Escalating Diesel, Jet Fuel Costs Threaten Nigerian Industries, Air Travel

The manufacturing and aviation sectors in Nigeria are on edge as the increasing costs of diesel and aviation fuel are casting a shadow of uncertainty over the future of industries and airlines operating in the country. Several states, including Kano, Ogun, Edo, Delta, Kogi, Lagos, and Kwara, have witnessed numerous factory closures due to the soaring diesel prices, according to the Manufacturers’ Association of Nigeria (MAN).

MAN has issued a warning that if diesel prices continue to rise and reach N1,500 per liter, more factories may face closure. Between June and October 2023, diesel and aviation fuel prices have surged by more than 50 percent, sparking concerns among industry stakeholders.

The price hikes are attributed to challenges in the downstream oil sector, including a shortage of foreign exchange needed for diesel imports and the rise in global crude oil prices. Chief Ukadike Chinedu, the National Public Relations Officer of the Independent Petroleum Marketers Association of Nigeria, emphasized that the situation is unlikely to improve soon. He cited the dependence on foreign exchange and the escalating international crude oil prices as the primary causes.

Oil marketers have called for a long-term solution, advocating for the repair and revitalization of the nation’s refineries as a means to combat rising diesel costs. Although the Nigerian government withdrew the 7.5 percent Value-Added Tax (VAT) on diesel after negotiations with labor leaders, the prices have continued to rise.

MAN representatives, including Mr. John Aluya, a member of the National Council of MAN, expressed concerns that if diesel prices reach N1,500 per liter, more companies will be forced to shut down. Aluya highlighted the additional challenge of unreliable national electricity supply, which has driven up production costs.

Several regional MAN representatives across states such as Lagos, Edo, Delta, and Kwara reported the adverse effects of high diesel prices, including partial shutdowns of manufacturing operations. They noted that businesses were struggling to maintain profitability, as customers were hesitant to accept higher prices for goods.

The situation is even grimmer in Kano State, where the Chairman of MAN, Alhaji Sani Sale, disclosed that approximately 90 percent of small-scale industries had ceased operations due to the exorbitant cost of diesel and unstable power supply. He emphasized the urgent need for intervention from both federal and state governments to address the crisis.

In Kwara and Kogi states, numerous manufacturing companies have either closed down or reduced their operational hours due to the soaring diesel prices. The Chairman of MAN in these states, Bioku Abdulrahaman, decried the daily increase in diesel costs and the lack of reliable electricity supply.

The diesel price increase has also impacted other sectors, notably the telecommunications industry. Gbolahan Awonuga, Head of Operations at the Association of Licensed Telecommunications Operators of Nigeria, warned that if not addressed, this issue could lead to a crisis that would affect various industries.

In the aviation sector, experts anticipate a significant rise in local airfare due to the surge in aviation fuel, also known as Jet A1, and foreign exchange rates. This development is expected to be felt by passengers as airlines may transfer the increased costs to ticket prices.

The ongoing fuel price crisis is a cause for concern, affecting industries across Nigeria and potentially reshaping the landscape of manufacturing and aviation in the country. Urgent government intervention and long-term solutions are being sought to alleviate the burden on businesses and consumers alike.