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Manufacturers Spend N226bn Monthly on Gas



File photo of an employee of German car manufacturer Mercedes Benz working on the interior of a GLA model at their production line at the factory in Rastatt
  • Manufacturers Spend N226bn Monthly on Gas

About 2,000 manufacturers using gas to power their operations spend an average of N200bn a month on power generation, investigation by our correspondent has shown.

The reason, according to manufacturers, is their continued payment for gas in dollars instead of the local currency.

Each of the manufacturers currently using gas spends an average of N113m on gas every month, a figure that is brought about by the high exchange rate.

While the global price of gas goes for $2.50, manufacturers in Nigeria pay $8 for one standard cubic metre of gas.

“An operator who spent N15m a month on gas when the dollar exchanged for N150 currently spends N45m at the current exchange rate of N450/dollar,” the Director-General, Nigerian Textile Manufacturers Association, Hamman Kwajafa, said.

The Chairman, Gas Users Group of the Manufacturers Association of Nigeria, Dr. Michael Adebayo, said manufacturers had been paying over N100m for gas since the regime of buying gas in dollars started two years ago.

“Some people spend as much as N127m a month; others spend as much as N150m a month,” he said.

The manufacturers listed the reversal of the policy on gas as one of the major catalysts that would make the sector rebound this year.

Adebayo said the government needed to remove manufacturers from the category of commercial consumers of gas and put them under strategic industrial sector category.

He said, “Globally, manufacturers are put under strategic industrial sector among gas consumers. We generate employment. We use the gas; we do not sell the gas. People that are selling gas are the ones that are supposed to be on the commercial category, not the people who are using the gas to produce goods for export.

“It is terrible; nobody can budget. We cannot even increase the price of what we are selling because people are not even buying.”

Adebayo suggested an amendment to the Gas Subsidy Gazette of 2008 that put manufacturers in the category of commercial consumers.

A major player in the oil and gas sector and Managing Director of Falcon Petroleum Limited, Prof. Joseph Ezigbo, told our correspondent that gas was benchmarked in dollars because of government policy and the cost of gas flaring.

He said, “It is very expensive to bring gas out of the ground. In the past, our gas was cheap because it was a by-product of oil; so, the gas was already paid for along with the payment for oil.

“But now, we are billing for gas exclusively and the cost of producing just gas alone is higher. So, comparatively, if you put gas and diesel side by side, the gas is still cheaper.”

He added, “The government took a deliberate action to fix the price of gas so that people will not sell differently.

“But there is a proliferation of willing-buyer-willing-seller situation where people are buying not within the ambit of the Nigerian Gas Company, the gas company that controls the price. Under such situation, the gas can vary from $10 to as much as $15.”

But the President, MAN, Dr. Frank Jacobs, told our correspondent that if the electricity generating companies were allowed to buy gas at $2.40, there was no reason for manufacturers to buy at $8.

He said the association had complained to President Muhammadu Buhari as well as the Senate President and Speaker of the House of Representatives.

“It is our hope that this year, something will be done about it because manufacturing is supposed to be a priority sector and should be given some concession. Besides, gas is not imported, it is an indigenous product and there is no justification for denominating it in dollars.

“We have made this position known to the government and we are hoping that they will do something about it.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade experience in the global financial markets.


FG Paying N1.1 Billion Per Day as Subsidy



petrol Oil

FG Paying N1.1 Billion Per Day as Subsidy

The recent jumped in crude oil prices means landing cost of Premium Motor Spirit (PMS), popularly known as Petrol, has increased but the Federal Government has maintained the old pump price of N161 – N165 per litre.

In a series of reports, the Petroleum Products Pricing Regulatory Agency (PPPRA) open market price, the price fuel marketers are expected to sell, is N183 per litre as of yesterday. A break down showed N160 is the landing cost per litre while the additional N23 is the Petroleum Products Pricing Regulatory Agency (PPPRA) pricing template.

Therefore, with the payment of additional N23 as stipulated in the PPPRA pricing template and the national petrol per day consumption figure at 50 million litres, the Buhari led administration is offsetting about N1.1 billion on petrol consumption daily.

The Nigerian National Petroleum Corporation (NNPC) has been deducting the amount before remitting balance of oil sales to the Federation Account, according to a Businessday report.

An anonymous person in the oil marketing industry said: “We are back to the era of subsidy and Nigeria is bleeding badly because of this.

With deregulation, the current price of petrol should not be less than N181, so who is funding subsidy of the product for Nigeria to buy at the current fixed price?“.

Another oil marketers said, “the government does not have the boldness to allow full deregulation of petrol because of the spiral effects on Nigerians, and bearing in mind that Nigerians are in very hard times.

Alao Abiodun, the Head of Energy Research, New Nigeria Foundation, explained that “Because of the loans from the IMF and World Bank that they got with the condition that petrol should be deregulated, I believe the government is trying to manage the problem.”

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Nigeria’s Big Oil-Refining Revamp Gets Off To A Slow Start




Nigeria’s Big Oil-Refining Revamp Gets Off To A Slow Start

A year after shutting down all of its dilapidated refineries to figure out how to fix them, Nigeria still can’t say how much it will cost to do the work or where the money will come from.

Nigerian National Petroleum Corp. said it has finished the appraisal of its largest facility, but hasn’t completed the process at two others. Refining experts said the extended halt means the plants are at risk of rotting away and unlikely to restart on time.

“Things haven’t been looking good lately,” with Nigeria’s plants probably “completely out of action for some 18 months,” said Elitsa Georgieva, Executive Director at Citac, a consultant that specializes in African refining.

The dysfunction of its domestic refineries has long put Africa’s biggest oil producer in an ironic situation. It exports large volumes of crude to plants overseas, then pays a premium to import the fuels its customers produce.

Failed Attempts

Pledges to fix the facilities have been made and broken again and again over the years. For at least a decade, NNPC’s 445,000 barrels a day of refining capacity barely processed 20% of that amount.

The latest effort to fix the refineries was supposed to be different to the failed attempts that came before. The company had totally shut all three plants down by January 2020 to do a comprehensive appraisal, and set the ambitious target of having them all back up and running at 90% of capacity by 2023.

“The refineries have been deliberately shut down to allow for a thorough diagnosis,” said Kennie Obateru, an Abuja-based NNPC spokesman. “They can be fixed based on what the diagnosis reveals.”

The appraisal of the 210,000-barrel-a day Port Harcourt refinery has been completed and NNPC has called for bids for the necessary repairs, Obateru said. The company hasn’t determined how much the work will cost.

“It is when we close the bids, everything is analyzed and presented that we will know how much we need,” he said.

The diagnosis is underway at the 125,000-barrel-a-day Warri facility and should be complete before the end of the year, he said. After that, the study of the 110,000-barrel-a-day Kaduna plant will commence.

Major Challenge

One year into the process, refining analysts are skeptical that all this work can be done by 2023.

“I don’t think anyone has a good understanding technically of what’s wrong with those refineries,” said Alan Gelder, vice president of refining, chemicals and oil markets at Wood Mackenzie Ltd. “They’re probably corroding, which makes it a very difficult proposition.”

NNPC reaffirmed its deadline and said there’s no reason the refineries, which are at least 40 years old, can’t be restored to full operation.

“There are refineries that are over a hundred years old still running, so age is not necessarily an impediment,” Obateru said.

There are parallel efforts backed by private companies to add to Nigeria’s capacity. Aliko Dangote, Africa’s richest person, is building a state-of-the-art 650,000 barrel-a-day refinery, which Citac estimates will start production in 2023.

Bringing NNPC’s Port Harcourt refinery to the same clean-fuel standards as Dangote’s modern plant would cost about $1.3 billion for the equipment, on top of whatever other repairs are required to get the facility running, Georgieva said.

NNPC is talking to oil-trading firms about $1 billion of prepayment deals that could finance the repairs at Port Harcourt, Reuters reported last week. Obateru declined to comment on the report, but said “I don’t envisage that we will have a problem getting people to invest.”

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Food Inflation Hits Record High of 19.56 Percent in December 2020




Food Inflation Hits Record High of 19.56 Percent in December 2020

Food Index, which measures prices of food items, grew by 19.56 percent in the month of December 2020 amid herdsmen attacks and flooding.

In the latest report from the National Bureau of Statistics (NBS), increases were recorded on Bread and cereals, Potatoes, Yam and other
tubers, Meat, Fruits, Vegetable, Fish and Oils and fats.

On month on monthly basis, the food sub-index rose by 2.05 percent in December 2020, 0.01 percent from 2.04 percent recorded in November 2020.

The average annual rate of change of the Food sub-index for the twelve-month period ending December 2020 over the previous twelve-month average was 16.17 percent, 0.42 percent points from the average annual rate of change recorded in November 2020 (15.75) percent” the report stated.

Headline inflation number increased by 15.75 percent in the month of December 2020, up from 14.89 percent.

The report noted that increases were recorded in all COICOP divisions that yielded the Headline index.

On a month-on-month basis, “the urban index rose by 1.65 percent in December 2020, same as the rate recorded in November 2020, while the rural index also rose by 1.58 percent in December 2020, up by 0.02 percent above the rate that was recorded in November 2020 (1.56 percent).

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