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The Almighty Power of Diesel – Diesel price crashes by 40%

Diesel prices have dropped sharply from their 2023 peak of N1,700 per litre to the current N1,000 per litre in April 2024, mainly due to increased supply from Dangote Petroleum Refinery. The crash of diesel prices at a time of elevated crude oil prices seems to many like a puzzle. With a refining capacity of 650,000 barrels per day, Dangote Refinery possesses a significant advantage in economies of scale, enabling cost efficiencies, competitive pricing, and enhanced market positioning in the refining industry. The appreciation of the naira from a low of N1,915/$ in February to nearly N1,200/$ currently also bolstered the achievement of the new milestone.

The multiplier effect on consumers and the economy

Diesel prices, through energy and logistics costs, are a major inflation-stoking factor, contributing about 15% to inflationary pressures. The sharp drop in diesel prices in Nigeria benefits consumers with lower prices for essentials and businesses with reduced operating costs, potentially leading to lower prices for their products and services. This cost reduction will boost economic activity, with GDP expected to rise from 2.7% in 2023 to 3.5% in 2024 while increasing the government’s tax revenue. Undoubtedly, the drop in diesel prices is a win-win situation for all stakeholders.

In an interview on Channels TV Business Morning programme, Bismarck Rewane comprehensively analyzes the impact of the fall in diesel prices, its sustainability, and its link to the exchange rate, inflation rate, and economic growth.

The video link and slides are attached.

Enjoy your read!