The demand for diesel has reduced significantly over the past few weeks, causing the price of the product to drop by 6.05 percent.
This follows a significant increase in power supply levels across the country, from the national grid, in the same period.

Diesel, which sold weeks back, for N165 per litre at fuel stations, now sells for N155, a drop of N10 per litre, a positive development for users and a pain for importers.
Many parts of the country have in recent times experienced improved power supply. Only on Tuesday, the country hit a record level of 4,477 megawatts in power generation.

The new peak exceeds the record level of 4,337 megawatts, achieved on Monday, August 6, this year, by 240 megawatts. Before then, it was about 3,800 megawatts.
The improved electricity supply, according to industry insiders has been as a result of increased gas supply to the power generating stations, the strengthening of distribution networks and transmission lines, and the fact that some of the National Integrated Power Projects have started contributing to the national grid.

Bart Nnaji, minister of Power, has attributed the sharp increase to gas availability, and praised the Nigeria Gas Company (NGC),adding “gas is coming up gradually and when fully stabilised, we can easily hit 5,000MW.”
Strengthening this position, are the additional distribution networks which have come on stream in some strategic locations across the country.

The nation’s gas agenda is robust. It puts gas-to-power at the core, but also envisions an aggressive gas based industrial growth. This in turn will drive further growth of demand for power.
The plan is for about 3billon standard cubic feetb(bcf/d) of gas, targeted at the Power Sector, with existing Power Holding Company of Nigeria (PHCN) plants being cardinal base load consumers of the product. Additional gas will come from other sources, such as Independent Power Plants (IPP’s).

The NIPP has 250 distribution network projects embedded within the existing networks of the 11 Electricity Distribution successor companies of PHCN. As such, the host distribution companies are fully involved in the commissioning and integration of the new facilities into existing networks.

Diezani Alison –Madueke, minister of Petroleum, commenting on the improved power supply in the country yesterday, listed the items completed in the critical pipeline segments that have helped improve supply, as including the 27kmX24inch permanent gas supply pipeline from Itoki to Olorunshogo via Ewekoro, all in Ogun State; the 56kmX24inch Escravos-Warri gas pipeline - doubling the pipeline capacity and enhancing gas evacuation from Escravos, as well as the 130kmX36inch Oben to Geregu pipeline.

“The net impact of all these is the addition of 120million cubic feet of gas per day (mmcf/d) to the grid and the permanent elimination of the challenges of low gas pressure that has plagued the Olorunshogo PHCN and NIPP power plants. We are also now well positioned to supply gas to the existing Geregu Power plant and all anticipated future expansions in that axis,’’ she said.

A chief executive officer of one of the major oil marketing companies, who spoke to BusinessDay, said it was true that demand was low, but it could be entirely attributed to improved power supply because usually the demand for the product was limited.
Another manager in one of the marketing companies also said that the price of the product has been retreating but added that at this period of the year, the demands is more for Dual Purpose Kersosene and not AGO.

Duro Kuteyi, president, Lagos State chapter, National Association of Small Scale Industries (NASSI), said the fall in diesel price may be due to the recent increase in the supply of electricity. “We hope it will continue and not be a flash in the pan”, he told BusinessDay.

Muda Yusuf, director- general, Lagos Chamber of Commerce and Industry (LCCI) said the drop in AGO price,“ is a relief to manufacturers. But is not good news for government, because it means lower revenue”. It is the outcome of full deregulation of diesel. Moreover, energy is a big issue. The fall in price can be tied to the ongoing global recession. Growth is declining globally, Nigeria inclusive. This is affecting prices”.

Olufemi Olawore, secretary, Major Oil Marketers of Nigeria, said that the drop in the price of the product could be as a result of improvement in power supply.
But Ikem Oha, the secretary, Depot and Petroleum Products Marketers Association of Nigeria, said the price of AGO which is imported is tied to the international price of crude oil, and could not be attributed to the improved electricity supply.

He said if the price of crude oil was rising, the price of the product would also rise and if it was falling, it would also fall.

Victor Ndukauba, vice president Afrinvest, told BusinessDay: “I believe the drop in diesel prices can be tied to a combination of two factors: the nearly 30 percent fall in crude prices last month had a knock on effect on refining costs, and therefore on the prices of by-products, and the relative improvement in public power supply within the Lagos metropolis, has impacted diesel demand. This may have also contributed to lower retail prices of diesel by marketers looking to achieve faster inventory turn-around”.

The fall in the pump price of diesel, analysts said, was increasing the risk of loan default by refined products importers, which was in turn raising the risk of higher Non – Performing Loans (NPLs), for Nigerian banks.
Nigeria imports most of its refined petroleum products because it does not have enough domestic refining capacity. While the price of Premium Motor Spirit (PMS) better known as petrol, is regulated, that of diesel is determined by market forces.

This implies that a diesel importer, who ordered cargoes earlier, may have his margins eroded due to the fall in prices in recent times.
“Banks financing diesel and other such imports, may be in trouble,” said one oil industry insider who declined to be named.

Nigerian banks have historically concentrated lending to blue chip companies, particularly in the oil and telecoms sectors, and with interest rates currently hovering above 28 per cent, smaller players in the non-oil sectors are increasingly locked out of credit.

“Also, banks no longer finance importation of PMS as their concentration is now on Automotive Gas Oil (AGO) which is now experiencing a glut in the Nigerian market, hence the desperation of the banks to want to sell off whatever cargo they have helped finance, in order to recoup their money.”

The banks have been burnt before. In 2010, the oil and gas sector got the largest chunk of loans with 20 percent of all banking loans.
The oil and gas sector also had the highest concentration of Non Performing Loans (NPLs) in 2010, at 20.2 percent of total outstanding bank loans.

HNosegbe:


http://www.businessdayonline.com/NG/index.php/news/76-hot-topic/42930-diesel-price-drops-on-back-of-improved-power-supply

chipmunkey: GOOOOOOOOOOOOOD NEWS.

denko: This is what some northerner dont want to hear and see, in order NOT to expose their inefficiencIES of the past, hence the creation of BOKO HARAM they will be put to shame at the end. NIGERIA MUST WORK.

~Bluetooth:

If PHCN is on strike,where are people now getting electricity from if not through I pass my neighbour ? Bunch of liars.

~Bluetooth:

If PHCN is on strike,where are people now getting electricity from if not through I pass my neighbour ? Bunch of liars.