Dollarization Of Natural Gas Prices May Force Factories To Close Shop

Following the persistent increase in the prices of natural gas and its dollarization, the Gas Users Group of the Manufacturer Association of Nigeria has warned that unless the Federal Government tackle the menace, over 65 per cent of factories in the country may shut down over the non-supply of the product to power their operations.
According to the Chairman of the group, Dr. Micheal Ola Adebayo, the manufacturing sector is facing a lot of challenges which is not unconnected with the economic realities currently facing the country and it has became pertinent that the federal government and the general public is made aware of some of the challenges the sector is facing.
“The incessant increase in the price of natural gas which has persisted for some time now has reached a crisis dimension as most factories have stopped production and are about to shut down their operations due to the non-supply of gas to power their operation and the current exorbitant and demand of foreign exchange to buy the product”.
In fact some of our factories have been threatened with disconnection on account of their inability to pay the increased prices’’ he added.
He traced the genesis of the imbroglio, Adebayo said problem started in 2008 when one of the franchisers of the Nigerian Gas Company (NGC) increased the price of gas from N21.05 per Standard Cubic Metre (scm) to N67.63 per scm on a claim that the company was bench-marking the Petroleum Products Price Regulations and Monitoring Agency (PPPRA) template to fix its prices.
Adebayo disclosed that the Ministry of Petroleum Resources which bench-marked the price of natural gas to the movement of foreign exchange as published by the Central Bank of Nigeria (CBN) was fingered as the final nail in the coffin of the group.
‘’For the past one year, manufacturers have been confronted with series of increase in the price of natural gas due to the unstable rate of exchange of dollars to naira’’ he said.
He however called on government to as matter of urgency put effective measures in place to checkmate the excesses of some powerful people in order to enhance good governance and the sustenance of the economy.
The Chairman urged FG and CBN to look at the flagrant abuse of its directives that businesses transacted in the country should be transacted in the local currency, hence Natural Gas should be charged in Naira and not in dollars.
He also called for the intervention of the Senate and House Committee to ensure that Nigeria as a gas producing nation plays by the rules by adopting the global price on gas which stands at $2.87 as against that of Nigeria which is $7.38.
Also speaking on the issue, managing director, the Nigerian Liquefied Natural Gas (NLNG), Babs Omotowa, said that any attempt to reverse the Nigerian Liquefied Natural Gas (NLNG) Act such that will truncate the sanctity of agreements contained therein will likely cost Nigeria about $25billion investment.
Apart from losing such monumental investment, huge fines would be slammed on the country for reneging on such agreement.
Omotowa said “Where NLNG ability to attract future investments to maintain and grow the plant is being put in jeopardy by attempts to renege on promises that Nigeria gave to foreign investors that has enabled us attract $15billion in foreign investment, and grown LNG capacity from a 2 Train complex to a 6 Train plant”.
The managing director explained that the financial incentives of the nature contained in the NLNG Act are not uncommon in the global LNG industry, adding that countries such as Qatar, Oman, Malaysia, Angola, etc have similar incentives in place.
Also, the Director General, Lagos Chamber of Commerce and Industry, Mr. Muda Yusuf , said the major challenge facing the Nigerian economy at this time is the inability to regain the confidence of investors, both local and foreign.
Yusuf stated that the instability and inconsistency in the foreign exchange management policy have been complicating matters for the manufacturing sector. “The economy has a major structural defect of being heavily import dependent”.
He noted that if the challenges cannot be fixed in the short term. Therefore, the shocks arising from the collapse of oil price and the corresponding depreciation in the naira exchange rate were inevitable.
The DG said that what is key for monetary authorities is to ensure that financial markets are efficient and transparent and to ensure that there is discipline among players.

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