Intensifying diesel scarcity and the sudden bounce in price to as much as N135 per litre is dragging industries and businesses into difficulties and casting a shadow on capacity utilisation and jobs.
Indications are emerging that companies are beginning to rationalise diesel usage by cutting down the number of hours their generators are required to operate their machines on a daily basis. The strategy, which could result in possible cost savings, has the propensity also to trigger frequent factory shutdowns and production time cuts. This could pressure bottomlines and result in job cuts.
Many of the businesses are already feeling the pressure on their finances having to pay increasingly higher prices to fuel their electricity generators with independent marketers and government giving no assurances of the crisis abating any sooner.
It is estimated that a company could be spending as much as N39.86 million yearly, assuming it is running a 350Kva generator that has the capacity to consume as much as 35 litres of diesel per hour at the current price of N130 per litre.
Most are turning to smaller generators, the types that may not be able to power all their machines at the same time as a result and this could have similar consequences on jobs and capacity utilisation. Beyond that, the move could help push up the prices of these category of generators in the market.
Business Day gathered that these difficulties have resulted in high enquiries on gas powered generators. The problem here is that there are none currently on ground in the country. It is understood that it will take at least six months from the date an order is placed for one to be delivered at the point of request. It has its advantage though. A gas powered generator could cut a company�s electricity bill by as much 50 percent and investment on the set could be recouped within 18 months.
A typical 275Kva gas powered generator could cost as much N18 million compared to N6 million for a diesel generator. Meanwhile, more industrial machines are grinding to a halt as the scarcity of diesel that a week ago has deteriorated. Businesses still running have had to pay increasingly higher prices to fuel their electricity generators with independent marketers and government giving no assurance of the crisis abating.
A source at the Petroleum Product Marketing Company (PPMC) said the situation was as a result of forces of demand and supply, alleging that dealers are not selling but are rather engaged in speculative marketing.
He said the PPMC has foreclosed any thought of intervening in the situation because diesel is a deregulated product which the dealers import and sell at their own prices. Unable to obtain regular power supply from the Power Holding Company of Nigeria (PHCN), most manufacturers are dependent on diesel to power their generating sets for daily production activities.
In the past few days, most of the manufacturers� diesel depots have run dry and they are unable to get fresh supply due to the scarcity.
Due to scarcity, the few who still have the commodity in supply have jacked up their price per litre.
All over the country, businesses have been chasing the limited quantity available mainly from informal sources with little success even when they willing to buy at any price. Investigation carried out by Business Day in Kano showed that a litre of diesel sold for N135 as against N109 two weeks ago. Despite the hike in price, the product was out of circulation in most of the filling stations within the state.
At the Texaco station along State Road, an attendant confirmed the hike in price. He also said the station has not got any supply in the last two weeks.
Texaco Filling Station at Gidi-gidi roundabout also sold the product at N135 per litre. The product was not available at the Nigerian National Petroleum Corporation (NNPC) mega station in Mariri-Wudil Road.
In Port Harcourt, the price of the product increased by 16 percent to N128 per litre in barely 24 hours. African Petroleum, a major marketer, which sold at N107 on Tuesday, did not have the product to sell yesterday, while Total Oil increased its pump price from N110 the previous day to N128. Others like Conoil, Mobil and Texaco did not have the product.
Also, most independent marketers in Port Harcourt did not have the product to sell.
Ibrahim Ishaq, chairman of National Association of Small Scale Industrialists, said, the increasing scarcity of diesel as well as the increase in pump price was compounding the difficulties confronting industries in the state.
He appealed to the federal government, as well as the management of NNPC, to address the problem in order to save from extinction the few manufacturing firms still operating in the state.
Speaking to Business Day for the second time this week on the diesel situation, Sam Ohuabunwa, president, Nigerian Employers Consultative Association (NECA) and council member, Manufacturers Association of Nigeria (MAN) said the situation had worsened as most industries were yet to resume activities.
“Our generators are not running. There is no diesel anywhere,” he said.
Reginald Odia, chairman of the Electrical/Electronics Group, MAN, indicated that his members would be meeting soon to deliberate on the next line of action.
Odia, also chairman of MAN Independent Power Project Committee said the situation should compel government to expedite action on the revival of the power sector.
He said the pace of the MAN IPP would certainly be hastened to save members the agonies inflicted by perennial scarcity of fuel/diesel and incessant outages from the official power supply system.
Similarly, Linus Kotey, managing director, Produce Extract Limited, wine makers, stressed that in this situation the small industrialists were worse off. According to him, an average small scale industrialist loses not less than N40,000 � N50,000 each day there is no production.
Meanwhile, in Benin-City the price of the product varied in different filling stations. At Oando both in Benin-City, Auchi and it�s environ a litre of diesel was N128, Total N128, Conoil N122, while and Zeek Oil an independent marketer sold for N125 per litre. However, the price remained N80 per litre at the NNPC mega filling station.
The change in price, which commenced just last Saturday, was as a result of the cost of the product some of the dealers told Business Day.
A staff of one of the Conoil filling station said they were selling the product N80 before Saturday when they were notified of the change in the price of the product.
According to him, “we have been selling the product N90 before we were called to change the price in Lagos. Each filling station sells the product according the price at which it was bought.”
At Auchi, only Oando filling station at Aviele, an outskirts of Auchi that had the product, and the price was N128, while in black market the price was N1,500 for 4 litres.
In Ekpoma and its environs the price was between N100 and N105 though only few stations have the product.
The hike in price some diesel users said is another ploy to cause scarcity of the product in the market.
Scarcity of diesel also hit Akwa Ibom State as most filling stations in Uyo, the state capital did not have the product to sell.
All the three filling stations visited along Ikot Ekpene Road in Uyo had no diesel for sale.
A petrol attendant told our reporter at one of the filling stations that �there is no diesel� adding that it has been long since the station last had the product.
The chairman of the Independent Petroleum Marketers Association (IPMAN) Edem Nta said when contacted that though there have speculations about an increase in the pump price of diesel, he could not ascertain its authenticity.
He said that since the beginning of the year, his station has not lifted any fuel product from the NNPC depot in either Calabar or Port Harcourt.
He said he had resorted to lifting the product from private depots in a bid to serve the consumers adding that the last time he took delivery of the product from Grand Depot was at N115 per litre. According to him, other major marketers have no product for sale. He said with the development, diesel was expected to be sold at N120 per litre pointing that he has learnt that the product has witnessed an increase of N8 per litre but could not confirm it.
He advised consumers of the product to remain calm and avoid panic buying. Businessday gathered that diesel has a consumption level worth over N700 million per week in the state.
Among the major consumers of the product include corporate organizations, manufacturers, heavy duty trucks as well as ocean liners.