With Worsening Power Supply and Rising Price of Diesel, Nigeria’s Organised Private Sector Foresees Tough Times

By Derrick Bangura

The Organised Private Sector, OPS, which includes the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA), the Lagos Chamber of Commerce and Industry (LCCI), and the Manufacturers Association of Nigeria (MAN), has stated that the current energy crises afflicting the Nigerian economy will exacerbate the woes of the country’s business operators.

This comes on the heels of reports that Nigeria’s national power grid experienced another outage on Tuesday, just 24 hours after a similar system failure resulted in a nationwide blackout.
However, NACCIMA and LCCI also pointed out that the development would create a difficult environment for businesses and Nigerians in the form of accelerated inflationary pressure, high cost of production, retrenchment of workers and worsened poverty rate.

The representatives of private sector operators however said they did not foresee economic activities in the country coming to a standstill due to the energy crises which has been manifesting in the form of poor supply of electricity, high cost of diesel, scarcity of petrol and shortage of aviation fuel that saw airline operators announcing that they would shut down flight operations from March 17.

The National President of NACCIMA, Mr. John C. Udeagbala, told THISDAY on Tuesday that although the association appreciated that the current energy crises would have far-reaching implications for the Nigerian economy as the use of the products were entrenched in the production and transportation processes of both the public and private sectors, yet, “we do not expect that the shutdown of flights over the scarcity of aviation fuel and the issues of the national grid to bring the economy to a standstill in the short or medium term, rather, with rising prices, we expect rising inflation, a further erosion of the purchasing power of the population, and redistribution of wealth that plunges more of the population below the poverty line.

“This is the likely result of the private sector seeking to adapt and adjust to the new realities.”

He added that NACCIMA, “is extremely concerned about rising prices of petroleum products; particularly diesel and aviation fuel; a hike which is very possibly an effect of the ongoing conflict in Europe and made worse by a lack of domestic production to meet demand despite the existence of refineries.”

The NACCIMA boss also reiterated his call for incisive policy implementation within the energy sector, “to limit our economy’s exposure to global shocks and serve as a springboard for sustained economic growth.”

Speaking in the same vein, President of LCCI, Dr. Michael Olawale-Cole said the escalating price of diesel, scarcity of petrol and aviation fuel as well as the collapse in national grid would definitely have implications for production downtimes, exasperate inflationary pressure, and eventually cause loss of jobs if they were not curtailed on time.

Olawale-Cole said: “With oil prices above $110 per barrel, this has not translated into profits for Nigeria for the reason of equally increasing fuel subsidy payments. The price of diesel, mostly used in industrial production and other heavy-duty operations has risen above N720 per litre.

“This definitely has implications for production downtimes, rise in prices, and eventually loss of jobs if not curtailed on time. The most sustainable way to go is to increase our local refining capacity and save the huge spending of our foreign exchange on importation of fuel.”

He added: “We are passing through a phase in our lives as a nation and I am very confident that we will survive it. All we can do is to keep advocating and keep discussing for solutions. The idea is for us to talk and give government alternative ideas as to what we feel it should do.

“The fact that subsidy payment increased by 447 per cent in seven years when capital expenditure remained under funded signified that opportunity costs, which by the way, is the real cost of the petrol subsidy payment, is very expensive.

“In fact, the resources that would have been used to provide standard road infrastructure, quality health care system, quality education and social safety net have gone into subsidising petrol consumption. It is also stifling private investments as uncertainty about price regulations discourage serious investment.”

The Manufacturers Association of Nigeria (MAN), has also warned that Nigerian manufacturers are set to encounter difficulties meeting production of goods as the cost of diesel hits N730 per litre.

This was made known in a statement by Mr Lanre Popoola, Chairman, Manufacturers Association of Nigeria (MAN), Oyo, Osun, Ekiti and Ondo on Sunday, according to the News Agency of Nigeria.

He also urged for the government’s intervention through palliatives to enable manufacturers to handle the costs.

Popoola said, the current costs of diesel has made it difficult to ensure production at this time, as diesel has gone up to N720 and N730 per litre.