Several factories and businesses in Nigeria may be forced to shut down due to the ongoing energy crisis, which has led to diesel prices exceeding N1,100 per litre.
The situation is being further worsened by the foreign exchange crisis, the floating of the naira, and the rising prices of alternative energy sources such as Liquified Petroleum Gas and Compressed Natural Gas.
The Nigerian Association of Liquefied Petroleum Gas Marketers Gas predicts that the price of a 12.5kg cooking gas may increase from N10,000 to N18,000. The manufacturing sector has already been hit hard by power shortages and unfavorable economic conditions, resulting in job losses and revenue declines.
The Central Bank of Nigeria’s currency redesign policy has also contributed to increased production costs. Manufacturers in Nigeria have been spending a significant amount of money to source alternative energy, and with an average of 95 manufacturing companies shutting down annually, the sector is experiencing a decline in factory output value.
The rising price of crude oil, currently approaching $100 per barrel, is expected to further impact businesses in the country since the electricity grid remains unreliable and actual electricity output remains low. The increase in diesel prices is expected to lead to higher production costs for industries and increased transportation costs for goods and services. Stakeholders in the transport sector are encouraging Nigerians to explore alternative transportation methods such as carpooling, electric vehicles, and public transit options.
The Nigeria Employers’ Consultative Association (NECA) has called on the government to remove VAT on diesel and Premium Motor Spirit (PMS) to mitigate the impact of fuel price increases. The government is being urged to address the challenges facing the manufacturing sector by reducing the cost of governance, improving power supply, eliminating corruption, and creating an enabling environment for industries to thrive.
