Manufacturers have expressed serious concerns about the implications of the over 200 per cent increase in the price of Automotive Gas Oil (AGO), otherwise known as diesel, on the manufacturing sector and by extension, the economy.

Speaking at the weekend, the manufacturers under their umbrella body, Manufacturers Association of Nigeria (MAN), said, for instance, that the sharp increase of over 200 per cent in the price of diesel will exert untold hardship on the manufacturing sector.

Such hardship on the sector, they warned, will lead to the closure of many industries, leading to reduction in capacity utilisation, further decline in Gross Domestic Product (GDP), large scale unemployment across 76 sub-sectors and increase in crime rate, among others implications.

MAN Director-General Segun Ajayi-Kadir in a statement on Friday also expressed fears that the situation would lead to a further decrease in foreign exchange earnings from the manufacturing sector, as high cost of production feeds into export commodity prices.

He also said it would force a sharp reduction in government tax revenue occasioned by drop in sales, lower profitability as lesser quantum of disposable income will be available to purchase manufactured goods.

Ajayi-Kadir further warned that the over 200 per cent increase in price of diesel will have a reverse-multiplier effect on the nation’s manufacturing sector, as cost of production escalates and the headways already made in the sector are grossly eroded.

The MAN DG listed other unsavoury implications of the skyrocketing price of AGO to include negative spiral effects on every sector of the economy, resulting in hyperinflation, lower productivity and turnover; depressing trickle-down effects on productivity, unemployment and standard of living of the citizenry.

He also warned that the situation would lead to uncontrollable incidences of insecurity with dangerous implications for economic and social well-being of over 200 million Nigerians.

Ajayi-Kadir, however, said in light of the gravity of the precarious situation that the nation found itself in and the looming dangers ahead, “Government should, as a matter of priority, develop a National Response and Sustainability Strategy to address challenges emanating from the ongoing invasion of Ukraine by Russia”.

According to him, the recent short supply and over 200 per cent increase in the price of AGO were part of the backlashes from the ongoing invasion of Ukraine by Russia.

“This resulted in numerous economic sanctions on Russia by the US and EU, which propped up the price of crude oil to $120 per barrel (now moderated to about $100) as Russia oil export is isolated,” Ajayi-Kadir said.

Read Also: ‘How to check rising prices of diesel, cooking gas’

He said in the short term, the disruption occasioned by the invasion of Ukraine by Russia would continue to heavily ruffle the global energy space and upset the supply of petroleum products thereby causing persistent increase in the price of refined petroleum products, including AGO.

“In the long run, it (the Russian invasion of Ukraine) will result in enormous increase in the prices of other manufacturing input like wheat, maize, fertiliser and the raw materials.

“And by the time the current domestic reserve of manufacturing inputs is exhausted, in the face of acute shortfall in supply, we are afraid that the prices of manufactured products will soar,” the MAN chief warned.

He said this is so because ironically, the economy is dependent on import of refined petroleum products, including diesel and other vital manufacturing raw materials and there are no sufficient alternatives.

Ajayi-Kadir also said the government should continue to support manufacturing to accelerate the process of recovery from the aftermath of COVID-19 and previous bouts of recession to avert the complete shutdown of factories nationwide with a multiplier effect on employment.

He also said licenses should be issued to manufacturing concerns and operators in the aviation industry to import diesel and aviation fuel directly to avert the avoidable monumental paralysis of manufacturing activities arising from total shut down of production operations and movement of persons for business activities.

MAN further said as a matter of urgency, there is a need to address the challenge of repeated collapse of the national grid (twice within a week), which is causing acute electricity shortage in the country, especially for manufacturers.

“Urgently allow manufacturers and independent petroleum products marketing companies to also import AGO from the Republic of Niger and Chad by immediately opening up border posts in that axis in order to cushion the effect of the supply gap driven by the high cost of AGO,” he added.

They also pushed for the removal of Value Added Tax (VAT) on AGO as an instant stimulus for immediate reduction in price and expedite action in reactivating or privatizing the petroleum products refineries in the country.

Ajayi-Kadir also called for the restriction of the export of maize, cassava, wheat, food related products and other manufacturing inputs available in the country, and grant concessional forex allocation at the official rate to manufacturers for importation of productive inputs that are not locally available.