Nigerian manufacturers are facing another increase in energy costs as Dangote Petroleum Refinery has raised its gantry price for diesel to N1,840 per litre, effective October 28, 2026. This represents a N40 increase, or 2.2 per cent, from the previous price of N1,800. The rise in diesel prices will affect factories that rely on diesel to power their operations due to the unreliable public power supply.
The Manufacturers Association of Nigeria (MAN) has expressed concerns about the impact of rising energy costs on the manufacturing sector. In 2025, MAN members spent N1.35 trillion on alternative energy, a 23 per cent increase from N1.1 trillion in 2024. The association's immediate past president, Francis Meshioye, stated that the growing dependence on self-generated electricity had become a significant cost driver for manufacturers, eroding their resources and affecting their competitiveness.
The rise in diesel prices will have varying effects on manufacturers depending on their location and size. Depot prices for diesel vary by location, with T.Time, Menj, and Ibachem offering diesel at N1,840 per litre in Lagos, while Rain Oil and Prudent listed the product at N1,890 in Warri. Marketers expect the gantry increase to raise their procurement costs, which may lead to higher distribution margins and pump prices.
Small businesses are particularly vulnerable to the impact of rising diesel prices. According to Femi Egbesola, national president of the Association of Small Business Owners of Nigeria, small firms now spend more than 80 per cent of their profit on alternative energy, up from more than 40 per cent. Egbesola stated that generators are no longer a viable option for many businesses due to the rising cost of diesel.
The implications of the diesel price increase extend beyond individual factories, affecting the broader economy. Manufacturing is a significant source of employment, industrial output, and demand for locally produced goods. Persistent energy cost increases could affect economic activity, making it challenging for businesses to maintain production levels without adjusting selling prices.
While some businesses are exploring alternative energy sources, such as solar power and embedded generation, the transition requires significant upfront investment. The latest price adjustment raises questions about the sustainability of manufacturers' energy spending, particularly as businesses continue to rely on privately generated electricity to compensate for shortcomings in public power supply.
The rising cost of diesel threatens to further squeeze profit margins for businesses with limited capacity to pass higher operating expenses to consumers. Manufacturers already contend with elevated raw material costs, foreign exchange volatility, transportation expenses, and weak consumer purchasing power. The N40 increase in diesel price may seem modest, but it adds to earlier rises that manufacturers have not yet recovered from.
Key points
- Manufacturers face increased energy costs due to the rise in diesel price
- Small businesses are particularly vulnerable to the impact of rising diesel prices
- The implications of the diesel price increase extend beyond individual factories, affecting the broader economy
