Nigeria's diesel-dependent economy braces for clean-fuel rules

It may be one of the world's largest economies, but it's not easy to run a business in Nigeria.

Some 70% of the country's companies rely on generators, according to the World Bank.

And for businesses like this bakery, it may soon become harder.

Diesel prices globally are expected to surge - some estimates say by as much as 20% - when new rules enforced by the United Nations come into effect at the start of January 2020.

They're aimed at cleaning up international shipping and getting vessels to consume less diesel.


"If the price of diesel goes up it becomes more difficult for us to operate because consumers considering the characteristic of the market in which we operate are not ready to bear the price and so it becomes more difficult for us to think about expansion. First is survival, you know, we will survive the situation if the prices of diesel goes up? This is a question I cannot really answer."

Analysts are not too optimistic either.


"Many businesses may go under, businesses may struggle to survive or in the best case scenario will at least downsize and shut down some production capacity because if you can't pay for the diesel for production, you can't pass the pricing for increased cost in diesel. The next logical thing to do is to shut down some of that production capacity and produce at the quantity that the demand can carry price you are willing to sell at."

While many Nigerian households and small business generators are powered by price-capped gasoline, larger firms, apartment complexes, and bigger houses can only run on diesel.

Government data shows generators provide at least 14 gigawatts of power annually.

Compared to the 4 gigawatts supplied by the country's electricity grid.

Still, although reliable, the machines guzzle cash and spew pollution.

But in a country where some 40% of the population has no access to grid power, most businesses say they have no alternative.

The cost, however, is likely to be high.

And the spike could also hit GDP growth, currently limping along at 1.92%, with inflation at 11%.