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7.5% VAT on diesel can disrupt fuel supply in Nigeria – NARTO

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On Tuesday, the Nigerian Association of Road Transport Owners (NARTO) called on the Federal Government to stop the 7.5 percent value-added tax on Automotive Gas Oil, popularly known as diesel.

NARTO said the halt of VAT on diesel is necessary in order to avert disruptions in the distribution and supply of Premium Motor Spirit, popularly known as petrol.

The association said diesel is the product required for fueling about 90 percent of the haulage trucks that convey PMS from depots located mostly in the South to various filling stations across the country.

It was observed that prior to the introduction of VAT on diesel, the cost of the commodity was barely above N600/liter but had increased to almost N1,000/liter currently. This, it said, had also raised the cost of transporting PMS by transporters.

On June 20, 2023, a national daily reported that the Federal Government had confirmed that it had commenced the implementation of the payment of 7.5 percent VAT on diesel.

Officials of the Nigeria Customs Service and the Federal Inland Revenue Service also confirmed that diesel was not exempt from the payment of VAT based on the VAT Modification Order 2021.

Commenting on the development in a statement issued in Abuja on Tuesday, the National President of NARTO, Yusuf Othman, said despite the high cost of operations in the downstream arm of the oil sector, the government had stopped increasing the pump price of PMS.

He noted that since marketers could not raise their pump prices for petrol, it had been impossible for them to increase their costs for the transportation of PMS, and that this had made the cost of doing business unbearable for transporters.

Othman said, “What we are talking about is an immediate solution, and the instant intervention is the removal of 7.5 percent VAT on diesel because it is increasing the cost of the diesel. NARTO is complaining that the high cost of diesel is unbearable.

“Even if you discuss it with the oil marketers, all they tell you is that the government has fixed the pump price (of petrol) at N617/liter and that since they cannot increase the pump price, they cannot increase the fare for us. So we are in trouble.”

He noted that unless the government urgently stopped the 7.5 percent VAT on diesel, there would be a shortage of gasoline supply because transporters might be forced to park their trucks.

According to him, “Diesel is now getting to N1,000 per liter, and our transporters are still on the same rate. But the government will say they don’t have business with us because it is deregulated. But the marketers say if there is full deregulation, PMS would go up.

“The government pegged the PMS pump price at N617, and because of that, even if diesel reaches N1000/liter, they (marketers) can’t increase transportation costs for us. And to make things worse, the government has put 7.5 percent VAT on AGO, and the dollar is about N1,000 now.”

He noted that most federal roads were terribly bad, adding that “from Okpella to Lokoja is bad; from Agai to Bida to Kutugi is bad.”

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