Foreign Exchange Crisis and VAT Surge Push Diesel Prices to N900-N950/Litre: Manufacturers Fear Job Losses

Diesel prices in Nigeria have surged to alarming levels, with oil marketers revealing that the dual impact of the foreign exchange crisis and the recent implementation of a 7.5% Value Added Tax (VAT) on Automotive Gas Oil (diesel) has led to costs ranging between N900 and N950 per litre in multiple states. This price escalation has prompted concerns about the future of local manufacturing industries, which fear potential factory closures and subsequent job losses.

At a press briefing held in Abuja, representatives of the Natural Oil and Gas Suppliers Association of Nigeria (NOGASA) expressed their challenges in accessing US dollars for diesel imports due to the prevailing forex crisis.

NOGASA’s National President, Benneth Korie, noted that before the introduction of the 7.5% VAT, diesel was priced around N650 per litre.

“Diesel price is now approaching N900 to N950/litre depending on where you are buying it from. Before the introduction of VAT on diesel by the FIRS, diesel was around N650/litre.

Korie urged immediate government intervention to address the scarcity of US dollars and implored all stakeholders, including bank CEOs and the Central Bank of Nigeria, to collaborate on a solution.

“This increase in price is also due to the scarcity of the dollars. The government has to intervene in this dollar situation. All bank CEOs, Central Bank of Nigeria and others must meet to address this dollar issue. The way it is going, it will destroy a lot of things for us if it is not controlled.”

In response to the price hikes, Hamma Kwajaffa, the Director-General of the Nigerian Textile Manufacturers Association, expressed concerns over rising operational costs, adding that several textile manufacturers were contemplating shutdowns due to soaring energy expenses.

He said, “Many are contemplating closing for now. We can’t meet up with that kind of amount. We have less than 24 textiles today, those who are working are contemplating closure. They have been pushed to the wall. These businesses are not in charity. They have to break even.”

George Onafowokan, the CEO of Coleman Technical Industries Limited, stressed that the increase in diesel costs would translate to higher production expenses, calling on the government to find lasting solutions.

Onafowokan said, “Whenever the price of diesel goes up, it makes everybody’s cost go up. Logistics costs will go up for everybody, power costs will go up if diesel sells at N950.

“We are all in crisis. For most businesses in Nigeria, especially manufacturers, we are taking hits day in day out and sincerely, the government needs to do better not only in giving palliatives to the people, but for the businesses that are employing them, especially manufacturers.”