A must-read for all owners of diesel-powered generators in Nigeria

Some diesel-powered generators- Diesel price to go up in January 2020

Nigeria’s frenetic commercial capital, Lagos, is plunged into darkness several times a day. Then its generators roar, and the lights flood back on.

Nigeria is one of the world’s largest economies where businesses rely so heavily on diesel-powered generators.

More than 70% of its firms own or share the units, while government data shows generators provide at least 14 gigawatts of power annually, dwarfing the 4 gigawatts supplied on average by the country’s electricity grid.

The machines guzzle cash and spew pollution, but they are reliable in a nation where nearly 80 million people – some 40% of the population – have no access to grid power. Now diesel costs could spike globally, and many businesses are not prepared.

Diesel prices are expected to surge as United Nations rules aimed at cleaning up international shipping come into effect on Jan. 1, with many ships expected to burn distillates instead of dirtier fuel oil.

Slowing economic growth and nascent trade wars could blunt a price spike, and as the shipping industry adapts to the rules, vessels will likely consume less diesel. But in the short term their impact could be profound.

Estimates vary widely, but observers warn that prices could surge by nearly 20%.

Higher costs for operating generators that power the machinery, computer servers and mobile phone towers that run Nigeria’s economy could impair growth in gross domestic product, already limping along at 1.92% at a time inflation is at 11%.

With the population growing at 2.6% each year, people are getting poorer.

“In an environment like this, where discretionary spending is very limited, this could have a big impact,” said Temi Popoola, West Africa chief executive for investment bank Renaissance Capital.

A 20% price rise could shave 0.2% off GDP growth, he said.