The prohibitive price of diesel

THESE are certainly not the best of times for households and businesses in Nigeria. The cost of diesel—relied upon by many businesses as regular and adequate electricity supply remains a pipe dream—has grown in geometric proportions since January. The surge in the price of diesel followed the upsurge in the global oil prices, which has been significantly buoyed by the ongoing Russia-Ukraine conflict. In large part due to Nigeria’s lax regulatory climate, members of the Independent Petroleum Marketers Association of Nigeria (IPMAN) have been fleecing Nigerians under the excuse that they are obliged to sell diesel, also known as Automotive Gas Oil (AGO), at a price that covers their cost price, import cost and exchange rate price. In response to the outcry by Nigerians over the situation, the House of Representatives recently resolved to investigate the development. It mandated its committees on Petroleum Resources (Downstream), Petroleum Resources (Upstream) and Gas Resources to conduct the probe with the goal of ensuring that a reasonable price was fixed to alleviate the suffering of Nigerians.

The resolution followed a motion by Honourable Chike Okafor (APC, Imo). Okafor, who recalled that the Nigeria Mainstream and Downstream Petroleum Regulatory Authority (NMDPRA) was created in August 2021 in line with the Petroleum Industry Act with a mandate to provide effective regulatory oversight and ensure sufficient product distribution and supply at an equitable and fair price, lamented the inflationary pressure arising from the rise in the cost of diesel. He said: “The product which was sold between N280 and N350 per litre three weeks ago is currently being sold above N780 per litre and the price  is still rising on a daily basis, accounting for over 115.4 percent increase within three weeks. Diesel was deregulated in 2009 with an initial price of N100 per litre, and from 2009 till date, Nigerians have witnessed a rising percentage increase in the price of the product.”

The astronomical hike in the cost of diesel is indeed having deleterious effects on all sectors of the economy, making life difficult for Nigerians. From the banking to the tourism, media, education and manufacturing, transport, aviation and agriculture sectors, the story has been the same. Expectedly, the diesel crisis is circumscribing the operation of the Deposit Money Banks (DMBs), most of which have announced drastic reduction in their banking hall hours in order to save costs. Media houses have either cut down on their operational hours or tinkered with their use of diesel in such a way that electricity  is available on their premises only at certain hours. The practice is the same in many places. It is not unusual these days to arrive at a company and find almost everything at a standstill because of the total lack of power supply. Enforced darkness during the day is now a business strategy. That is the case even in hotels, most of which switch on their diesel-powered generators only at specific hours. On their part, the distribution companies cause outrage and laughter simultaneously with their “power supply”; the kind that is cut off before a phone can be plugged into a socket.

Following the outcry by the parent body, the Manufacturers Association of Nigeria (MAN), the leadership of the Premium Breadmakers Association of Nigeria (PBAN) has been lamenting the high cost of diesel, saying that most of its members had been forced to shut down. By the way, it costs a fortune to buy a loaf of bread these days. There is discomfort everywhere you turn. Sadly, as businesses face intense pressure, including the possibility  of laying off staff or shutting down entirely, the Federal Government is busy explaining away its failure and going after the media and the opposition. Minister of Information and Culture, Mr. Lai Mohammed, told whoever cared to listen that the rise in the prices of petroleum products was not limited to the country but was rather “a global problem also experienced in the United Kingdom and the United States.” Deploring “the figures being bandied around by the folks on the other side and a section of the press,” Mohammed said: “This misuse of statistics is clear mischief.” The information minister failed to mention that the governments of the countries he referred to had been taking steps to address the issue. For instance, the United States government recently ordered a major release of oil from the country’s reserves in an effort to bring down high fuel costs. Indeed, the release of about 180 million barrels of oil over six months is reportedly the largest since the reserve was created in 1974.

It is time the Federal Government addressed the diesel crisis squarely. It must avert further repercussions of the current situation, including social unrest. It is a no-brainer that even the government’s capacity to earn is impeded when businesses shut down. In any case, if there was adequate electricity supply, who would use diesel-powered generators? The Central Bank of Nigeria (CBN) claims to have, in the last five years, disbursed over $3.2 billion to the power generating and distribution companies to acquire equipment, buy meters and improve electricity supply in the country. However, there are no results to justify that intervention and in any case, power supply continues to worsen with the collapse of the national grid. The Federal Government must realise that it was elected to solve problems, not to lecture Nigerians that they have global application.