Diesel price hike hits gated communities

The rising price of diesel is making the cost of living in gated communities in Nigeria unbearable for residents who also have other service charges to contend with.

Data obtained by BusinessDay from the National Bureau of Statistics indicate that the average diesel price in Lagos was N303 per litre in January 2022, representing a 24-percent rise when compared to the N243 per litre it sold for in December 2021.

A litre of diesel now sells for between N650 and N700 per litre and is projected to hit N750 per litre this month, according to the June outlook presented by Bismarck Rewane, CEO of Financial Derivatives Company, in his monthly Breakfast Session at Lagos Business School.

This meteoric rise in the price of this essential commodity, according to Rewane, is distorting the consumption function and logistics costs. This has been made worse by galloping inflation, which is projected to rise to 17.5 percent from the current rate of 16.82 percent.

Residents of gated communities who rely on centralised services for their electricity, water supply and sanitary services have seen landlords and facilities managers, unwilling to bear the costs, transfer the increases to them.

Gated communities and serviced apartments are generally sought-after settlements by middle-class individuals who can afford the costs. Besides security, these communities are in high demand for exclusivity, higher status, better quality of life, less noise and congestion, more contact with nature, and a stronger sense of community.

These attractions are now being undermined by a combination of inflation and cost of diesel, which experts say are making them pay more while the expected benefits are dropping as hours of power supply are now graduated according to individual needs.

Recently, homeowners and residents of New Horizon 2 Extension Estate in Lekki got the shock of their lives when Coraxen, the facilities management services provider in the estate, issued a statement announcing increases in their energy tariff.

The statement signed by the company’s acting head said, among other things, that effective from May 13, 2022, their new tariff would be N250/kWh, up from N155/kWh; the minimum purchase monthly for power was N50,000.00; their base charge deductions monthly was N40,000.00, while the management would be able to guarantee 16 hours power from Monday to Sunday.

The company said the action became necessary following a deficit of N5,689,398.29 in their running cost within a four-month period — January to April –during which it recorded a total expenditure of N14,566,398.29 and total receivables of N8,877,000.00.

A breakdown of the total cost shows N12,609,500.00, N1,364,510.29 and N 592,388.00 spent on diesel, Eko Disco Bill and generator maintenance respectively while its receivables from token recharge by residents was N8,877,000.00.

“We are pained to bring this to your notice, taking into consideration growing economic challenges. It is quite unfortunate that the cost of providing power for the estate has not eased up with the current tariff but rather has continued to be steep, considering the huge losses we have incurred in managing power,” Coraxen said.

Wale Odufalu of Alpha Mead Facilities confirmed to BusinessDay that the cost of maintaining power in estates was becoming too challenging, saying that they were strategic about it.

“We have a mix of tenants and what we do is to provide services according to demand. We have tenants who, for their company policy, still work from home. Such tenants need 24 hours power supply. There are other tenants who are out of home most part of the day. For those void periods, we don’t supply power to them,” she said.

Read also: How telcos curb diesel theft as prices rise

Odufalu said it was a trying time for all stakeholders including landlords, tenants and facilities managers as, according to her, it was becoming increasingly difficult to manage costs as the economy was biting everybody.

Gbenga Olaniyan, CEO of Estate Links, told BusinessDay in a telephone interview that “with increased cost of diesel in particular, many serviced apartments are facing a high default level”.

He said several buildings had reduced the number of hours they use generators with a lot of high-end properties adjusting their 24-hour power promise to run a 7pm-7am generator service.

“This is becoming the most popular timeline for generator usage; properties that have a mix of short-let and long-stay generally face major problems as landlords are now getting more price-sensitive, sometimes trying to negotiate or tenants outright refusing to settle service charge bills during their void periods,” he added.

To maintain a reasonable level of comfort, some of these tenants go the extra mile to acquire alternative sources of energy such as inverters.

One of the respondents to a BusinessDay poll on tenants’ experiences in gated communities and serviced apartments amid rising diesel cost confirmed that they were spending more to continue to live in those neighbourhoods.

The respondent, who identified himself simply as Raymond and did not disclose the name of his estate, said apart from general discomfort caused by limited power supply, household income is affected as they are compelled to spend more on cooking for short periods to avoid waste.

Besides the problems of power and other controlled facilities, gated communities also have the problem of rising rents. This has a direct connection with the rising insecurity in Nigeria.

“Growing insecurity is fuelling demand for gated communities and Abuja residential assets,” Rewane said, adding that in Abuja particularly, these communities are in high demand as they are safe havens for people ‘migrating’ from the troubled parts of the North.

Due to this high demand, both sales prices and rents are constantly under pressure, with the prices trending upwards and making the available houses largely unaffordable to many buyers and prospective tenants.

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