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Rising diesel price cause companies to fold

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By Mercy Kelani

Forex & the inflating cost of crude oil in the global market is responsible.

The Manufacturers’ Association of Nigeria, in Kwara, Lagos, Kogi, Delta, Edo, Ogun and Kano states, announced that the hike on the cost of diesel has caused the closure of many factories in these states. The national body declared that if the price of diesel increased to N1500, many factories will close up. According to report, the prices of aviation fuel and diesel has increased by more than 50 percent. Significantly due to the rise in global crude oil prices, the scarcity of foreign exchange required by marketers for diesel imports and challenges in the downstream oil sector were caused by the price hikes of diesel.

Chief Ukadike Chinedu, the National Public Relations Officer of the Independent Petroleum Marketers Association of Nigeria, stated that the crisis will not ameliorate anytime soon. He said that the price will not reduce owing to the current price of the diesel which is more than N1,000, even if VAT (the Value-Added Tax) is removed. He stated that forex is the reason of the challenge and the inflating cost of crude oil in the global market. The oil marketers announced that the repairing of the refineries and immediate functioning is the only solution to address the rising cost of diesel.

More factories will fold if the cost price of diesel increases to N1,500.

According to the oil marketers, the implementation of a 7.5 percent VAT on diesel and foreign exchange crisis contributed to the inflating cost of the price to between N900 – N950 per litre in some states. The marketers, under the sector of Natural Oil and Gas Suppliers Association of Nigeria, said that what was hindering their importation of diesel was their inability to access the United States dollars. Benneth Kori, the National President of NOGASA, said that before the Federal Government imposed a 7.5 percent VAT, the diesel price was at the range of N650/litre.

Mohammed Idris, the Minister of Information and National Orientation, said that the withdrawal of VAT on diesel was approved by President Bola Tinubu as a medium of assisting manufacturers. This was announced after the meeting on October 1st this year between labour leaders and the Federal Government. However, Mr. John Aluya, a member of the National Council of MAN, expressed dissatisfaction and fear that more factories will close down if the cost price of diesel increases to N1,500, despite the removal of VAT.

Thousands of job opportunities have been lost as a result.

Aluya announced that MAN has contacted Huawei to supply other alternative sources of energy. He disclosed that MAN can no longer rely on national diesel. George Onafowokan, the Chairman of MAN, stated that higher operational and production cost is a result of the inflation of diesel price. Okwara Udendi, the Chairman of MAN in Edo and Delta states, disclosed that partial shutdown of operations has been caused by the irregular power supply and increase in the price of the commodity.

Mr. Francis Eruotor, the WACCIMA president decried that the negative impacts on operations of the members was caused by the current inflation of the cost of diesel. In addition, Chief Barnabas Okey, the Group Chairman, Ayanle Plastic and Nylon Manufacturing Company, Onitsha, Anambra State, said that thousands of job opportunities were lost as a result of the inflation of diesel prices, which affects production. Hence, many companies and factories have folded up. Chief Goddy Chidi, a member of the Onitsha Chamber of Commerce, Industry, Mines, and Agriculture, highlighted the implications of the diesel hike.

Poor and inconsistent power supply worsen the situation.

Alhaji Sani Sale, the state Chairman of MAN, said that in Kano, 90 percent of small-scale factories are no longer functioning. This situation has led them to rely on the Kano Electricity Distribution Company which is inconsistent. Bioku Abdulrahaman, the Chairman of the MAN in Kwara and Kogi states, announced that the situation is worsened by the poor and inconsistent power supply. An industrialist stated that, per day, he spent N360, 000 on diesel which has now reduced the production of the firm to four hours per day.

Related Link

Global petrol prices: Website

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