Following the free fall of the naira against the United States dollar, the cost being incurred for the purchase of gas for power generation has risen by about 60 per cent, our correspondent has learnt.
Gas for power generation is denominated in the US dollar but power generation firms pay the naira equivalent.
The Federal Government had, through the Nigerian Electricity Regulatory Commission, in 2014 approved a new gas-to-power pricing benchmark of $2.50 per thousand cubic feet from $1.5 per mcf, taking effect from January 1, 2015.
The naira closed at 314.14 to the dollar on Wednesday at the interbank market.
The Chief Executive Officer, Eko Electricity Distribution Company, Mr. Oladele Amoda, said, “Gas cost for power generation is denominated in dollars.
“It is paid for in naira at the prevailing exchange rate. This creates more liquidity gap in the power value chain. Discos’ revenue shortfall is about N800bn and if the volatile exchange rate and low level grid power are considered, there will be a further dip by N400bn, making a total of about N1tn.
Amoda said the situation would slow down further investment in the sector, and network improvement and metering, adding, “Discos need upward review of tariff now.”
He said, “Power sector requires Presidential approval to exchange dollar at N197 to procure power equipment, cables and meters. Just as approved for the hajj pilgrims. The cost of all categories of transformers, cables, and several other electrical accessories including meter component, has almost doubled.”
The Managing Director, Transcorp Power Limited, one of the generation companies in the country, Mr. Adeoye Fadeyibi, said, “The exchange rate is affecting all of us. The cost of procuring is higher; so, the exchange rate is disturbing everybody.”
The Gencos had recently said the cost of the equipment needed to carry out repairs of turbines and associated auxiliaries in the international market had increased by about 100 per cent in the last three years, arising from the devaluation of the naira.
They said, “Given the fact that the majority of the parts and equipment procured by the Gencos are sourced outside the country, this has had significant impact on the Gencos’ purchasing power and inevitably on their ability to upgrade and maintain their various power plants.”
The firms stated that as of the time of paying for the power assets in 2013, the acquisition financing was largely sourced in dollars, to the knowledge of appropriate government and regulatory agencies.
The Gencos said, “The cost of repaying those facilities has significantly increased by about 100 per cent in the last three years arising from the devaluation of the naira as well.
“This has resulted in additional huge losses with suffocating effects on the Gencos. It is, however, important that there is special consideration for foreign exchange allocation to support the power sector.”
Nigeria’s Natural Gas Production Declines Despite N250bn Intervention Fund
Despite the injection of a N250 billion intervention fund into the gas sector, Nigeria witnessed a downturn in natural gas production last year, raising concerns about the effectiveness of the financial stimulus.
The Energy Institute, in collaboration with KPMG, unveiled an industry report revealing a notable drop of 4 billion cubic feet meters in Nigeria’s natural gas production between 2021 and 2022.
While Nigeria’s gas production demonstrated consistent growth from 39 billion cubic feet meters in 2012 to 49 billion cubic feet meters in 2020, the trajectory abruptly shifted to a decline, reaching 45 billion cubic meters in 2021 and further slipping to 40 billion cubic meters last year.
The Federal Government’s intervention included a N250 billion fund, facilitated through the Central Bank of Nigeria, with N130 billion earmarked for 15 selected companies for the construction of Compressed Natural Gas (CNG) conversion centers.
This initiative, part of the National Gas Expansion Program (NGEP), aimed to promote CNG as the preferred fuel for transportation and Liquefied Petroleum Gas (LPG) for domestic cooking, captive power, and small industrial complexes.
The 15 recipient companies, including prominent names like Dangote Oil Refinery, Nipco Gas Ltd, and Greenville Liquefied Natural Gas Company, received a combined N130 billion.
However, despite this financial injection, the natural gas production figures tell a different story.
Chinedu Okoronkwo, President of the Independent Petroleum Marketers Association of Nigeria, expressed dissatisfaction with the exclusion of his members from the loan, stating that inclusion would have accelerated the conversion of over one million vehicles to CNG models.
The Senate Committee on Gas, chaired by Jarigbe Agom Jarigbe, has summoned the 15 companies to provide progress reports on the projects funded by the intervention.
As Nigeria aims for substantial investment in the gas value chain, these revelations raise questions about the efficacy and impact of financial interventions in the country’s critical sectors.
Experts Urge Swift Government Action on Nigeria’s Untapped N3 Trillion Logistics Sector
Experts at the Courier and Logistics Management Institute conference in Lagos have emphasized the critical importance of the overlooked logistics, courier, and transport sector in Nigeria, valued at over N3 trillion.
During the event themed “Logistics Solutions and National Infrastructure Development,” the CLMI Executive Chairman, Prof. Simon Emeje, highlighted the urgent need for the federal government to prioritize this sector, which remains relatively untapped on a global scale.
Emeje underscored the sector’s significance, stating, “Any country that does not pay attention to logistics, courier, and the transport sector cannot survive.
The government must not ignore this sector because it is the bedrock of any economy.”
The logistics, courier, transport, and management industry boasts an average asset worth over N3 trillion, offering substantial potential for job creation.
Emeje emphasized that commerce is crippled without effective logistics, illustrating the importance of the sector in facilitating trade, enhancing the supply chain, creating jobs, and propelling economic growth.
Despite its undeniable importance, the Nigerian logistics sector faces hindrances such as infrastructural deficits and weak government policies, preventing it from reaching its full potential.
Emeje called for immediate attention to address these challenges and unlock the sector’s capacity to create millions of employment opportunities for Nigerian youth.
Former Minister of Communications, Barr. Adebayo Shittu, urged the institute to draft a comprehensive proposal for government adoption, offering assistance in facilitating engagement.
Both Shittu and Prof. Emeje called on the Federal Government to establish a dedicated ministry to foster an enabling environment for Courier and Logistics Management, drawing parallels to the recognition given to the entertainment industry.
President Tinubu Seeks Senate Approval for $8.6 Billion and €100 Million Borrowing Plan
President Bola Tinubu’s administration has formally requested the approval of the Nigerian Senate for a borrowing plan totaling $8.6 billion and €100 million.
The request was presented to the Senate through a letter read during the plenary by the Senate President, GodsWill Akpabio.
According to the letter, the proposed funds are integral to the federal government’s 2022-2024 external borrowing plan, previously sanctioned by the administration of former President Muhammadu Buhari.
Tinubu clarified that the projects earmarked for funding through this loan cut across diverse sectors, emphasizing their selection based on rigorous economic evaluations and their anticipated contributions to national development.
The letter highlighted, “The projects and programs in the borrowing plan were selected based on economic evaluations as well as the expected contribution to the socio-economic development of the country, including employment generation, and skills acquisition.”
The specified sectors earmarked for development include infrastructure, agriculture, health, water supply, roads, security, and employment generation, along with financial management reforms.
The borrowing plan’s comprehensive approach aims to address critical needs and propel the nation’s progress.
President Tinubu emphasized the urgency of the Senate’s approval, stating, “Given the nature of these facilities, and the need to return the country to normalcy, it has become necessary for the Senate to consider and approve the 2022-2024 external abridged borrowing plan to enable the government to deliver its responsibility to Nigerians.”
This appeal follows previous successful requests, including the National Assembly’s approval of an over $800 million loan for the National Social Safety Network Programme in August.
Also, the assembly greenlighted the 2022 Supplementary Appropriations Act of N819 million to provide palliatives to Nigerians, mitigating the impact of fuel subsidy removal.
As the deliberations unfold, the Senate’s decision on this substantial borrowing plan will play a pivotal role in shaping Nigeria’s economic trajectory.
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