Diesel Price Hits N950/Litre as Forex Crisis, VAT Bite Hard on Oil Marketers and Manufacturers

The foreign exchange crisis in Nigeria and the recent introduction of a 7.5 per cent Value Added Tax on Automotive Gas Oil, commonly known as diesel, have pushed up the price of the product to between N900 and N950/litre in many states, oil marketers said on Monday.

The development has also triggered an outcry from local manufacturers, who said that the situation could force them to close down some factories and lay off workers.

The oil marketers, who spoke under the umbrella of the Natural Oil and Gas Suppliers Association of Nigeria at a press conference in Abuja, explained that their inability to access the US dollars was hampering their ability to import diesel.

The National President of NOGASA, Benneth Korie, told journalists that the price of diesel was around N650/litre before the Federal Government implemented a 7.5 per cent VAT on the product.

On June 20, 2023, Newsflash Nigeria reported that the Federal Government had commenced the collection of 7.5 per cent VAT on diesel. Officials of the Nigeria Customs Service and Federal Inland Revenue Service had confirmed this in Abuja, stating that AGO was not exempted from the payment of VAT based on the VAT Modification Order 2021.

Speaking at the press conference on Monday, the NOGASA president said, “Diesel price is now nearing N900 to N950/litre depending on where you are buying it from. Before the imposition of VAT on diesel by the FIRS, diesel was around N650/litre.

“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. If it is not controlled, it will ruin a lot of things for us.”

Korie also appealed to President Bola Tinubu to get Nigeria’s refineries working. He said the demand for dollars by marketers and other importers would reduce when Nigeria’s refineries start to produce refined products.

“Our refineries were built by human beings and can be fixed by human beings. I believe Nigerian engineers can fix these refineries, instead of us depending on imports. This is not sustainable.

“We are putting pressure on the very limited dollars in the country by importing petroleum products and other commodities. But once our refineries start working, this pressure will drastically reduce. The government has to fix our refineries,” he stated.

The NOGASA president also lamented the state of Nigerian roads, as he gave an example with the Port Harcourt-Warri road, saying that about 500 tankers were currently stuck on that road due to its poor condition.

“For two weeks now our tankers have been on that road; you can’t cross it. Our roads are bad, our trucks trapped on the Warri-Abuja road for two weeks, our drivers are kidnapped, killed, while others suffer.

“Some of the roads are blocked. If the government does not fix those roads, then petroleum products will stop coming to Abuja and other locations across the country,” Korie stated.

Manufacturers decry hike

Meanwhile, reacting to the development, the Director-General of the Nigerian Textile Manufacturers Association, Hamma Kwajaffa, said many textile manufacturers were considering shutting down their operations due to rising costs, mainly caused by soaring energy costs.

The DG said textile manufacturers could not afford to buy diesel at the projected price of N950/litre.

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

Similarly, the Chief Executive Officer of Coleman Technical Industries Limited, George Onafowokan said increased diesel costs implied increased cost of production.

He said, “We have been buying diesel at N650/litre before now but with this new development we don’t know what will happen next.”

He urged the government to intervene and address the challenges facing manufacturers in the country.

“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.”

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