ACCORDING to oil marketers, the recent huge crackdown and demolition of illegal refineries contributed to the apparent scarcity and price spike in Automotive Gas Oil, often known as diesel, in Nigeria.
Prior to the crackdown on the illicit refineries, it was learned that the facilities were generating fuel in manageable levels for the market, which reduced the cost of locally produced diesel when compared to imported diesel.
The Independent Petroleum Marketers Association of Nigeria has called on Nigeria’s President Muhammadu Buhari, to declare a state of emergency over the Nigerian National Petroleum Company Limited’s three refineries.
Another reason for the high cost of diesel, which was above N655/litre on Friday, according to IPMAN’s National Public Relations Officer, Chief Ukadike Chinedu, is that the fuel is no longer refined in reasonable amounts in Nigeria.
He said, “Diesel, kerosene and aviation fuel have been deregulated for a long time and since then the products are imported into the country. And in as much as there is importation, the landing cost is being influenced by the foreign exchange rate.
“Based on the freight, vessel rate, product cost and forex, diesel should be sold in Nigeria at between N500 to N600/litre. But because there was local refining of diesel by some illegal refiners who were involved in bunkering, they were able to refine diesel locally and sold it at between N200 to N300/litre.
“This made diesel not be lucrative for those who were importing the product because they will sell at a loss. And most companies and individual houses were finding a way to use the locally refined diesel.”
Ukadike added, “But when the Federal Government declared war on illegal refineries in conjunction with the governor of Rivers State and some other governors, they slowed down the production of locally refined diesel. So most diesel users we left with no choice but to buy the imported ones.
“So what is happening now is that the demand for imported diesel is becoming heavier and importation has been less due to the rising price of crude oil and the instability of forex.”
On the current cost of diesel, Ukadike stated that “it is around N655/litre and above and it is possible for this price to increase as far as the dollar continues to rise against the naira since we’ve seen a drop in crude oil price for about two days now.”
He added, “But the appeal is that the Federal Government through the Niger Delta ministry, should look into bringing in equipment and foreign partners who would open modular refineries to start production.
“This is because once the product is produced locally, its cost will not be on a steady rise as we have seen in the past few weeks.”
