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‘Why manufacturers pay more for gas’

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Gas plant

Gas plant

Dangote offers coal alternative

At about $7.65 per bcf (billion cubic feet) compared to landing cost of $2.50 per bcf, manufacturers have decried huge costs being paid for the commodity, even as franchisers hinge high cost on lack of key infrastructure to deliver the product to industrial clusters.

Indeed, while negotiations are ongoing between manufacturers and franchisers, President of Dangote Group, Aliko Dangote, has urged many industrial firms to adopt the coal alternative, describing it as cheaper at $1.50 when compared to gas.

To this end, manufacturers have sought government’s intervention in addressing cost–related challenges in accessing the product, even as the franchisers frown against any form of subsidy, while emphasising the need for market forces to determine the costs of the services rendered.

Former Director-General of Manufacturers Association of Nigeria (MAN), Jide Mike, described the present situation where manufacturers pay huge costs for gas as stifling operations and uncompetitive.

For Dangote, he explained that the problems of unreliable power supply from the national grid and increasingly dwindling gas and Low Pour Fuel Oil (LPFO) supply, made his firms invest in coal-fired power plants in its Obajana, Ibeshe and Gboko plants.

Chief Executive Officer, Seplat Petroleum Development Company, Austin Avuru, urged the Federal Government to address infrastructural challenges affecting the delivery of gas to industrial clusters, noting that such challenges account for other costs that affect the rate being charged by operators in the oil and gas sector.

Avuru added that the oil and gas sector remains the engine for the growth of the real sector, stating that the resources from the oil and gas industry can be used to develop the non-oil sector.

Similarly, The Guardian had recently reported concerns over the use of new flexible foreign exchange rate for services rendered by gas franchisers before the policy was revealed.

According to MAN, the use of the new policy of parallel/flexible exchange rate unveiled by the Central Bank of Nigeria (CBN) last month for services rendered in the period pre-dating the apex bank’s policy is worrisome and only adds to the burden of the real sector.

Specifically, some of the franchisers include, Shell Nigeria Gas Limited, Falcon Corporation Limited and Gaslink Nigeria Limited.

Director-General of MAN, Remi Ogunmefun, said the ongoing crisis in respect of the price of gas and the billing calculation system of the franchisers, remains a concern for MAN member-companies, who were given demand notice for services rendered at an exchange rate of N281/$1 against the N199/$1 at the time of agreement.

He explained that some other franchisers had issued their bills based on the appropriate use of CBN exchange rate in arriving at the bill issued to some of its members, noting that in the same month when exchange rate was N283/$1, MAN members were billed on the ruling rate for the gas supplied using the appropriate rate of N199/$1.


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1 Comment
  • Triple_O

    The Director-General of MAN, Remi Ogunmefun, should remind the Governor, CBN, Mr Emefiele, of his recent defence of CBN providing pilgrims on the 2016 Hajj with USDollars at N197/$ as reported in the newspapers, viz: “Emefiele said refusing to provide foreign exchange at the N197 per dollar agreed rate would mean that pilgrims would have to pay the difference between the old and new rates”. This, he noted, was against sound business principles.”
    In line with this “sound business principles” statement, he should immediately issue his CBN Circular to all Banks directing
    them to provide USDollars at N197/$ to all their customers who submitted and fully funded their applications for forex before the introduction of the “Flexible Forex Policy” (FFP), and where necessary, immediately refund to those customers any additional “Difference in Exchange Rate” charges the banks had levied on implementation of the FFP!!!