Macroeconomic Report & Economic Updates

Nigeria Economic Update (Issue 24)

Data from the National Bureau of Statistics (NBS) shows that the average retail price of Automotive Gas Oil (Diesel) paid by consumers in Nigeria increased by 181 percent from N238.82 in May 2021 to N671.08 recorded in May 2022.4 On a month-on-month basis, the average retail price increased from N654.46 in April 2022, indicating a rise of 2.54 percent compared to the average retail price paid in May 2022. The rising cost of diesel is partly due to the Russia-Ukraine conflict. The economic sanctions imposed on Russia, a leading oil producer, in the international market have disrupted the global distribution chain for crude oil. As a result, diesel produced from crude oil is currently in low supply, resulting in a hike in its price. With the poor power supply in the country, most businesses depend on diesel-powered generators for electricity to carry out their production and other activities. The rising cost of diesel has increased the costs of businesses and put them at risk as their costs have increased significantly. The impact of the increase in diesel on business cost of operation is due to the country’s poor power situation and the reliance on the importation of diesel. In the short run, the government could support businesses by providing financial support to SMEs to survive the current high operating cost induced by high diesel prices. In the medium and long run, the government needs to focus on the power and refinery production capacity. An improvement in the power situation would reduce businesses’ reliance on diesel to power their operation. Also, the government needs to intensity efforts to increase the number of functioning refineries in the country thereby increasing domestic production of refined petroleum products, including diesel. Improvement in the power situation and an increase in domestic diesel production would reduce the businesses expenditure on diesel and reduce their overall cost of operation.

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March 13, 2018 - 4:00 am
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