Last week the Federal Government approved the new National Gas Policy. The new Gas Policy’s main objectives is to transform Nigeria from a crude oil export-based economy to an attractive oil and gas-based industrial economy.
It is also meant to extend gas penetration in the domestic market in order to facilitate the growth
of the electric power, agricultural, industrial and transportation sectors. The power sector for example, relies on gas to generate electricity. It is also meant to help gain a presence for Nigerian gas in international markets.
Immediate benefits of a Gas based economy
- Nigeria is said to have the world’s ninth largest proven gas reserves, at 187 trillion cubic feet.
- A revised policy that is focused on pivoting to a gas based economy could increase Nigeria’s foreign exchange earnings which currently relies mainly on crude oil exports.
- With a new Gas policy, the incessant epileptic power supply, mostly caused by cut in gas supply to power generating companies could reduce drastically. This will ensure that power generation is at least steady, giving more generators the incentives to generate more power to the grid.
- It could also help improve investments in fertilizer based manufacturing, gas based transportation etc.
- With this new policy, Nigeria now has a third tier sector in its Oil and Gas setup. Upstream which is for crude oil, downstream which is for oil marketing and refining, and then midstream which is for gas.
- The policy is also aimed at dividing the Nigeria Gas Company into separate transport and gas marketing companies and introduce “market-led wholesale gas pricing” after a transitional period.
- According to the policy, domestic gas prices, which had been a thorny issue for gas producers, will now be priced at The average export market price less the costs of regasification, shipping and liquefaction.
- This pricing will remain in the transition period before morphing into a pricing determined solely by the market.
- The policy also requires that upstream licenses will now include a condition to provide gas to the domestic market subject to the limit of their obligation.
- According to the report, even against subsidised kerosene a consumer of kerosene will spend N130 per litre for fuel compared with N89 the same consumer will spend on unsubsidized LPG. As such, a gas policy to provides an enabling environment for increased domestic gas usage will increase demand and provide a greater economies of scale, which will further reduce the price of LPG.
- Despite this obvious benefits, LPG usage in Nigeria is low as about 30 million households still rely on firewood to cook. Reasons cited are high cost of buying cooking gas equipment such as cylinders, cookers etc.
- The initial cost of acquiring a LPG cooking pack (cylinders, stoves, regulators etc.) as compared to other fuels is higher. Not only are the LPG cylinders specialised, but they are also subjected to import taxes even though domestic production capacity is presently limited.
- Also, VAT is levied on domestic production of LPG and LPG cylinders but not on imported cylinders.
- The policy is targeted at ensuring that introducing a tax policy that ensures cooking gas market is not put at a disadvantage.
You can download the Gas Policy below
