The Minister of Power, Adebayo Adelabu has mooted the idea of creating legislative measures to ensure gas payments are made in naira in the power sector.
The Minister stated this on his official X handle after a meeting with the Minister of State for Petroleum Resources (Gas), Ekperikpo Ekpe on the issue of shortage of gas supply to electricity generation companies across the country.
According to the Minister, delivering enough gas supply to generation companies has been an issue and local gas payment can solve the supply issue.
- He stated, “Proposing domestic gas payment in naira is a key step toward stability, aligning with our economy’s needs and promoting sustainable energy production. Payment shortfalls within the electricity sector pose risks to production and the entire value chain.”
- “Leveraging my financial sector experience and contacts, I’m working with stakeholders to advocate for legislative measures mandating naira-denominated payments for domestic gas supply.”
The vandalisation of gas infrastructure
The Minister also noted that vandalization of gas infrastructure is another problem facing the power sector referencing a 2021 NEITI report that recorded around 7,143 incidents of pipeline breakages.
He further noted that from now on there will be clear contractual agreements between GENCOs and gas suppliers to ensure a steady gas supply to generation companies.
Backstory
- Last week, the Minister of Power, Bayo Adelabu, revealed that two of the nation’s largest electricity generation facilities, Omotosho and Olorunsogo power stations, were running at less than 25% of their capacity due to inadequate gas supply.
- It was reported recently that the national electricity grid shut down, plunging the nation into darkness because of a shortage in gas supply to generation companies.
More Insights
- Natural gas is priced in dollars for power plants due to investments associated with constructing gas plants and pipelines being denominated and transacted in dollars.
- Nevertheless, local operators have encountered challenges in making dollar payments following a currency crisis that has resulted in a substantial depreciation of the naira. This currency depreciation is anticipated to lead to a significant increase in the price of gas in the domestic market.
- Nigeria possesses proven gas reserves of 206 trillion cubic feet, which it has found difficult to exploit due to financial constraints. The government aims to address these challenges by transitioning to naira payments and implementing caps on dollar prices.
Good luck with finding business people who will source and invest dollars to drill gas wells, build a gas processing/transportation facilities and sell the gas in naira.