By Moses Oluwapo
The Nigerian Association of Road Transport Owners (NARTO) has made a fervent plea to the Federal Government to discontinue the imposition of a 7.5% Value Added Tax (VAT) on Automotive Gas Oil (diesel).
NARTO emphasizes that the removal of VAT on diesel is imperative to prevent disruptions in the distribution and supply of Premium Motor Spirit (PMS), commonly known as petrol.
Diesel serves as the lifeblood of approximately 90% of the haulage trucks responsible for transporting PMS from depots, primarily located in the South, to various filling stations nationwide. Prior to the introduction of VAT on diesel, its cost barely exceeded N600 per liter. However, it has now surged to nearly N1,000 per liter. This significant increase in diesel prices has directly contributed to elevated transportation costs for PMS, as observed by NARTO.
On June 20, 2023, it was reported that the Federal Government had officially initiated the application of a 7.5% VAT on diesel. The Nigeria Customs Service and Federal Inland Revenue Service confirmed this development, asserting that diesel no longer qualifies for VAT exemption, based on the VAT Modification Order of 2021.
Addressing this issue in a statement released on Tuesday in Abuja, the National President of NARTO, Yusuf Othman, highlighted that despite the escalating operational costs within the downstream oil sector, the government had refrained from raising the pump price of PMS.
Othman emphasized that because marketers are unable to increase the PMS pump price, they are equally incapable of raising transportation costs. This predicament has created an untenable business environment for transporters. He stated, “What we are talking about is an immediate solution, and the instant intervention is the removal of the 7.5% VAT on diesel, because it is escalating the cost of diesel. NARTO is decrying the unbearable high cost of diesel.”
He further added, “Even when discussing it with the oil marketers, all they tell you is that the government has fixed the pump price (of petrol) at N617 per liter, and since they cannot raise the pump price, they cannot increase fares for us. So, we are in a difficult situation.”
Othman cautioned that unless the government promptly terminates the 7.5% VAT on diesel, the nation could face a petrol supply shortage, as transporters may be compelled to halt their operations.
“Diesel is now reaching N1,000 per liter, and our transporters are still operating at the same rates. However, the government contends that they have no business with us because it’s a deregulated sector. Yet, the marketers argue that with full deregulation, PMS prices will rise,” Othman explained.
He underlined the dire condition of most federal roads, describing them as “terribly bad.” Othman concluded by stating, “We require serious government attention, and it must be swift. Firstly, the government must reconsider the 7.5% VAT on diesel, as it’s one of the driving factors behind the diesel price surge. Secondly, the government must evaluate the PMS pump price so that marketers can adjust transportation costs for us.
Without revisiting the pump price, marketers cannot increase transportation charges. If they do not act on this, we will have no choice but to continue parking our vehicles, which will lead to unwanted disruptions in the supply chain – and we certainly want to avoid that. While we are not necessarily advocating for a hike in the pump price of petrol, given the suffering of Nigerians, if marketers do not increase our transportation costs, and with AGO at N1,000 per liter and the dollar approaching N1,000, we cannot sustain our operations.”