Gas Sale To Gencos Should Be Below .50/SCF: Statement Of Nigeria Labour Congress On Reduction Of Gas Price To Electricity Generation Companies

Gas Sale To Gencos Should Be Below $1.50/SCF: Statement Of Nigeria Labour Congress On Reduction Of Gas Price To Electricity Generation Companies

The Nigeria Labour Congress has been inundated with numerous enquiries from workers and members of the Nigerian public alike concerning the reported slash of domestic gas prices for electricity generation and its lack of noticeable impact or reduction of electricity tariff.

Congress notes that the underlying statement of gas price reduction was attributed to the Minister of State for Petroleum Resources, Timipre Sylva, as widely reported in the local media of 2nd August 2021. The Minister at the 2021 Gas Stakeholders Forum in Kano reportedly announced that the Federal Government had approved the reduction of domestic gas prices for electricity generation from $2.50 to $2.18 per standard cubic feet (SCF).

It is partly as a result of the misgivings generated by the policy statement of the Minister of State for Petroleum that Congress is compelled to issue this statement. The purpose is to openly ventilate the agreed position between the Federal Government and Organised Labour on gas pricing as a critical factor in the computation of electricity tariff.

Congress states that the information she now shares with the public has already been provided to her members.

It is significant that the incessant increase of electricity tariff was one of the several issues discussed between the representatives of the Federal Government of Nigeria and Organised Labour, hereinafter referred to as the Principals, on 28th September 2020. Specifically, an agreement was reached at the meeting to set up an FGN-Organised Labour Technical Committee on Electricity Tariff.

The Technical Committee thus set up on 28th September 2020 had a clear mandate to review several critical issues in the power sector and to suggest reforms that will provide succour to Nigerians over the short and long term.

The Technical Committee submitted its final report to the Principals at the close of January 2021. The meeting of Principals convened on 22nd February 2021 and discussed the report. The Principals accepted among other recommendations that “necessary actions should be taken to use efficiency to bring the gas price to below $1.50 per MMBtu.”

Indeed, the public will recall that at the close of the meeting, Dr Chris Ngige, Minister of Labour and Employment, made a statement to the media that the electricity tariff will go down considerably. According to The Nation newspaper report of February 23, 2021, the Minister of Labour and Employment stated that “Nigerians will witness a reduction in the cost of electricity tariff, Minister of Labour and Employment Chris Ngige said on Sunday night. The minister said the Federal Government and organised labour agreed on the reduction in the cost of gas sold to Generating Companies to $1.50 as against the $2.50 it is sold to GENCOs.”

Congress also wishes the Nigerian public to know that about 80% of electric energy generated in Nigeria is from thermal stations, which are powered by natural gas. In fact, the GENCOs consume over 70% of domestic gas production. Whereas the GENCOs are required to pay as much as $2.50 per standard cubic feet (SCF), other gas users, however, get the same at lower rates, ranging from $1.50 to $1.70 per SCF. The worn explanation for the incongruous high differential was the lack of timely payment by the GENCOs for the gas supplied.

In other words, the lack of payment discipline and certainty was implicated as a major contributing factor that despite GENCOs account for over 70% of the consumers of domestic gas, rates are higher for power generation.

To redress the invidious situation, the Principals resolved that Gas Companies should be integrated into the Central Bank of Nigeria (CBN) payment waterfall of the Nigerian Electricity Sector Industry (NESI) to guarantee payments for gas and contract sanctity of GENCOs.

Congress has gone into this lengthy detail to underpin her position that the gas price reduction for GENCOs announced by the Minister of State for Petroleum is a flagrant repudiation of the kernel of the agreement between the Federal Government and Organised Labour, as it falls far short below expectation.
Congress reiterates the abundant evidence presented to the Technical Committee and the meeting of the Principals that the pricing of domestic gas for GENCOs in US dollars represents the quintessence of underdevelopment of Nigeria’s energy sector. Therefore, the dollarisation of domestic gas supply to local power generating companies similarly feeds neatly into the debate of the commodification of the indigenous resources to forcibly incorporate the developing countries into spawned dependency. Hence, Congress rejected the denomination of domestic gas pricing to GENCOs in foreign currency. Rather, Congress insisted on a payment regime in Naira not only for domestic gas but also, all energy associated products, which should be denominated in local currency.

To be fair to Government representatives, the meeting of the Principals was convinced by the argument of Congress. Thus, the Principals unanimously accepted that the current practice of gas pricing in US dollars would be discontinued to enable gas supply to GENCOs to be made payable in Naira.

From the foregoing, Congress is increasingly hard put to repose confidence on the discussions and agreement at the meetings. The resolutions of the Principals cannot certainly be the basis for the minuscule gas price reduction announced by Minister Timipre Sylva.

Consequently, Congress demands of the Federal Government to reduce the pricing of domestic gas supply to GENCOs to less than $1.50 per SCF. We also demand that payment for gas by GENCOs should be denominated in Naira. Furthermore, the Gas Companies should be included in the Central Bank of Nigeria (CBN) and Nigerian Electricity Service Industry (NESI) payment waterfall to guarantee payments for gas and contract sanctity with GENCOs.

Finally, Congress demands that the Federal Government should respect the agreement it reached with Labour on electricity tariff. Congress remains implacably committed to the ultimate reduction of electricity tariffs by N15 per kilowatt-hour by December 2021 as contained in the agreement. Congress hereby serves notice that the posture of the Federal Government to flout agreements is completely unacceptable and would be resisted.

Comrade Ayuba Wabba, mni
President