Sunday Magazine

Soaring Diesel Prices: A heavy burden the rich, poor bear

Owing to the rocketing price of diesel, a number of business owners have closed shop, growing the number of Nigeria’s army of the unemployed. While many businesses are still on life support, Nigerians lament its negative impacts. In this report, LADESOPE LADELOKUN and JOHNPAUL BORISADE write on the effects of the high cost of diesel and the options the Federal Government and Nigerians can explore for succor

 

Necessity, as the saying goes, is the mother of invention. With diesel selling for over N800 per litre in many parts of Nigeria, business owners have donned their creativity cap with the sole aim of managing what they consider a bad situation to stay afloat.

But it is not without implications as concerns grow that many businesses will close shop, flinging more Nigerians into poverty’s dark celļ and the labour market overflowing over cost of production occasioned by diesel-powered generators. From banks to newspaper companies, hotels to transport industry, the hue and cry about the high cost of diesel has reached a disturbing decibel, Sunday Telegraph gathered.

Lamenting how it cost him N710,000 to convert the diesel engine of his commercial bus to a petrol engine to remain in business, a commercial bus driver, Ahmed Olayiwola, told how bus conductors avoided him like a plague because they feared peanuts would be left for them to earn after spending heavily on diesel, adding that he was jobless for months till he got assistance in form of a loan  to take the bold step.

“It’s not up to a week that I started work again. You must have heard my conversation with the mechanic that just left. He’s not also finding it easy because he specialises in diesel engines.

What that means is that many like him will have their income hugely depleted because a great number of my colleagues have also changed engines. I was spending N28,000 to fuel this bus daily when it used diesel. But those whose buses use petrol spend about N10,000. You can see the difference. “After spending that much on diesel, what then am I working for?

Conductors were avoiding me because they knew they would have very little to go home with. I had to work out what would work for me to stay in business. For two months, I was at home because I was not making profit before I eventually got a loan to change my engine. It’s been very tough but I’m glad I no longer have to think about the problems of diesel.”

Meanwhile, checks by Sunday Telegraph revealed Dangote Group converted more than 4,500 of its trucks between 2013 and 2021 for dual fuel usage – diesel and natural gas. Also, checks further revealed that BUA Group has begun replacing diesel generation capacity with natural gas.

For the Principal Executive Officer at the Ministry of Defence, Niyi Alonge, changing his engine is not an option worth considering. He reasoned that it would be a lot better to abandon his bus and plan on getting another vehicle than pay a whopping N500,000 to get another engine.

“Diesel is N800 per litre and 10litres is N8,000 and so if 10 litres is N8,000 where do you want to go with 10 litres that it won’t finish in the less than only-God-knows-what?

And if it finishes, I will be spending hugely on diesel and I decided not to drive the bus again.

“If I want to change the engine, do you know how much the engine is sold? The  engine of my bus is about N500,000. For someone that cannot afford to buy diesel that is going to cost about 10 litres for N8,000 or 20 liters for N16,000? And you expect me to pay N500,000 or N600,000 to change engine.

There is no such luxury of fund. So, because there is no such luxury of fund, you keep the bus till diesel price falls and if it doesn’t, the bus will be there until I’m able to raise the money. Instead of spending N500,000 or more on diesel engine, I will look for money and add to it so I could get use a new bus using petrol.”

Lamenting how the price of diesel is having adverse effects on his business, a baker in the Arigbawonwo area of Ogun State, Abiodun Sijuade, said: “People are not being fair to us. Many believe we just derive pleasure in increasing the price of bread arbitrarily. Look at the diesel I used to buy for N340 last year is now over N800 per litre. If I buy 20 litres at the current price, you know how much it is and you know what it cost at N340 a litre. And we must use diesel.

How do we survive? Don’t forget we now by a 50kg bag of flour and sugar at N29,0000 now. Some sell for N30,000; something we still bought for N17,000 around June last year. It’s not been easy for us. Many bakeries have closed. These are the reasons.”

According to the World Bank, Nigeria is ranked 131 among 190 economies in the ease of doing business; something experts trace to harsh business environment fuelled chiefly by worsening insecurity level, multiple taxations, policy inconsistencies, scarcity of foreign exchange, multiple exchange rates, poor infrastructure, among others.

Also, in what appears to further explain how the ease of doing business in Nigeria has deteriorated, data from the National Bureau of Statistics (NBS) showed that while Nigeria’s growth rate fell from 5.01 in Q2, 2021 to 4.03 in Q3, 2021, it dipped further  to 3.98 and 3.11 in Q4, 2021, and Q1, 2022 respectively. The rich also cry “How many of you are using diesel in your production? I use diesel and I’m already sweating. I’m already sweating.”

These were the words of former President Olusegun Obasanjo, when he hosted the South West fish farmers at the Obasanjo Presidential Library (OOPL), adding that fish farmers may soon go bankrupt. His words: “I don’t know your calculation. My calculation is that I cannot produce a kilo of fish with less than N1,400. That’s about what it cost as of today.

So, if I sell my fish around N1,400 I cannot make a profit,” Obasanjo was quoted as saying in a statement by his media aide, Kehinde Akinyemi. “If we don’t come together as an association, nationally, we will sink individually. If we come together, we will swim and survive together. “And while we are working on coming together, I thought that the situation has arisen whereby we have to do something urgently.

The price of diesel has gone sky high because the management of this country is not what it should be. And it is as simple as that. “Then, what will happen is that particularly those of us who have to use a bit of diesel in producing fish, we will completely go bankrupt, and when that happens, Nigerians will still have to eat fish.”

“And you will go jobless, poor, and indigent. So, what do we have to do? To come together… we want to sustain fish production, and we must be able to take care of those who are going to eat and those of us who are producing.”

Which way Nigeria?’

As major consumers of diesel, our correspondent sought the opinion of truck drivers. One chose to be anonymous. Sunday Telegraph: How is the high cost of diesel affecting you?

Frank: I don’t think people should be asking such a question because everybody knows that when diesel is high, the prices of a great number of items will also increase Sunday Telegraph: How is the high cost of diesel affecting you?

Anonymous: Ha! It’s affecting me ooo. Everything is expensive in the market. The diesel of 30 litres I was buying for N6,500 before is now N23,000. Food is expensive in the market.

Where are we going in this Nigeria? Sunday Telegraph: Where do you drive your truck to and from Anonymous: I dey come from Agbara (Ogun State)with empty cans of Malta Guniness and deliver for their office Sunday Telegraph: So, what are you planning to do as the cost of diesel is high

Anonymous: Ah!!

I dey beg God say person wey go be president should change the situation of Nigeria. I advise Nigerians to get their PVC. Imagine salt that was N200 is now N250. So, if get a new bus now, I will leave this one because it’s giving me problems.

Stories from MDAs

Commenting on how the current price of diesel has changed the way work is done in his office, Niyi Alonge said: “You see, before now, we could use the generator for as long as there’s no power supply, but these days, that does not happen anymore because of the cost of diesel.

So every day, if we were using the generator for 8 hours or 7 hours, but now, we only use it for an hour. So, anything anyone wants to do on the computer has to wait till that one hour. And when the generator is on, you must do all your typing job within an hour. Should you fail to finish your work within an hour, you have to suspend it till the next day.

That is because they are trying to cut down what is spent on diesel. “Look, when diesel price is high, business men still have to pay staff. Already, the cost of diesel has affected the cost of production. So, because it has affected the cost of production, the retail price now increases. So, every individual who goes to buy on retail is affected.

“You see, diesel has a huge effect on the people and companies that produce what we eat like biscuit, sweet, milk etc. These companies make use of diesel to run their generator. There is no petrol generator that can power an industry or a factory. It is always diesel and that is why diesel engine is always heavy duty, that is, it is powerful enough to run a company.

So, because of that, it affects the prices of good and services and every citizen. The reason it is high is because government is subsidising petrol and not diesel. If they remove the subsidy from petrol, the price of petrol will increase to N500 per litre.”

On whether he plans to quit his present job, he asked: “How will I change my office? Who is employing? Nobody is employing. If your company increases your salary, fine. And if they don’t increase your, you either quit or you be looking around for another job but nobody is ready to quit because there is no job anywhere.

So, everybody is just struggling to make life. Justifying why waste collection bill will be raised by the Lagos State Waste Management Authority (LAWMA), its Managing Director, Ibrahim Odumboni, said the cost of Diesel used by Private Sector Participants (PSP) , which used to be N278 per litre in January, had risen to about N875, representing 300 per cent increase. “PSP, CDA/CDC and LAWMA will take part in the review process.

We want to appeal to tenements, the quicker we resolve this, the better it will be for us in terms of the percentage increase. “In some cases, it might be lesser than that because waste is dependent on your individual lifestyles.

“We are in the process of extensive and consultative pricing review for PSP services that we offer in household, knowing full well that we are trying to recognise the economic trend in Nigeria. “We are trying to ensure that we are not introducing any change that will automatically disenfranchise people and cause the menace of waste in our immediate society.’’

 

Renewable energy now more affordable with business models -Segun Adaju, President, REAN

Speaking with Sunday Telegraph, President, Renewable Energy Association of Nigeria (REAN), Segun Adaju, disclosed that the rise in the cost of diesel is a blessing in disguise as more than ever before, people are switching to renewable energy for their energy needs.

According to him, there are business models that have made renewable energy more affordable. “It’s obvious that when you have a challenge in one area, it’s not out of place to look for a way to resolve that challenge. You get an alternative. It’s pretty more obvious now that there’s need for diversification of energy sources. There’s need to look for alternatives.

And I can tell you that renewable energy is becoming that credible and real alternative. Yes, I can say more players in the industry are doing more work. There is no doubt about that. That’s the trend we are seeing. But that that doesn’t mean it’s jubilation time or cash out time because you also have to incur some costs. Overall, more people are adopting renewable energy, especially solar power.

We are getting more businesses, more connections, although you know there is also rise in cost of production – foreign exchange issues, inflation issues. So, as we are having more jobs, there’s also rising cost. The honest truth is that we are seeing more connections. That’s what we are particular about.”

“We are seeing more people deploying this alternative in replacement of generators which is becoming very expensive. As the President of the Renewable Energy Association of Nigeria, I have been in the forefront of leading advocacy and engagement with the government on policies, incentives that will support the rollout of this solution and also create affordability.

Yes, there are some progress being made but it can be better. However, the second comment I will make is that there are business models now that have made solar more affordable, more convenient to adopt. There are business models that create an opportunity for end users to pay in instalments or to pay for the use of energy. So, you could approach a credible  project developer or solar project developer

Building refineries, solution to problems -Expert

Baring his mind on how Nigeria can bid farewell to problems created by high cost of diesel, Economics lecturer at the University of Lagos, Dr Babatope Ogunniyi, told Sunday Telegraph the current hardship precipitated by high cost of diesel can be surmounted if the Federal Government is willing to revive Nigeria’s ailing refineries.

“Nigerians should be smiling to the bank now. Unfortunately, the government, maybe, on their part or the part of their advisers, did not do the needful. Let me put it that way.

For a medium-sized refinery, it will take an average of three ,four years to be completed. Let me tell you. If we have a standard refinery, Nigeria should be one of the countries that should be rejoicing now because of the global effect on price.

It would have been that we are producing our motor spirit, producing our AGO, producing kerosene and other lubricants from petroleum products that we export raw. Unfortunately, we’re still depending on importation of fuel. So, as a matter of fact, we are not in control. Since we are not in control, there’s no way you can help. And some people are of the opinion that in a matter of days or weeks, Dangote will come to the rescue. Dangote is a business man. “He borrowed money to set up the refineries and his main target is profit maximization.

So, he would want to meet up the local demand as well as setting his price. Notwithstanding whether he’s getting the crude directly here. But that ought to be done by the government. The second option is making our refineries work. We have about four. Maybe, they would have said, okay, don’t bother yourself, just take one and produce at optimum level. But as it is, every item of the products is being imported. “So, what do we expect? It’s an exogenous factor which we are not in control of. So, the government of the day cannot control any price until government is ready to set up or repair the refineries. And that is the best solution. Be that as it may, there could be some little way the government can work out things. There are some repentant smugglers that are working against the government. They’ve been short changing the government. Whatever they tell the government is what the government will take. It is not difficult for a benevolent leader to make the refineries work and that is the unquestionable solution. Any other thing will depend on the international market. And that’s just it. This has actually affected medium, small scale businesses. The cost of doing business is astronomically high. And that is why what China will produce at N20, Nigeria cannot produce it at N100. And at the end of the day this will kill our local factories.”

 

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