Diesel price in Nigeria has jerked up, as it is sold above N1000 per liter, according to a September 19 Nairametrics review.
The review findings have unveiled the prevailing purchase range of diesel at the pump for Nigerians, fluctuating between N980 to N1150 per liter.
This price escalation has triggered an uptick in haulage transportation, a concern underscored by Benneth Korie, the President of the Natural Oil and Gas Suppliers Association of Nigeria (NOGASA).
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Korie emphasized the detrimental effects of the escalating diesel prices on the industry, citing challenges in loan accessibility and product procurement faced by suppliers, which have compounded the prevailing situation.
Notable diesel price drivers
The surge in diesel prices in Nigeria stems from a multifaceted interplay of factors.
Recently, Reuters shed light on a significant contributor to this rise: a global shortage of diesel.
This scarcity worldwide is a consequence of reduced spare capacity, exacerbated by disruptions caused by the pandemic and the subsequent swift demand recovery orchestrated by policymakers.
It is crucial to grasp that as the global economy gears up for accelerated growth in late 2023 and throughout 2024, supply constraints are anticipated to have a rapid and pronounced impact.
To elaborate on this phenomenon, it is pertinent to note that presently, oil refineries globally are grappling with diesel production. Major oil producers like Saudi Arabia and Russia have curtailed their production and plan to sustain this reduction until year-end, consequently affecting diesel production, a by-product of crude.
As a result of this, the available diesel has become expensive, burdening Nigerian marketers.
This scarcity is compounded by local challenges such as inadequate road networks leading to accidents and breakdowns of diesel delivery trucks across states.
All these factors contribute to the escalating prices at the diesel pump. In August 2023, when diesel in Nigeria was trading at N950 per liter, stakeholders diligently scrutinized the underlying reasons for this price surge.
These factors included the imposition of a 7.5% value-added tax (VAT) on diesel by the Federal Government.
This tax imposition was further compounded by volatile foreign exchange rates, given the country’s heavy reliance on petroleum product imports, necessitating transactions in foreign currencies.
Notably, the market witnessed a close at around N960 to a dollar on Monday, further exacerbating the surge in prices. Moreover, the dearth of domestic refining capacity within the nation compounds this challenge.
However, bringing a glimmer of hope, Nairametrics reported on Tuesday that the highly anticipated Dangote refinery is set to commence diesel refining operations by October 2023.
This development holds promise for many stakeholders, potentially alleviating the current burden faced by manufacturers and other business owners in the country, provided the timeline is adhered to.
