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Local firms pay more for gas than foreign buyers

By on June 13, 2016

Nigerian firms pay about 200 per cent more for gas to power their operations than importers of the product and manufacturers using gas in other countries, an investigation by SUNDAY PUNCH has shown.

Specifically, local manufacturers say they pay $7.38 for 1000 standard cubic feet of gas while the product sells for less than $3 outside Nigeria.

It was learnt that those importing the product from Nigeria were paying $3 including the cost of freight and other charges.

About 100 firms affected by the situation have cried out to the government to prevail on the gas firms to reduce the cost and save their companies from going under.

The President, Manufacturers Association of Nigeria, Dr. Frank Jacobs, confirmed this, adding that the association was in the process of hiring consultants to advise manufacturers on how best to engage the government on the pricing.

“Some of our members that use gas are really complaining about it.  We want to engage the government so that they can change the denomination (of payment) to naira. In this period of naira depreciation, if you check the naira value against the dollar, it is a lot of money to pay $7.38 for a 1000 standard cubic feet of gas.

“Gas companies don’t have equipment to capture enough gas and so do not have enough to meet local demand. What most of these companies do is that because they need dollars, they tend to export overseas and starve the local market.”

The Deputy Director, Haffar Industrial Limited, Dr. Michael Adebayo, decried the high price, adding that this was contributing to high prices of locally manufactured goods.

He said, “We are buying gas for $7.38 per cubic feet.  In Saudi Arabia, the same gas is being sold for less than $2.

“When you order from Saudi, you pay $2 with freight and other charges. People that are equally importing from Nigeria are paying $3 including freight and other charges. Why do we have to pay $7.38 when Nigeria is selling gas to people outside for $3?”

The volume of the product supplied to firms by gas companies on a take-or-pay agreement is usually pegged at 10,000 cubic feet a month, according to findings by our correspondent.

“They give you that volume of gas whether you want to use all of it or not. Even if you do not use everything, you still have to pay for 10,000 cubic feet,” Adebayo, who is a textile manufacturer, said.

The Coordinator, Steel manufacturers’ Association of Nigeria, Oba Okojie, said the amount charged by gas companies was not the actual price agreed between the government and the manufacturers.

But a major player in the oil and gas sector and Managing Director of Falcon Petroleum Limited, Prof. Joseph Ezigbo, attributed the high price of gas being sold in Nigeria to the cost of gas flaring and other factors.

He said, “You need to find out what it costs to bring the gas out of the ground. In the past, our gas was cheap because it was a by-product of oil; so, the gas was already paid for along with the payment for oil.

“But now, we are billing for gas exclusively and the cost of producing just gas alone is higher. So, comparatively, if you put gas and diesel side by side, the gas is still cheaper. Even at $10, it is still cheaper.”

He added, “The government took a deliberate action to fix the price of gas so that people will not sell differently.

“But there is a proliferation of willing-buyer-willing-seller situation where people are buying not within the ambit of the Nigerian Gas Company, the gas company that controls the price. Under such situation the gas can vary from $10 to as much as $15.”

 

[Punch]