High price of diesel

•Govt should come to the aid of manufacturers to reduce cost of production.

For manufacturers who have been groaning under high cost of production, the steady rise, in recent times, of the price of diesel is definitely one too many. Indeed, the rising prices have been further exacerbated by the Russia-Ukraine war which started on February 24. As at January, diesel sold for between N400 and N420 per litre.

Today, it is dispensed at about N720-N730 per litre. This is a dilemma for Nigerian manufacturers who had hitherto been operating under a most inclement business climate. Indeed, this is the essence of the manufacturers’ plea to government for help.

The Chairman, Manufacturers Association of Nigeria, Oyo, Osun, Ekiti and Ondo branches, Mr Lanre Popoola, succinctly made the point in Ibadan on March 13, while speaking on the increase of prices of petroleum products and lack of power supply. According to him, “It is a difficult thing ensuring production at this time, as diesel has gone up to N720 and N730 per litre.

“It is getting extremely difficult to produce and I don’t know how we are going to cope because 70 per cent of industries are running on diesel, there is no light.

“There is no power supply, we are having 30 per cent of what it used to be, whereas the disposable income of people is not increasing and the cost of products are going up”, Mr Popoola lamented. On a personal note, he said his company now runs a shift instead of three shifts of eight hours each, even as other businesses are also running limited hours on diesel because they cannot afford to use generator all day. The rising price of diesel is particularly problematic for companies that have cut off from the national grid because of the irregular public power supply, relying solely on generators 24/7.

To worsen matters, diesel suppliers no longer grant the companies the usual credit facility because of the unpredictability of the market; it could sell for N630 per litre this week only for the price to jump to N730 next week. Where do the suppliers get the difference to restock?

However, Mr Popoola hit the nail on the head when he said Nigeria would not have been so badly affected if we were producing diesel locally. Unfortunately, we are not. “So the more the international prices of petroleum products go up, the higher the prices of what we are going to get from them,” he said.

This is true. As a matter of fact, the rising price of crude oil in the international market should have been a thing of joy for the country as a major crude producing nation. But it is not because Nigeria imports virtually all its fuel needs. it is therefore double whammy for it, irrespective of whether crude prices are rising or falling. While the falling price of crude means less revenue for the country, rising crude prices would have translated to more foreign exchange in the government’s coffers, but it would also mean paying more subsidy because the economy is powered with imported fuel.

In essence, the high price we are paying for diesel now is the cost of not fixing our refineries.

We agree with the MAN chief that there is need for government’s intervention to cushion the effect of the  rising price of diesel as well as other factors militating against local production. Unfortunately we are not sure how ready the government is in this regard. Fixing the country’s moribund refineries is key to reducing the cost of production. Likewise, the unreliable power situation. The Muhammadu Buhari government has been in power for over six years and has no clear plan to resuscitate them. We do not know what it can do in less than 14 months to leave office to have a dent on the challenges.

Indeed, the cavalier manner the government has been operating is evident in the report that the president has approved that those responsible for the importation of off-spec petrol into the country last month be sanctioned. The president reportedly said the same thing when the fuel crisis began about four weeks ago. That we are still at the level of threats when the culprits ought to have been sanctioned shows the government’s lackadaisical approach to issues, including the energy sector, the cash cow. If the government is yet to punish those who threw the national economy into crisis that it has not fully recovered from over such a grievous matter more than three weeks after, we wonder when that would be done, or whether it would ever be done.

Yet, things cannot continue like this. Rising cost of production amidst dwindling disposable income is unsustainable. It is an open invitation to social unrest and its attendant consequences.

Source: The Nation

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