BusinessDay's findings revealed that rising diesel prices are threatening Nigeria's huge generator economy, as conflict in the Middle East has reduced supplies of both the industrial fuel and the grade of crude oil most suitable for its production.
The price of diesel has soared to N1,650 per liter in some parts of the country since hostilities between Israel and Iran intensified, a level that is inflicting fresh pain on businesses and families already accustomed to the grinding cost of self-generated electricity.
For a country where the national grid has long been a practice of managed frustration, diesel is no luxury; It is the oxygen of commerce.
“This is not just a fuel story,” said Chidi Okonkwo, an energy analyst at Lagos-based Frontier Economics. “This is a story about the structural failure of the Nigerian state to provide infrastructure, and what the real cost of that failure is every day.”
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Nigeria's reliance on generators is unmatched among major economies. The country of more than 220 million people, on average, generates only a fraction of the electricity its population and industries need.
Businesses ranging from multinational oil companies to roadside kiosks rely on diesel-powered generators to keep lights on, computers running and cold chains intact. The result is an uneconomic energy sector of staggering scale and staggering cost.
BusinessDay economists have long argued that the failure to secure reliable grid electricity has led to an untold socio-economic loss over more than three decades.
He argues that the costs are not just financial but structural, reducing Nigeria's competitiveness, deterring foreign investment and presenting to the outside world the image of a country unable to guarantee its own most basic productive inputs.
The latest price hike has further exacerbated the already existing supply tension. Traders say diesel stocks have been tight for years, largely due to Ukrainian drone attacks on Russian refineries and Western sanctions on Moscow's energy exports.
Russia was an important supplier of diesel to global markets; Its partial withdrawal left a gap which Middle Eastern supplies were partially filling. Since this area is now under pressure, the pressure is becoming intense.
Traders said crude, the light, low-sulfur grade best suited for producing diesel, is also in short supply, hampering refinery output at a time when demand in developing markets remains strong.
For Nigerian businesses, times could hardly be worse. The naira has depreciated sharply over the past two years following the removal of the currency's long-standing peg, meaning internationally priced commodities like diesel now carry a far more punishing exchange rate. The crutches which were already expensive have become even more expensive.
Small and medium-sized enterprises, which form the backbone of Nigeria's non-oil economy, have been hardest hit. Manufacturers report that energy costs already account for a disproportionate share of their operating expenses, squeezing margins to such an extent that production cuts are becoming inevitable.
“Every time diesel goes up, something has to give,” said the owner of a printing business in Isolo, an industrial suburb of Lagos. “Either we raise prices, we cut staff, or we eliminate a shift. There is no fourth option.”
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Analysts say the episode should reinforce the urgency of long-delayed power sector reforms. Nigeria's electricity grid, troubled by a lack of investment and transmission constraints, has provided only intermittent supply for decades, despite the country boasting some of the largest natural gas reserves in West Africa, resources that could theoretically power many times the power of a modern grid.
President Bola Tinubu's administration has promised to prioritize energy reforms, and there have been modest improvements in some urban distribution networks. But the structural gap between what the grid can provide and what Africa's largest economy needs is huge.
Until that gap closes, Nigeria's generators will keep running – and its businesses will keep paying according to diesel market demand.
