Diesel Price Hits N950/Litre, Manufacturers Fear Shutdowns, Job Losses

Oil marketers have expressed their concerns about the current foreign exchange crisis in Nigeria and the recent implementation of a 7.5 per cent Value Added Tax (VAT) on Automotive Gas Oil (diesel), which has led to a significant increase in the cost of diesel in many states. This surge in diesel prices, ranging from N900 to N950 per litre, has raised alarms among local manufacturers who fear potential factory closures and subsequent job losses.

Representatives of the Natural Oil and Gas Suppliers Association of Nigeria addressed the media in Abuja, shedding light on how their inability to access sufficient United States dollars has hindered their ability to import diesel. Before the introduction of the VAT, the cost of diesel stood around N650 per litre. This shift has had ripple effects across various industries, as manufacturers are grappling with elevated energy costs that could cripple their operations.

The introduction of the 7.5 per cent VAT on diesel was reported by The PUNCH on June 20, 2023. Both the Nigeria Customs Service and the Federal Inland Revenue Service confirmed the implementation, emphasizing that Automotive Gas Oil was not exempted from this VAT as per the VAT Modification Order 2021.

The president of NOGASA, Benneth Korie, highlighted that the increase in diesel prices is compounded by the scarcity of US dollars. He urgently called for a coordinated effort involving bank CEOs, the Central Bank of Nigeria, and other stakeholders to address the ongoing dollar crisis, warning of severe consequences if the situation remains unchecked.

Korie also urged President Bola Tinubu to prioritize the revival of Nigeria’s refineries. He argued that a functional refinery would alleviate the pressure on scarce dollars, as the need for imported petroleum products would decrease. Korie emphasized that Nigerian engineers possess the capability to restore the refineries, advocating for a sustainable domestic solution.

Concerns over the deteriorating state of Nigerian roads were also raised, particularly the Port Harcourt-Warri road, which currently has approximately 500 trapped tankers due to its poor condition. Korie underscored that inadequate infrastructure negatively impacts the transportation of petroleum products, potentially disrupting the supply chain across the country.

The increase in diesel costs has sparked a ripple effect within the manufacturing sector. Hamma Kwajaffa, the Director-General of the Nigerian Textile Manufacturers Association, revealed that many textile manufacturers are contemplating shutting down due to the soaring energy costs. The CEO of Coleman Technical Industries Limited, George Onafowokan, echoed these sentiments, highlighting that higher diesel prices translate to increased production costs for businesses. Both industry leaders called on the government to address these challenges and provide lasting solutions.

In conclusion, the surge in diesel prices resulting from the foreign exchange crisis and the VAT implementation has ignited concerns among oil marketers and manufacturers alike. The implications extend beyond the energy sector, with potential consequences for industrial operations and the broader economy. Stakeholders are urging collaborative efforts to stabilize the situation, including addressing the dollar crisis, refurbishing refineries, and improving infrastructure.