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At $8/kcf, manufacturers fret over increment, dollarisation of natural gas

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Natural gas power plant Source: International Energy Agency

With many manufacturers paying about $8/kcf (thousand cubic feet) for natural gas against the $3.77/kcf under the new gas pricing arrangement unveiled in the official gazette by the Federal Government, operators in the sector have expressed concern about the increase and dollarisation of the commodity, when access to foreign exchange is limited.

Indeed, the Manufacturers Association of Nigeria (MAN), said the continued denomination of price of gas in U.S. dollar has made the product perpetually exorbitant, and gradually getting out of the reach of majority of the manufacturers, particularly the Small and Medium Industries (SMIs).

Adding that manufacturers, with the exception of textile producers were exempted in the new gas pricing gazette, MAN President, Mansur Ahmed, explained that the price of natural gas used by his members to power their plants and machinery has reached a crisis dimension.

Ahmed at an interactive session on gas pricing dialogue between the Minister of State for Petroleum Resources and members of MAN, said: “These are areas we hope this meeting will critically look into and address in order to help the competitiveness of our members and the concerted efforts to improve the current contributions of the manufacturing sector to the Gross Domestic Product of the country.”

He continued: “In addition, and quite importantly, I would like to state that it is now imperative and incumbent on government to clarify the recent confusions over the amendments of the Federal Government Official Gazette No.2, Vol 106 dated 4th January 2019.

“A new Gazette in the Gas Pricing Framework for Textile Industries suddenly appeared without the inclusion of manufacturing sector as previously indicated in the earlier Gazette Vide; ‘Federal Government Gazette No.2 of 4th January 2019, Vol.3: Gas pricing for textile and manufacturing sector’.

“Our members earnestly seek official clarification on the latest position of government and operational gazette they should rely upon to plan their operations and make their business projections.”

He expressed the hope that the outcomes of the interactive session will include a definite gas price and a price mechanism that supports industrial production, competitiveness, wealth and job creation with the accompanying positive multiplier effect on the economy.He assured members that better times are coming for the manufacturing sector, saying that the law that is expected to come in place concerning gas aggregation and distribution will give explanatory notes to gas consumers to identify the whole value chain of the gas industry

Also speaking, the Minister, Dr. Ibe Emmanuel Kachikwu, who was represented by his Technical Senior Adviser, Dr. Timothy Okon, said the present administration’s intention is to reverse the trend of many factories leaving the shores of Nigeria to operate in neighbouring countries, stressing the need to add value to the nation’s gas resources.

“It is actually critical that we have a mechanism to use our natural resources efficiently. The intention of our 2019 intervention is to make sure that these sectors are clearly recognized, so we are making some changes in the 2008 regulations such that people will not treat the law with levity,” he said.He said the government was not dictating the gas price, but simply relying on a market derived pricing mechanism, which is negotiated and must match international pricing.

The Chairman, MAN Gas Users Group, Dr. Michael Adebayo, said most companies are not getting gas to power their machinery, saying that this is hindering manufacturing activities in the country.He however commended the present administration’s 2019 gas policy, while also calling for its speedy implementation to enable manufacturers plan ahead.

“Our members are not happy at all, and most of them are moving out of this country to other ECOWAS countries because of the incentives they get over there and this is how we lose heavy industries.

The government must have the political will to do what is necessary in the case of gas. The government should review the price of gas downward to about $4 from the present $8 to attract foreign investments and also creating job opportunities,” he said.


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