The combination of the ongoing foreign exchange crisis and the recent implementation of a 7.5 per cent Value Added Tax (VAT) on Automotive Gas Oil (diesel) has led to a substantial surge in the cost of diesel across Nigeria.
Oil marketers reported that the diesel prices have escalated to an alarming range of N900 to N950 per litre in numerous states, significantly impacting both industries and livelihoods.
The Natural Oil and Gas Suppliers Association of Nigeria (NOGASA) conveyed their grave concerns during a press briefing held in Abuja.
They emphasized that the dual challenges of restricted access to United States dollars and the imposition of the VAT had severely hampered their capacity to import diesel, thereby propelling prices to unprecedented levels.
Benneth Korie, the National President of NOGASA, highlighted that before the introduction of the VAT, diesel was priced around N650 per litre.
This increase in diesel costs has triggered a ripple effect throughout various sectors, with local manufacturers sounding the alarm bells about potential factory closures and the subsequent loss of jobs.
The rising energy costs, largely influenced by the surge in diesel prices, have pushed industries, including textile and manufacturing, to the brink.
Hamma Kwajaffa, Director-General of the Nigerian Textile Manufacturers Association, revealed that several textile manufacturers were contemplating shutting down operations due to the insurmountable rise in costs.
Also, Coleman Technical Industries Limited’s Chief Executive Officer, George Onafowokan, stressed that the escalated diesel prices had dire implications for businesses’ overall cost of production.
He urged the government to find lasting solutions to these constant increases in diesel costs, emphasizing the importance of supporting manufacturers who play a crucial role in employment generation.
The situation has raised concerns not only about the immediate financial burden on businesses but also about the broader economic impact.
With industries struggling to absorb the soaring costs and potential job losses looming, stakeholders are urging the government to take immediate measures to stabilize the situation.
Experts are calling for a multi-pronged approach that addresses the foreign exchange crisis, explores avenues to reduce dependency on diesel imports, and encourages local production through the revival of Nigeria’s refineries.
While the government had introduced the 7.5 per cent VAT on diesel as part of its fiscal policy measures, the unintended consequences of this move have underscored the need for careful consideration of economic policies’ downstream effects.
The urgency to find a balanced solution is further highlighted by the growing number of tankers stranded on dilapidated roads, causing disruptions to the supply chain and distribution of petroleum products.