The cost of diesel in major filling stations across Lagos surged past N400 per litre in recent days as fuel scarcity, rise in oil prices trigger general price increases in the cost of goods and services.
A survey conducted by Nairametrics reveals most filing stations now sell diesel between N400 and N420 across Lagos up from an average of N350 per litre in late January. Diesel prices closed the year (2021) at under N300 per litre. This time last year, Diesel sold for under N250/litre. The price is as high as N600 per litre in the Federal Capital City Abuja.
Data from the National Bureau of Statistics (NBS) indicate average diesel price in Lagos was N303 in January 2022 a 24% rise when compared to the price of N243 in December, The NBS data also indicate diesel price was N131.47 in June 2015 when the Buhari administration came into power.
Unlike fuel, diesel is not a subsidized product as marketers are allowed to sell at any price provided it is determined by demand and supply. Marketers often raise diesel prices if the economics of product supply and cost of delivery requires.
Why the surge in prices
- Demand for diesel has surged in recent weeks due to epileptic power supply caused by gas shortages to generating companies as well as several grid faults and repairs being carried out by the Transmission Company of Nigeria.
- Oil prices have also surged in recent weeks rising to an 8 year high of $95/barrel. A rise in the price of oil will often lead to a corresponding price in diesel prices as Nigeria imports 100% of its diesel needs.
- Thus, whenever oil prices rise, diesel prices also rise.
- Nigeria’s case is compounded by fuel scarcity, port congestion, and general inefficiencies that create multiple layers of costs.
What this means
- With diesel prices on the rise, prices of goods and services are likely to be increased by businesses that rely on diesel to power their businesses amidst an epileptic power supply.
- Electricity bills for most diesel-powered manufacturing companies will rise in February and could eat into profits.
- Households who rely on a blend of diesel and power from the national grid will also experience a rise in the blended cost of their electricity bills due to the double whammy of lack of grid power supply and rise in diesel prices.
- Things are about to get even tougher for Nigerians as diesel is considered a direct input in the factors of production. We expect traders to start reflecting this cost on their prices.
- Cost of haulage, transportation of water, sand, building materials, and product that rely on any articulated vehilce to be delivered will rise soon if the price trend is not reversed.
