising diesel price means a jump in the cost of doing business in Nigeria at a time Nigerian firms are facing fierce competition from foreign products which have flooded the local market.
The volume of diesel consumed in Nigeria daily is currently put at between 12 to 13 million litres per day.
BusinessDay’s investigation revealed that the pump price for diesel is now between N95 and N105 per litre.
The product as at the time of this report was not available in most filling stations in Abuja, as only AP filling station which got fresh supply sold diesel for N105 per litre and threatened that it may rise further soon. Visits by our reporters to filling stations in Abuja revealed that although Obat, Oando, AP filling stations did not have diesel they sold their last supply at N100 per litre while Total and NNPC sold at N95.
The black marketers who mopped up the product from the filling stations are also unwilling to sell. The filling stations have been directing motorists and other buyers to black marketers who sell between N110 and N120 to organisations and insist on N140 per litre.
In Kano where the product is available in only a few stations, it is selling for N96 per litre.
Also, the price of diesel in Lagos has increased as AP filling stations which used to sell for N95 per litre a month ago increased to between N98 and N100. Mobil’s retail price is now N98 per litre, Texaco in Festac area of Lagos sells for N95 while Total goes for N98 per litre. Other retailers like Tom-Tan filling station on Amuwo Odofin road sells for N97 per litre, Sabola at Ago Palace Way retail at N100 per litre while King petrol filling station also on Amuwo Odofin road sells for N95 per litre.
In Benin City, Edo State capital, diesel goes for N100 per litre at Buvel filling station an independent marketer, Total N99, Oando N98, Zeek Oil N95, NNPC mega station N95 and AP N98.
The current development seems to be having a damaging effect on manufacturers as Bashir Borodo, president of the Manufacturers Association of Nigeria (MAN), has also decried the virtual collapse of power supply from the national grid and the current rising cost of diesel in the country. Manufacturers are spending an average of N1.8 billion a week to fuel their generators, he said.
He noted that the early part of last year witnessed a relatively stable supply of petroleum products, an improvement from the last quarter of 2008 and the first quarter of 2009 when product availability was low. The initial shortages were contained only to resurface following the deregulation of petroleum prices.
BusinessDay also learnt that to move the product to the end users, marketers incur additional transportation cost, consequently pushing the price at retail outlets higher.
Marketers’ profit margin is put at N4.15 per litre and is required for maintenance of operating infrastructure, employee emoluments and wages, among others.
The diesel end of the petroleum market is fully deregulated, as no subsidy is paid on imported diesel, but marketers are pushing for a change, urging government to intervene decisively and place diesel import on Petroleum Support Fund (PSF). If adopted, the product will then enjoy some measure of subsidy from government.
Meanwhile, Femi Otedola, president/CEO of Zenon Petroleum and Gas, Nigeria’s major diesel importer, had earlier appealed to the Federal Government to subsidise diesel import to force down the price “at least temporarily”.
According to Borodo, the surge in the price of diesel followed the trend in other downstream petroleum products as there was a major government intervention to keep the price of PMS (petrol) at acceptable level.
“From the period of deregulation to date, industrial consumers have witnessed three price outbursts, particularly in AGO and LPFO. This was foreseen by us, and about 18 months ago we made passionate pleas for the reduction in the price of AGO, and permission to partner with NNPC to import LPFO directly. Promises were made but that evaporated into thin air.”
MAN had earlier protested the crippling price increases and drew the attention of the government to the imminent collapse of industries which depend on AGO and LPFO to power their generators or boilers. The economy is burdened by industrial production’s dependence on self-generation of power and heavy reliance on road haulage for delivery of raw materials and finished goods. In this instance, AGO and LPFO are compelling necessities for trailers and trucks in the logistics value chain as well as for industrial machines and boilers.
To Godwin Oteri, president of the Ikeja branch of MAN and managing director of Johnson Wax plc, private power generation accounts for 30 percent of production cost as so much money is spent on purchasing diesel to keep businesses running. In addition to the convoluted process of clearing raw materials from Nigeria ports, the devaluation of the naira andmultiple taxes, industrial capacity utilisation has further dropped from an average of 38 to 35.24 percent.
“This development has altered our cash flow and cost equation; truncated our planning projections; compounded our ability to compete and has led to temporary shut-down of factories with a consequent lay off of staff. The resultant effect is higher unemployment rate with the attendant negative social and security implications,” Oteri said.
According to him, by MAN’s records, industries in the Ikeja branch area had an average power supply of less than six and half hours per day and 17 and half hours outage.
For Aliko Dangote, president, Dangote Group, and a major manufacturer of cement in the country, the price of cement is directly related to the cost of energy. “Anytime price of diesel goes up by one naira today, transporters will up their price and this is passed on to the price of cement.”
“Price of cement depends on where you are buying from, what determines the price of cement today is the imported cement. You pay for freight, duty, etc. Right now, freight is high. Freight is determined by owners of vessels and we do not have ships. Freight is affected by increasing price of fuel,” Dangote said.
With the dynamics of cement pricing, Dangote said his company’s control over the price of cement is limited.
The chairman of Livestock Feeds plc, Robert Tade, also disclosed that distribution costs have gone up as his company currently spends over N20 million on diesel, to power production plants and vehicles.
He observed that low capacity utilisation and lack of basic supporting infrastructure such as power and good roads continue to be major issues confronting manufacturing companies in Nigeria as raw materials and finished goods face high distribution costs due to levies and other taxes imposed on trucks that ply the roads.
Aug42009