Gas price hike imminent as forex scarcity persist

Marcus Amudipe
Marcus Amudipe
Cooking Gas Depot

Owing to the lingering scarcity of dollars in the country, there are speculations that Nigerians might have to pay more for gas.

According to The PUNCH, National Operations Controller, the Independent Petroleum Marketers Association of Nigeria, IPMAN, Mike Osatuyi said independent importers were obtaining dollars from the illegal market, thus the price of gasoline would continue to rise until the naira rose on the foreign exchange market.

“Our members, who still sell gas, bought 20, 000 metric tonnes at around N11 million last month, but now, the price has jumped to N12.3 million per 20, 000 metric tones,” he said.

He said that as long as the dollar kept getting stronger, gas prices could go up even more.

Apart from the poor international gas supply caused mostly by the Russian/Ukraine war, it was also gathered that gas output from Nigerian Liquefied Natural Gas Ltd, NLNG, has plunged.

According to people with direct knowledge of the situation, high-level theft and oil and gas pipeline vandalism were the main causes of the production decline, which had reduced NLNG’s capacity to 60%.

The source also cited “feed gas constraint and high maintenance activities” as part of the causes.

From 20.7 million tonnes in 2020 and 2019 to 16.8 million tonnes in 2021, NLNG’s six-train Bonny plant’s output and export has decreased.

According to the company’s General Manager, Production, Adeleye Falade, who spoke at the 45th Nigeria International Conference and Exhibition 2022, NLNG has reportedly lost about $7 billion in revenue so far in 2022 as a result of gas supply restrictions.

Global gas consumption is anticipated to decrease by 0.8% this year as a result of a record 10% contraction in Europe and flat demand in the Asia Pacific region, according to the IEA’s quarterly gas market report. Natural gas markets around the world have been getting tighter since 2021.

Persistent under-investment, coupled with the perennial problem of oil theft from pipelines, has plagued Nigeria’s oil and gas sector in recent years.

Oil majors have drawn back from investing in Nigerian supply, and many foreign firms have either sold assets or signaled divestment plans.

Nigeria’s crude oil exports plunged to as low as 900, 000 bpd in August, the country’s lowest level on record, according to statistics from OPEC. The country was 700,000 bpd behind its OPEC quota in August.

As a result, The PUNCH learnt that foreign customers, who had booked for gas supplies, are currently experiencing fears as the country’s Bonny Island output falls to a record low.

Portugal, one of Nigeria’s major importers, has expressed concerns over supplies.

Portugal’s European Union, EU Environment and Energy Minister, Duarte Cordeiro, said his country could face supply problems this winter if Nigeria did not deliver all its supplies.

“From one day to another, we may have a problem, such as not being supplied the volume of gas that is planned,” he said in Lisbon, adding that the country was already considering alternative supplies.

The PUNCH learnt that Nigeria’s other European countries are also considering alternative supplies due to uncertainties from NLNG.

Oil and gas expert and analyst, Dr. Dauda Garuba, described the low gas production as “double tragedy for Nigeria,” adding that the country faced tougher times in terms of revenue.

“This means the country should expect lower revenue. These are tougher times for Nigeria because when we have less to export, then, we would be counting our losses,” he said.

Faculty Member at the Lagos Business School, LBS, and Head, Centre for Applied Economics, Pan African University, Dr. Austin Nweze, told The PUNCH “it is sad that Nigeria has been unable to meet its customers’ demand.”

He said this meant loss of revenue for the country, noting that everything should depend on planning so that the country would not depend on just one source of production.

“And, it is not a good business strategy to disappoint one’s customers because they will be forced to look for alternatives just as it’s happening now,” he said, adding that the Federal Government should have a business recovery plan that allowed the country to bounce back so as not to wallow in revenue losses.

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