From a January average of 288 naira ($.70) per liter, diesel now sells for over N700 ($1.69) per liter in Nigeria. It is causing widespread anxiety for businesses that rely on the product to power generators that make up for historically unstable power supply.
“You people need to know that 100% of our operations are being done with diesel or fuel because there is no electricity,” said the chairman of a media company in northern Nigeria, who suggests that the region’s radio and TV stations may suspend operations if nothing changes.
A similar complaint is being heard from the Manufacturers Association of Nigeria (MAN), a trade group. “It is getting extremely difficult to produce and I don’t know how we are going to cope, because 70% of industries are running on diesel,” the chairman for the group’s southwest region said.
The situation with diesel is compounding the stress of a couple of weeks in Nigeria. The national power grid collapsed twice in three days causing blackouts, while a strike by academic staff of government-owned universities is expected to last for two months. And that is before including the expected adverse effects of the ongoing Russia-Ukraine war on food prices.
In the first week of February, Nigerian authorities said petrol imported into the country by oil marketers contained unsafe levels of methanol. That led to an immediate scarcity at gas stations as the bad products were recalled, never mind the damage to many cars. The Nigerian National Petroleum Company (NNPC), which oversees petrol imports, has not held anyone accountable and long lines around gas stations persist in Lagos and Abuja.
Transportation costs have increased sharply since, with flight tickets reaching a N50,000 ($120) flat rate for one-way trips, from about $80 in February due to scarce aviation fuel. After threatening to shut down operations this week, local airlines have reached an agreement with Nigerian oil marketers to receive fuel at a reduced price, though the deal will be reviewed after three days.
As with every episode of price hikes at the pump, Nigerians wonder how one of the world’s most oil and gas-abundant countries continues to suffer crushing scarcities.
In reality, Nigeria continually fails to meet its OPEC output targets, and the shortage is made worse by theft to the tune of 50,000 barrels per day, according to Tony Elumelu, a banker and oil magnate. Lacking local refineries, Nigeria imports refined products at prices that become more expensive with events like the Russia-Ukraine war.
Unlike petrol, the Nigerian government does not subsidize diesel imports. As such, the pump price may yet go higher as the war in Europe continues to affect global markets.
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