• Sat. Jun 10th, 2023

    Labour rejects Nigerian govt cut in gas price; wants gas to GENCOs at below $1.50 per SCF

    ByBassey Udo

    Aug 5, 2021


    The Nigeria Labour Congress has criticized the recent announcement of a slash in domestic gas prices for electricity generation, describing the decision as not representative of the agreement between Labour and the government on the issue.
    Again, the NLC frowned at the lack of noticeable impact of the reduction in gas price on electricity tariff in the country.
    The Minister of State for Petroleum Resources, Timipre Sylva, who announced the reduction at the 2021 Gas Stakeholders Forum in Kano said domestic gas price was reduced from $2.50 to $2.18 per standard cubic feet (SCF). 
    The NLC President, Ayuba Wabba, said the misgivings by the different sectors of the economy, including workers by the policy statement by the Minister necessitated a clarification on the issue.
    “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 in the country,” he said. 
    “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,” Wabba said.
    At the close of the meeting, Wabba said the Minister of Labour and Employment, Chris Ngige, said electricity tariff would go down considerably.
    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,” he said.
    The Labour leader said considering that about 80 percent of electric energy generated in Nigeria is from thermal stations, which are powered by natural gas, electricity tariffs would remain high without a significant reduction in gas price.
    The GENCOs, he said, consume over 70 percent 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 explanation for the incongruously high differential was the lack of timely payment by the GENCOs for the gas supplied,” he said.
    Wabba argued that the lack of payment discipline and certainty was implicated as a major contributing factor that despite GENCOs account for over 70 percent of the consumers of domestic gas, rates are higher for power generation.
    To redress the situation, Wabba said 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. 
    Besides, he said the gas price reduction for GENCOs announced by the Minister did not conform with the agreement between the Federal Government and Organised Labour, as it falls far short below expectation.
    Again, the NLC said the pricing of domestic gas for GENCOs in dollars also represents the “quintessence of underdevelopment of Nigeria’s energy sector.”
    “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.
    While rejecting the denomination of domestic gas pricing to GENCOs in foreign currency, Wabba 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. 
    He said the meeting of the Principals unanimously accepted that the current practice of gas pricing in dollars would be discontinued to enable gas supply to GENCOs to be made payable in Naira.
    Consequently, Wabba said Congress demanded the Federal Government to reduce the pricing of domestic gas supply to GENCOs to less than $1.50 per SCF.
    They 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. 
    “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,” Wabba said.

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