Why FG must end dollarisation of domestic gas

Afolabi Aiyela, Chief Executive Officer (CEO) of Welbeck Electricity, has urged the Federal Government to end the dollarisation of domestic gas.

Aiyela said that gas needed to be available if more people are to have access to both Grid and Independent Power and that it must be priced in the local currency like every other product sold in Nigeria.

He also noted that there were two major impediments preventing improved power supply in the country.

Aiyela made the observation at a recent stakeholders’ meeting on the Lagos Electricity Market, hosted by the Lagos State Commissioner for Energy, Biodun Ogunleye at Alausa, Ikeja.

“Investors, both foreign and local, are reluctant to make new investments in the Nigerian power sector due to the constraints that come with a market whose tariffs are still set by the government. Subsidised markets have never attracted high levels of investment, an example being the lack of investment in oil refining over the decades. It is a bitter pill to swallow, but Nigerians must understand that subsidy removal is a prerequisite for private sector investment leading to better service.

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“Current MYTO electricity tariffs averages around N85/kWh for high demand users. An average Nigerian spends approximately N200/kWh and N392/kWh to fuel their generators with petrol and diesel, respectively and this does not include the capital cost or maintenance costs.

“N200 to N392 per kilowatt hour is significantly higher than the tariff would be if there was no subsidy, meaning that if the government removes subsidy and as a result, supply of electricity improves, most Nigerians would eventually be spending less on power than they are now with their mix of public utility grid power and private generators. It may also interest you to know that in Lagos alone, over 20,000MW of diesel generators are used to power Lagosians during blackouts. This is over four times the total average grid generation,” Aiyela said.

Echoing a recent observation of the Minister of Power, Adebayo Adelabu that “proposing domestic gas payment in Naira is a key step toward stability, aligning with our economy’s needs and promoting sustainable energy production,” Aiyela said: “If the Minister along with his Petroleum counterpart are able to work with the legislature to make this change happen, it will see things stabilise in our sector. Independent power producers are the lifeblood of industry in some areas, while more and more estates are turning to independent power. The gas needs to be available if more people are to have access to independent power and it must be priced in our local currency like every other product sold in Nigeria.”

On his part, Biodun Ogunleye said: “Domestic gas must be priced responsibly and in local currency” in order to sustain the power industry and ensure affordability of electricity for end users.

With regards to the subsidy, Aiyela further said: “The government has to remove the subsidy if it is serious about attracting foreign investment. There is also a huge knock-on effect as power affects almost every aspect of our lives. In order to strengthen our Naira, we need to produce more of the products we buy and consume at home and import less, which can only be achieved with steady power.”

According to him, “if we as a country can get power right, we could become the manufacturing hub of Africa and begin to rival countries like even China. We can learn from some of the countries that make up the BRICS group, such as South Africa that produces 58,095MW or Brazil with their 181,532MW. These countries have fully deregulated electricity markets that encourage investment and innovation and no price regulations or subsidies. We have the skills, the manpower and the entrepreneurial spirit embedded in our culture, so with the right enabling environment, the possibilities are endless.”

In his contribution, Welbeck Technical Director, Vesiri Ibru, said: “Welbeck along with other investors in the IPP industry are ready and able to significantly increase the power available to Nigerian consumers, but only if the market is truly demand-driven. We have had various discussions with potential foreign partners; however, they are hesitant to deploy investment assets to a market that is not free of government intervention.”