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Buhari consults marketers, others on fuel subsidy




• Power generation plummets to 1,327mw
• Aliyu canvasses its removal

PRESIDENT-ELECT, Muhammadu Buhari, is now gathering data that will drive his policy direction on the downstream sector of the petroleum industry, with a view to finding solution to scarcity of products.

The Guardian gathered that he is making contact with relevant stakeholders on how to effectively implement the subsidy regime by analysing the market response to the policy, especially as it affects acute scarcity of products.

Meanwhile, Nigeria is plunging further into darkness, as power supply collapsed across the country. In fact, unless there is a miracle of some sort in the next 24 hours, Jonathan would be handing over a power sector that is generating a meagre 1,327 mega watts of electricity or less.

Niger State Governor, Babangida Aliyu, yesterday, said the solution to frequent fuel crisis is total removal of subsidy on petroleum products. He said this at the inauguration of a three-star hotel constructed jointly by the Niger State Development Company Limited (NSDC) and the state Subsidy Re-investment and Empowerment Programme (Sure-P).

According to him, removal of fuel subsidy will put a stop to activities of cabals in the oil business, while guaranteeing regular supply of the product across the country.

The subsidy on petroleum product, Aliyu argued, is currently being enjoyed by only a section of the society who has the necessary connection to be importers of the commodity.

‘‘Unless fuel subsidy is removed and we go back to the real market, we will continue to have the type of problem facing the country at the moment.”

“Is it not an irony that we sell crude oil and we end up buying refined petroleum from the international market?” Aliyu asked.

He also suggested the regionalisation of the distribution of power, instead of lumping all parts of the country onto the national grid.

The Executive Secretary of Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN), Olufemi Adewole confirmed an invitation to the group by the President-elect’s Transition Committee.

“Yes we received an invitation from the Transition Committee for us to submit a presentation to it today (yesterday). We are still working on the presentation and will submit it as soon as it is ready,” Adewole said.

Though government had been beating its chest that installed generation capacity has increased to 6000 mega watts, actual generation is less than 1,327, leaving the nation with about 4,800mw capacity lost to factors including unavailability of gas and the strike by the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), and the Nigeria Union of Petroleum and Natural Gas Workers (NUPENG).

Also, Nigeria’s hydro power plants don’t seem to be faring any better as one of them, Shiroro Hydro-electric Power Plant suffered a major system collapse Sunday evening, worsening an already bad situation. This has left Abuja and environs with only 15 mega watts.

In the meantime, only ‘sensitive installations’ within the Central Business District of Abuja are on electricity supply.

The Abuja Electricity Distribution Company (AEDC), for instance, has witnessed a huge drop in power supply to customers, following a sharp drop in its own allocation from the national grid which was 145mw as at Friday, May 22, 2015, and 115.6mw for Saturday, May 23 and Sunday, May 24, 2015.

As at Monday, 18 out of the 23 power plants had been shut down.

Confirming the dismal state of affairs, a statement from the Nigerian Electricity Regulatory Commission (NERC) said the regulatory agency had noticed with concern the acute shortage in power supply and the attendant hardship Nigerians are passing through on account of increase in vandalism in the run up to the April 2015 elections.

“But this bad supply condition has worsened in the last few days.

“At present, 18 out of the 23 power plants in the country are unable to generate electricity due to shortage of gas supply to the thermal plants with one of the hydro stations faced with water management issue. This has led to loss of over 2,000mw in the national grid.

“This situation is further compounded by the recent industrial actions embarked upon by workers in the oil and gas industry, a development which is taking toll on other sectors of the economy. Gas supplies to the thermal plants have been further constrained by the industrial actions of workers in the oil and gas industry.

The Commission had proactively engaged the gas supply companies and its licencees when two weeks ago, discussion was held on how to firm up gas supply in order to increase power supply.”

Chairman of NERC, Sam Amdi said: “Not much progress was made through this meeting as NNPC and its subsidiary, Nigeria Gas Company, disclosed high incidence of vandalism in some areas such as the damage to Trans-Forcados pipeline in the western axis and ELPS gas pipeline in the eastern axis.

“In essence, what has brought about this development is the increased incidence of vandalism which is beyond the control of the regulator and the industry operators. However, we have continued to engage with relevant authorities on how fast we can address shortage of gas supply to the thermal plants. We are also engaging with the industry operators on how to improve electricity supply. The Commission regrets the hardships which Nigerians are being subjected to on account of this development as we intensify efforts to bring the situation under control in the shortest possible time.”

Permanent Secretary in the Ministry of Power, Ambassador Godknows Igali confirmed that power generation nationwide had dropped from 4,800MW to 1,327MW, leading to the massive load shedding ongoing across the country.

“It is because some Nigerians go to destroy our pipelines. They don’t allow gas to get to our power plants. But we are going to solve that problem. The nation will get over it.’’

Blaming vandalism for the situation, Igali said: “I say this because the amount of gas we have now can give us more than 6,000mw. If we have 6,000mw, most parts of Nigeria can have power for at least 16 hours.”

On why many Nigerians still receive bills despite the outage, he said: “This is as a result of the estimated billing system. What the power distribution companies do is to guess; based on the size of a house they approximate and charge. So the country is going to be embarking on a robust metering scheme. The Federal Government is involved in this and it is working with private companies in the sector.”

But despite the sorry state in the quantum of power supplied to Nigerians, the Federal Government is beating its chest on the investments put into the sector.

Minister of Power, Prof Chinedu Nebo, is optimistic that Nigerians will soon begin to enjoy better power supply.

“Today’s power sector is a deregulated one that has benefitted immensely from the gains of privatisation,” he said.

He noted how the reform had brought with it “concrete and tangible results recorded in the area of quantum injection of capital – both foreign and local.

“It is on record that at the recent privatization exercise, the bulk of the money invested in the sector came from local financiers. Since privatisation and subsequent take-over, more technical know-how and the application of value-added ICT initiatives for improved processes have also been introduced to the power sector. Ughelli Power Plant for instance, which was doing a paltry output of a little above 100MW before take-over, today is operating at over 600MW, with plans to push close to 800MW soon.”

Beyond gas-fired plants, the minister said the hydrological endowment if fully harnessed, as envisaged in the new National Policy on Renewable Energy, would see rapid development of hydro potentials.

With the aim of boosting supply, government has variously invested huge amounts into the power sector in the areas of direct involvement and also through intervention funds.

For instance, the three tiers of government have invested a whopping sum of about $5 billion in building 10 electricity generation plants, several kilometres of transmission lines and distribution facilities across Nigeria under the National Integrated Power Projects (NIPP).

Early this year, the Central Bank of Nigeria (CBN) commenced the disbursement of N213 billion to encourage, among other things, gas supply to the sector.

Amadi explained the rationale behind the fund. He said: “Firstly, it is to pay debts owed gas suppliers. It is our expectation and plan that this will in turn enable the gas suppliers to supply more gas so that more electricity can be generated and distributed to the Nigerian people. As you may know, lack of adequate gas supply to generation companies (GENCOs) has been one of the main reasons for electricity shortage. And one of the main reasons that adequate gas is not getting to GENCOs is because the gas suppliers have been owed huge sums of money for the gas they have been supplying.

About 80 per cent of our generation comes from gas-fired plants. So it will be grossly negligent to damage the confidence of gas supplier by not paying for gas supplied even before the assets were privatised. But note that we are paying only well verified and attested gas debts.

“Because of these problems, GENCOS are not paid for power supplied. The CBN money will help to pay for the unpaid debt owed to GENCO. Paying off this revenue shortfall, under the arrangement we are putting together with the CBN will provide financial liquidity that will enable DISCOs and GENCOs to invest more in building capacity to deliver reliable electricity to Nigerian homes and businesses.”

On the present fuel crisis, Adewole explained that marketers are now loading products that were imported by the Petroleum Products Marketing Company (PPMC), saying marketers are not on strike but do not have products to sell as banks have refused them credit facilities to enable them import products on account of unpaid debts.

“Marketers are still supplying the products that we have despite the fact that we have still not been paid the outstanding money. The PPMC cargo brought in the stocks that major marketers and a few of DAPPMAN are loading in partnership with the PPMC. Until we are paid, we are incapacitated in the process of sourcing funds to import products,” he explained.

  • Sal Yarima

    Dancing with IMF is the same as chasing your own tail China did not do what IMF wanted. China is great today. Who in Nigeria has the guts to stand up to the IMF?

  • tit

    NO to subsidy removal.
    The poor masses will suffer!

    • emmanuel kalu

      how would they suffer?

  • bigbang

    Remove the subsidies immediately. Use the savings to fix the refineries. The price of oil is currently low. Without the subsidies, the cost should be about 150N per litter. Nigerians should make sacrifices for long term benefits. Once the refineries are fixed. The cost of oil should go back to 65N per litter.

    • oduduwa

      N150/Litre? you are completely out of tune with reality. Which sacrifice? many will die before the long term effect takes place. Price of Oil is low you say, have you considered the exchange rate? Do you realize the ripple effect this will have on everything in this country? you can speak for your self and not for us all. Remember the outgoing administration removed it but most people in the incoming administration mobilized Nigerians against it so i do not see why they themselves should remove it.

      The only fair thing to do and i think that is what Buhari would do, is to thoroughly screen the marketers who claim subsidy payments and embark on an emergency plan to build refineries that will meet the energy requirements within the next four years. This is the only reasonable thing to do other than rely on text book theory of subsidy removal and long term gains without considering the reality of untold suffering this will cause.

      • emmanuel kalu

        what are nigerian’s paying right now N180-200. right now, we are paying for the interest rate, forex difference and profit for the marketers. that is a complete now risk business. the regulated price of fuel is N87. i can’t remember the last time anyone paid that. it is time to deregulate the market and end the madness. we are wasting over 5 billion each year on this madness.

        • oduduwa

          let us be truthful to ourselves. Through out this administration, fuel prices and availability has been relatively fair up ontill this last days with the sabotage. Previous administrations have seen us having long weeks of fuel scarcity and black market pricing but it became more stable. removal of subsidy is good as long as the price remains the same since many of the incoming governments people have said in the past that there was nothing like subsidy in the first place. We are no so dumb man!

  • Paddy8

    Full surgery on a weak patient will only kill him.Subsidy removal and retail price increase has to be in four or five stages spread over the next 2/3 years.20% cut now will be comfortably absorbed in the market. Simultaneous effots are to be on for growth of the country and its GDP.Once employment growth is fast tracked, second 20% cut can be achieved.This will also give President Buhari enough time to plan and implement energy reforms including energy saving, conservation measures.What is happening now appears to be a political conspiracy to fail President Buhari`s efforts to revive the economy.He needs time and hence the reforms process which has not been initiated all these years can wait for a few more months for the new President to review. In any other modern democracy, the outgoing government which has lost the polls would not have been allowed to present a budget with such big reforms. I do not know why such a process is allowed in Nigeria. President Buhari will do well to change this process to take effcect from next elections.

  • Donald Ikenna

    Its about time we remove the subsidy as it is far from benefiting the poor Nigerian masses. Subsidy payments overtime have eaten deep into the Nigerian purse, served as a channel for stealing and eroded developmental opportunities. What is stopping the building of local refineries? Deregulate the oil and gas industry generally, and remove subsidy. Nigerians are already paying more than N87/litre (Nigeria is bigger than metropolitan lagos and abuja), so its best we remove it and save as all the subsidy theft and investigations and probes than never yields any result or imprisonment. from the PPPRA pricing template as at 22 May 2015, a price of refined imported fuel per litre is N132… Pls check @Donaldikenna1

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  • emmanuel kalu

    mr incoming president, the matter of subsidy is settle. nigerian’s and smart people have decided the looting has to end. nobody but the cabal benefits from this, yet nigerian’s have to suffer massively. removing the subsidies is easy. deregulate the market, use PPMC to import fuel( which right now is happening) the marketers are loading the fuel that PPMC imported. the imported fuel by PPMC should be solde at a small profit or at cost. simple. subsidies over, the looting and blackmail of nigeria over.

  • Sal Yarima

    Sabotaging Nigerian economy. Time for the death penalty. With the death penalty, few Nigerians would take money from the Oyimbo man to sabotage Nigerian facilities.

  • New Nigerian

    One thing is clear – there is no subsidy. Because there is no subsidy, you do not stop what is not there in the first place, as many have called for. What we have is simply this, a hand-picked folks who are the only one that can import fuel (monopoly), who we pay their cost of offloading fuel at the ports, including demurrage, if incurred, who are the only ones who can sell to Nigerians (a guarantee market of 177million people), who pay no tax on their products and who we pay $32billion a year for their trouble, and some divert the same paid-for products to neigbouring countries to be sold at market rates for more money (since the pump price is higher in those countries) ….This is slavery and Nigerians were enslaved to these few hand-picked (by PDP) cabal. This is the slavery that MUST be stopped and to the extent that we did NOT sign off for this slavery, we should ask for the refund of $192billion + however more have been paid since inception back to the treasury of the federal republic.

    So what need to happen is a comprehensive plan in the short term, similar to what entails under General Buhari in 1984/85 and when he was oil minister of comprehensive open bid to capable conglomerates to maintain our refinery and at the same time ensure that we have refined products through their network of refineries world wide while we provide them crude to ensure that we only pay at cost + value add, then we should tax the products and use the funds to develop the transportation sector. In the medium to long term we should have the plan to build refineries in Nigeria and transform NNPC to build refineries everywhere in Africa ensuring we derive the value chain from production to the pump.

  • Ayodele

    Enough with the speculation! The handover is just 2 days away. The self-appointed advisers to the new president should just pack it up and stop playing judge and jury.

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  • Dominion

    Gas pipe line vandalization ! Do vandals also scoop gas from the broken pipes ? Please can we stop this self deceit ? Contractors repairing the gas pipeline and those awarding the contracts should be held responsible ! They are the ones sponsoring the breakage of the pipes, so the contracts to repair them will keep coming. That is more jobs and Billions into their pockets. For such amount, some Nigerians will kill their own mothers ! Change the mode of operation and all these nonsense will stop ! If government do not have the resources to drive these process, they should engage those with the requisite expertise like us.