Several investors and business managers have begun to scale down operations in response to the rising energy cost that has worsened the harsh operating environment in the country.
The price of Automotive Gas Oil (AGO) otherwise known as diesel has gone up by about 200 per cent to between N650 and N800 in the last three months, forcing many to devise ways to stay afloat or in the worst alternative, close shop for the meantime.
The increasing cost of diesel which is used by many firms to power their machinery and generators has affected every facet of the country’s life, lowering productivity and pushing up the cost of production and ultimately, a spike in the cost of goods and services.
The immediate past Director-General of Lagos Chamber of Commerce and Industry (LCCI), Muda Yusuf on Monday raised alarms that investors have started to pass the cost of production to the final consumers, blaming the sudden surge in the prices of fuel that has paralysed Nigerian businesses in all ramifications.
This was corroborated by Chukwuma Adaobi, the manager at New Horizons Systems Solutions Ltd, a tech company in Abuja, who said unlike before, they only allow the air conditioners in their office to run for a particular period and then put them off.
“Normally we close around 5 pm and the power generator always runs till that time. But since the scarcity and the increasing cost of diesel, we turn off the generator by 4 pm but we still close at 5 pm or even later, doing other things that don’t require electricity”.
Likewise at GTbank, a member of GTCO, the incessant energy crisis has forced the bank to revise downward, its operational hours from nine to eight in a day, thereby bringing down its closing hours to 4 pm as against the previous 5 pm closing hour.
“We would like to inform you that our branches will now open from 8 am to 4 pm from Monday to Friday effective Monday 21 March,” said GTbank in an 18th March notice titled, “Updated Branch Hours” to its customers.
Segun Agbaje, the group managing director, GTCO said the decision is the company’s response to the rising energy cost and one of the strategies to cut costs.
GTCO has therefore directed the bank’s customers to its various digital banking platforms to transact their businesses.
“Our secure and convenient digital banking channels are always available to you. You can bank 24/7 via GTWorld Mobile App, Internet banking at any GTbank ATM or by calling *737*”, the bank said.
The airlines are not spared as the prices of aviation fuel (Jet A1) and natural gas had similarly skyrocketed, creating instability in the fragile sector.
Yusuf explained that “This has both global and domestic implications”.
Local airlines under the aegis of Airline Operators of Nigeria (AON), had in March, threatened to shut down flight operations over the outrageous spike in JET-A1 cost.
What the airlines do now is to lump flights together as seen in Ibom Air which merged its 1.30 pm flight and 6 pm flight to Uyo, Akwa Ibom state on March 10, creating inconveniences for passengers.
“We write to sincerely apologize that due to a scarcity of aviation fuel in the market, we have had to adjust our day’s schedule for the day, 10th March 2022″.
” Your flight is now unavoidably rescheduled to depart Lagos at 6:15 pm”, stated Ibom Air in a notice to its passengers.
The diesel crisis became exacerbated by the collapse of the national grid about a month ago, leading to a sharp drop in electricity supply from the consequent load shedding.
The situation which became unbearable for both households and investors stirred up
series of blame games among players in the electricity supply chain – the DISCOs, the GENCOs, Transmission companies, the Gas suppliers and the power ministry.
Adding further, Yusuf noted, “Cost of transportation, especially haulage cost by companies spiked because most haulage trucks are powered by diesel.
The former LCCI director-general also blamed the crisis on the country’s foreign exchange crisis, which he said, is a major headwind to investment performance and economic growth in the last couple of months.
” The dollar is scarce now at the bank and application for foreign exchange could wait for over three weeks unlike before, according to staff in one of the Tier-1 banks.
“Mostly affected are those in need of forex for tuition fees of their children outside the country”, said the bank official who is not authorised to speak.
The parallel market rate has plunged by over 15 per cent in the past three months reaching a new low of N590/dollar currently. Meanwhile, the official exchange rate remains fixed at N416/dollar.
“The operating exchange rate for economic players remains the parallel market because the investors and exporters (I & E) window is not liquid,” Yusuf said.
“These forex challenges are fueling inflation, aggravating the cost of operations and costs of production, accelerating business mortality and eroding the confidence of investors.”
He pointed out that major macroeconomic indicators suggest that the Nigerian economy had been further weakened by these headwinds, lamenting that “A stumbling economy cannot afford these multiple shocks.
