More pain for small businesses as diesel price rises by 24%

From haulage to consumer goods, retail outlets, and small businesses, all are coming under pressure as the retail cost of diesel at various filling stations jumped by 24 percent to N410 per litre in February, findings by BusinessDay reveals.

The price of diesel, which is not regulated by the government, has surged by over 24 percent on the back of the soaring price of Brent crude, dollar price, and the forces of demand and supply, sources said.

“Unlike petrol, diesel is deregulated, which means the increase in the international price of crude oil is responsible for what we see across Nigerian filling stations,” Mike Osatuyi, national operations controller of Independent Petroleum Marketers Association of Nigeria (IPMAN), said.

Crude oil price accounts for a large chunk of the final cost of petroleum products such as diesel, kerosene, and such associated products.

Removal of subsidy on kerosene and diesel by former President Olusegun Obasanjo means that the pump prices of the products will reflect changes in the international oil market.

Brent crude, the benchmark for Nigeria’s crude oil has gained more than 28percennt to $91 on February 09, 2022.

“We bought diesel at N410 today and this has affected the cost of checking-in to our hotels and short let apartments,” Azeez Raji, Manager of Urban Metro Inn, who runs on diesel to sustain his business.

Esu Olumba-Obu, the Group managing director of Royal Farms Ltd says the high cost of diesel is posing serious threats in sustaining the group business.

“The high cost of diesel most businesses are now faced with the option of closing down or retrenching staff to survive,” Olumba-Obu told BusinessDay.

Data gleaned from the National Bureau of Statistics (NBS) showed the average price paid by consumers for diesel increased by 4.15 percent from N277.83 in November to an average of N289.37 in December 2021.

It said states with the highest average price of diesel were States with the highest price Enugu (N349.29), Borno (N340.00), and Oyo (N326.25).

“States with the lowest average price of diesel were Kebbi (N232.36), Yobe (N226.61), and Katsina (N225.00),” the NBS noted.

Observers believe that, while businesses are feeling the pinch, the government is powerless because the downstream diesel sector is deregulated.

Diesel is mostly used by businesses, especially manufacturers, to power their generators amid a lack of reliable power supply from the national grid. Many vehicles transporting goods and people across the country also use diesel.

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More than 70 percent of Nigerian firms rely heavily on diesel-powered generators. The machines guzzle cash and spew pollution, but they are reliable in a nation where nearly 85 million people – some 40 percent of the population – have no access to grid power.

While many Nigerian households and small business generators are powered by price-capped petrol, the big generators for larger firms, apartment complexes and more substantial homes can run on diesel.

“It is unfortunate that the price of the product keeps increasing and nothing is being done about it. The high inflation rate in the country means that people have less money to buy things, and when prices are going up and the masses have less money to buy those products, we are going to have a lot of joblessness in the country,” the President, Association of Small Business Owners of Nigeria, Femi Egbesola said.

Nigeria, Africa’s largest oil producer, relies largely on importation for petrol and other refined products as its refineries have remained in a state of disrepair for many years.