Industries and airlines in Nigeria are facing an imminent crisis due to the soaring prices of diesel and aviation fuel.
This alarming situation has already led to factory closures in several states, including Kano, Ogun, Anambra, and others.
The Manufacturers’ Association of Nigeria (MAN) has sounded the alarm, emphasizing that more industries and companies could be forced to shut down if the price of diesel continues its upward trajectory, reaching the feared N1,500 per litre, from the current N1,000.
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Rising Diesel and Jet Fuel costs are threatening industries and airlines. Photo: BusinessDay[/caption]
Between June and October of this year, the prices of both diesel and aviation
fuel have surged by over 50%, raising significant concerns among industry players and aviation operators.
The primary culprits behind these price hikes are problems plaguing the downstream oil sector.
These issues include foreign exchange shortages required for diesel imports and the global surge in crude oil prices.
Chief Ukadike Chinedu, the National Public Relations Officer of the Independent Petroleum Marketers Association of Nigeria, highlighted that the grim situation is unlikely to improve in the near future.
He pointed to forex issues as a major contributing factor to the escalating diesel prices. Despite the removal of the Value-Added Tax (VAT), diesel remains expensive, primarily due to forex-related challenges and the increasing costs of crude oil internationally,
Punch reports.
Oil marketers have stressed that a critical solution to this problem lies in the prompt rehabilitation and revitalization of Nigeria's national refineries, a sentiment echoed by many in the industry.
Earlier in August, the imposition of a 7.5 percent VAT on diesel had already pushed the commodity's cost to between N900 and N950 per litre in numerous states, raising concerns among local manufacturers about potential factory closures and job losses.
The Natural Oil and Gas Suppliers Association of Nigeria (NOGASA) has cited their inability to access U.S. dollars as a hindrance to importing diesel, further exacerbating the issue.
Before the VAT implementation, diesel was priced around N650 per litre. Even after the VAT withdrawal, diesel costs have continued to surge, prompting worries within the Manufacturers' Association of Nigeria.
Members of MAN, including Mr. John Aluya, a member of the National Council of MAN, have expressed fears that if diesel prices reach N1,500, more companies will be forced to cease operations.
The absence of adequate electricity supply from the national grid has compounded this situation, as the rising diesel prices drive up production costs, making it increasingly difficult for companies to maintain profitability.
To address these challenges, MAN is actively exploring alternative energy sources, including discussions with Huawei to find sustainable power alternatives.
The chairmen of MAN in various states, such as Ogun, Edo, and Delta, have reported partial shutdowns of operations, as the high cost of diesel and erratic power supply have rendered generator-based production economically unviable.
This situation has already had a detrimental impact on businesses, and if not addressed promptly, it may lead to factory closures and job losses.
The Warri Chamber of Commerce and Industry is particularly affected by the soaring diesel costs, with over 80 percent of its members experiencing severe consequences.
They warn that if the trend continues, it may result in the closure of factories and substantial job losses.
Manufacturers in Anambra State, including Chief Barnabas Okey, have reported the crippling effect of diesel prices on production, leading to the unfortunate closure of numerous businesses and the daily loss of thousands of jobs. The situation is dire and necessitates urgent attention and action.
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