By Tolulope Oke
The focus of attention for Nigerians and the rest of the world has been the uproar and fury over the outrageous price of automotive gas oil, popularly known as diesel.
We’ll look at some of the reasons why consumers are currently purchasing diesel in Nigeria for an average of N700 a liter.
It is widely known that companies that rely on the product to power generators to make up for historically erratic power sources are under a great deal of stress.
Recent data obtained from the National Bureau of Statistics (NBS) showed that the average retail price of diesel climbed month over month from N654.46 in April 2022, which represents an increase of 2.54 percent over the average retail price paid in May 2022.
The report further revealed that the diesel price increased from N238.82 in May 2021 to N671.08 in May 2022, indicating a 181.00% rise, over a year-to-year analysis.
It is no shock this happened because of the nation’s rising inflation rate, coupled with the fact that Nigeria imports refined goods since it lacks domestic refineries, and doing so results in higher costs as a result of things like the Russia-Ukraine war. The Russian-Ukraine war is stand out because companies are cutting ties with the world’s third-largest supplier of crude oil!
The Minister of State Petroleum Resources, Chief Timipre Sylva explained some days ago that it is not the position of the Federal Government to intervene in the rising price of diesel, because the product is determined by foreign exchange, which on the other hand has been battered by the inflation.
A good look into the foreign exchange market so far will further give insight into how the turnover has been. Commencing the month of June, CBN sold Dollars to banks at the rate of N415, however, banks have been finding it hard to sell out more than $100 to a consumer due to a shortage of notes, thus resulting in an overloaded queue for the black market sales.
The black market on the other hand has capitalized on this, and trading is as high as N617 to 1 US Dollar. So you see, it is like a triangle of issues. Importers will not get dollars at the official CBN rate to import diesel – thus everybody is resulting to the black market to get dollars to import their products and so, the price of diesel is expected to be high.
Timipre added that “It’s not a supply issue at all. It’s just a global problem. You know that the problem in Ukraine and Russia has actually exacerbated the rise in prices; it is not in Nigeria alone. The high cost of diesel is also because of the same reason and these are not subsidised commodities, they are deregulated commodities so actually, it is not within the purview of the government to intervene in the price.”
The global price of crude oil is another factor in the increased price of diesel in Nigeria. As of yesterday, the global prices witnessed a fall after flirting with the $123 per barrel mark for WTI crude. When the US Department of Energy released the fourth Notice of Sale of 45 million barrels of crude oil from the Strategic Petroleum Reserve last week, the selling pressure was evident.
Also, amongst OPEC, the production of crude oil has witnessed a decline.
In May, for instance, OPEC’s Monthly Oil Report revealed that Nigeria’s crude oil production decreased by 45,000 barrels per day (bpd). Of course, this is declining because of a shortage of capacity brought on by infrastructure issues and other security issues.
The group as a whole did not meet the monthly average promised, because, in May, an average of 28.51 million bpd was produced indicating a 176,000 bpd decrease in oil production compared to April.
The secondary sources stated that the decline was due to lower production in Equatorial Guinea (-2,000 barrels per day), Venezuela (-2,000 barrels per day), Iran (-20,000 barrels per day), Iraq (-21,000 barrels per day), Gabon (-32,000 barrels per day), Nigeria (-45,000 barrels per day), and, most notably, Libya (-186,000 barrels per day).
So you see, the issue stems from the various economic downplays the world is currently faced with and with hopes of finding a truce to the Russia-Ukraine war, as well as, improving the infrastructural amenities in Nigeria.
Lest I forget, the Dangote refinery is at the helm of completion, and Nigerians hope it will be the messiah the oil sector awaits!