The foreign exchange crisis in Nigeria, coupled with the recent enforcement of a 7.5 percent Value Added Tax (VAT) on Automotive Gas Oil (diesel), has propelled diesel prices to unprecedented heights, reaching between N900 and N950 per litre in various states. This substantial surge in costs has ignited alarm among local manufacturers, who are warning of potential factory closures and subsequent job losses.
The Natural Oil and Gas Suppliers Association of Nigeria convened a press conference in Abuja to voice the concerns of oil marketers, who elaborated on the intricate challenges stemming from their inability to access United States dollars for importing diesel. The shortage of forex has severely hindered their capacity to import the commodity efficiently, consequently driving up the price.
Benneth Korie, President of the National Oil and Gas Suppliers Association (NOGASA), elucidated the trajectory of diesel prices before government intervention. He noted that prior to the imposition of the 7.5 percent VAT, the cost of diesel stood around N650 per litre. However, the introduction of the VAT mechanism has notably exacerbated the price issue, placing an additional burden on both manufacturers and consumers.
In a significant update, it was reported on June 20, 2023, that the Federal Government had initiated the implementation of the 7.5 percent VAT on diesel. This development was confirmed by officials from the Nigeria Customs Service and Federal Inland Revenue Service in Abuja, clarifying that Automotive Gas Oil (AGO) was not exempt from this VAT payment based on the VAT Modification Order 2021.
Speaking at the press briefing, Korie expressed grave concerns over the mounting diesel prices and its wider economic implications. He stated, “Diesel price is now approaching N900 to N950 per litre depending on the purchase location. This price escalation is also linked to the scarcity of the US dollars. Urgent government intervention is required to address this currency challenge. Key stakeholders, including bank CEOs and the Central Bank of Nigeria, must convene to tackle this escalating dollar crisis before it inflicts irreparable damage.”
Korie further urged President Bola Tinubu to spearhead the reactivation of Nigeria’s refineries. He emphasized that reviving the refineries would alleviate the pressure on forex caused by the importation of petroleum products and other commodities. He stated, “Our refineries were constructed by our own engineers and can be restored by them. Relying on imports is unsustainable. Once our refineries are operational, the forex pressure will significantly diminish, making it imperative for the government to prioritize their rehabilitation.”
As the turmoil surrounding diesel prices persists, industry players are calling on the government to take decisive action to stabilize the situation and avert potentially catastrophic consequences for both businesses and the broader economy.
