Nigeria has the biggest gas reserves in the African continent, though 75 percent of the country’s electricity is generated from fired thermal plants, over an 80million of its citizens lack access to electricity.
Nigeria’s gas reserves and potentials are so huge that it was once said that the gas flared in Nigeria was sufficient to generate electricity for the whole of Trinidad and Tobago for one year. However, the enormity of the gas reserves has not guaranteed the security of the energy supply.
Many Nigerians are wondering why cooking gas (LPG) prices keep rising, despite Nigeria’s large gas reserves. They also wonder what the federal government of Nigeria might be doing to stem this tide.
The Nigerian government has tried to explain how keen it is on forming collaborative partnerships with the private sector in a bid to grow the economy using gas, showing a new oil law as evidence of its intention, but operators say more is required.
Industry experts believe the main reason for this ugly development is the government’s stranglehold on regulating gas prices, which is disrupting the market and ruining businesses according to investors.
Ironically, improving energy access is the government’s argument against a liberalised gas pricing regime.
The federal government placed on gas producers, a domestic gas supply obligation, which mandates them to sell a certain percentage of gas produced to legacy power plants at a controlled price regardless of their cost of production and business assumptions.
Cooking gas is produced from processing gas and refined crude. It, therefore, requires some processing and or refining. Thus, merely having natural gas or crude does not guarantee that the country will have cooking gas, if there is the capacity and or the infrastructure to refine the requisite petroleum or process the natural gas into butane and propane.
Nigerians are suffering in the midst of an abundance of gas, and this cannot in any way be accounted as a credit to the ruling government.
Reliance on the importation, the introduction of 7.5 percent value-added tax (VAT), devaluation of Naira, as well as the scarcity of inflow dollar, have been adduced as major reasons responsible for the recent surge in the prices of liquefied petroleum gas (LPG) also known as cooking gas.
According to experts 60 percent of the cooking gas consumed in Nigeria is imported.
And, because just 40 percent of demand for LPG is being supplied locally while 60 percent is sourced through importation, a lot of other external factors have come to affect the price. Chief among these is the 7.5 value-added tax (VAT).
It is obvious that why cooking gas prices are on the rise is because of domestic underproduction, and the vagaries of importation. If a country imports an international commodity from the international market then the vagaries of the international market will impact the same.
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It is also important to note that because cooking gas is imported even if its price does not increase in the international market, the same will continue to increase if the Nigerian currency continues to devalue because more naira will be required for the same United States price of a commodity.
As unfortunate as it is, the federal government has claimed that it has no direct control over the rising prices of cooking gas, and cannot regulate it at will. But it could impose VAT on a product that it does not have the control to regulate.
It is a universal truism that a government all over the world is stationed to alleviate the sufferings of its people. Nigerians are suffering in the midst of an abundance of gas, and this cannot in any way be accounted as a credit to the ruling government.
The continuous hike in the price of cooking gas exemplifies everything wrong with the country’s ecosystem and why the economic handlers should make a conscious effort to create an atmosphere of optimism. Cooking gas is symbolic because it represents a product that many Nigerians, especially those living in urban and semi-urban areas, need for everyday cooking.
Nigeria has it in abundance, being the 9th largest reserve (about 207 trillion standard cubic feet as of 2019), and it is a source of clean energy that country is advocating for many of its citizens to change to.
Aside from being used as cooking fuel, it is used to power appliances, power some vehicles, and some small businesses depend on gas. Whatever happens to gas affects almost all families one way or the other.
The Nigeria gas policy should be tailored to protect and promote the wellbeing and welfare of its citizens, irrespective of the tide in the international market. It is sacrilege for a people to be suffering in the midst of abundance.
Bearing in mind the essentiality of cooking gas, the federal government must need to review the VAT policy. Besides, Nigeria must continue to develop the capacity to refine and process its base natural resources, especially with the obligation to reserve some of that for domestic sale. With this in place, the federal government might be able to play a serious role in stemming the tide of incessant price increases.
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