BY VICTORIA ONU, ABUJA
THE volatile nature of foreign exchange may threaten the nation’s gas to power initiative, as well as the gas industry at large.
The changes in the forex market undoubtedly affects gas pricing which in turn affects power generation and payment for gas as the business of gas pricing is done in dollars.
However, with gas purchase being done in naira at retail outlets, there is apprehension that the business may not be sustainable because of the current level of foreign exchange volatility.
The Department of Petroleum Resources, in its latest report released on its website on Monday, noted that the power sector had not attracted the needed investment due to issues around gas pricing.
It stated, “We expect that more investors would invest in the distribution as well as transmission of power, but these investments are not coming for two reasons: We generate power, we use gas and there is the issue of gas pricing.
“The explorer of gas uses dollars to explore and bring out the gas. But when he gives the off-taker, he wants to pay in naira, especially the GenCos. So, that really creates a huge gap, with the regular currency disparity.
“Unfortunately not only for us, a lot of other economies rely on dollars to transact internationally. But that is the key to determining success of gas to power, gas to industry.”
According to the report, every power generated, transmitted and marketed, which the consumer did not pay for, will be paid for by the government, because they are usually paid up-front.
It stated that a huge quantity of gas was exported because of the need to recoup the Forex needed for production.
The report said, “So now the gas owners are struggling to get their money back because their transaction is in dollars but they are selling it in naira. That also explains why most of them prefer to export gas to get needed Forex so that they can continue to produce.
“Their argument is that with this intermittent gap, we have to sell some portion of the gas to earn dollars so that we can be able to pay for drilling since I will give you the gas, you pay me in naira. But we are trying to solve that problem and once solved, that case closes.”
“Today, if naira becomes one of the international trade currencies, I can tell you so many things will change,” it added.
The DPR, in the report, added that while crude oil was expected to remain relevant in the next 50 years as an ingredient for developing economies to grow, there was a need for Nigeria to get into the race of getting renewable energy.
The report further showed that about 75 per cent of Nigeria’s population did not have access to energy, as Nigeria’s energy security rallied around 25 per cent.
