As electricity subsidy balloons, Nigeria to propose naira payment for local gas

February 10, 2024

Nigeria is proposing for gas producers to sell gas to local power plants in naira to solve problems of dollar shortages after a second currency devaluation in less than a year is expected to balloon costs and make it hard for firms to pay.

The devaluation of the naira has led to the emergence of a government subsidy as high as N160bn a month but it is unclear for how long the government will continue to cover such massive bill.

Nigeria has 24 gas power plants with a combined output capacity of 11,434 megawatts, but it only delivers around a third of its capacity to the grid due to issues with gas supply.

“Proposing domestic gas payment in naira is a key step toward stability, aligning with our economy’s needs and promoting sustainable energy production,” Power Minister Adebayo Adelabu said in a post on X.

Adelabu added that he plans to create legislative measures that will mandate naira payments for domestic gas supply.

Natural gas is sold in dollars to power plants because investments tied to building gas plants and pipelines are priced and paid for in dollars.

However, local operators have had difficulties making dollar payments since a currency crisis which has seen the naira lose significant value. The currency weakness is expected to force the price of gas in the domestic market sharply higher.

Nigeria has proven gas reserves of 206 trillion cubic feet which it has struggled to tap due to capital constraints. The government hopes it can fix the challenges by switching to naira payments and capping dollar prices.

The Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), the local gas regulator, has asked producers to keep gas prices at $2.18 per million British Thermal Units (MMBtu) as per agreement with unions three-years ago

Yesterday, I met with Hon. Ekprerikpe Ekpo, Minister of State for Petroleum Resources (Gas), to address the ongoing challenge of insufficient gas supply to power generation companies (GENCOs). Nigeria has significant gas reserves, but delivering enough gas to meet domestic demand has been a persistent issue. To tackle this, we've established a joint ministerial committee.

It's crucial to find innovative solutions for ensuring stable gas supply to the power sector. Proposing domestic gas payment in naira is a key step toward stability, aligning with our economy's needs and promoting sustainable energy production. Payment shortfalls within the electricity sector pose risks to production and the entire value chain. Leveraging my financial sector experience and contacts, I'm working with stakeholders to advocate for legislative measures mandating naira-denominated payments for domestic gas supply.

Addressing the vandalization of gas pipelines in the Niger Delta is also a priority. A 2021 NEITI report highlighted 7,143 cases of pipeline breakages and deliberate vandalism between 2017 – 2021, significantly impacting the efficiency of the electricity supply industry (NESI).

Clear contractual arrangements between GENCOs and gas suppliers are essential to ensure consistent supply and maximize our power generation capabilities. The upcoming commissioning of the OB3 line is expected to greatly enhance gas supply to the northern region, fostering industrial growth.

In conclusion, the establishment of a joint ministerial committee to tackle the issue of inadequate gas supply to power generation companies (GENCOs) represents a crucial stride towards resolving challenges in Nigeria's energy sector. We are dedicated to assembling a team of experts for this committee, and upon its formation, we will publicly announce the timelines for our initiatives. #EnergySector #GasSupply

Dididrumz:
Big big talks all the time but no impact.

naptu2:


https://businessday.ng/news/article/as-electricity-subsidy-balloons-nigeria-to-propose-naira-payment-for-local-gas/?

alcuin:
Is this even newsworthy? Shouldn't we be paying for local gas in naira since?

What kind of leaders do we have in this country?

There's more darkness than light in this country. Countless families sleep in darkness every night and we are discussing this nonsense.

It's hard. But I have given up on this country.

Johnjustice:
We have very myopic leaders, why on earth would we be pricing products and services inside Nigeria in dollars?

Didn't you people read economics, didn't you read about balance of payments?

Ban use of dollars for any payments in Nigeria now!

Johnjustice:
We have very myopic leaders, why on earth would we be pricing products and services inside Nigeria in dollars?

Didn't you people read economics, didn't you read about balance of payments?

Ban use of dollars for any payments in Nigeria now!

naptu2:
Bayo Adelabu @BayoAdelabu



https://twitter.com/BayoAdelabu/status/1755863429875655004?t=yd2_E1TyFjkQexYCKRcFSQ&s=19