Nigeria currently has infrastructure deficit of $30 billion annually which has been affecting the oil and gas sector negatively.
Dapo Oni from Ecobank Oil and Gas section, who stated this at the National Association of Energy Correspondents Retreat held recently in Lagos said that
Nigeria should not have such infrastructure gap because the country has at least 600 undiscovered gas fields, adding that globally, there is need for $300 billion investment in Oil and gas annually.”
He noted that Nigeria has impressive performance as the country is still the biggest oil producing country in the whole of Africa, noting that Nigeria is the only country one can buy oil field and start exploration immediately. The potentials he said are there.
Oni however noted that there was not enough incentive to develop gas in Nigeria. In the global front, he said, “Oil Producing Exporting Countries (OPEC) has discovered that the global oil investment has dropped for three consecutive years, adding that the global oil supply is threatened as investment is dropping in oil and gas sector. He maintained that OPEC would still cut production in June 2017.
“Regional supply is growing and over 60 per cent of the crude grade output of the West African regions is light and sweet. By volume it is higher as it is near 75 per cent condensates constituting a rising amount of 15 per cent due to countries such as Equatorial Guinea, Cameroon and Nigeria,” he said.
He revealed that there is a lot of shadow ownership in Nigeria oil field, adding that one of the key things needed in Oil and Gas is corporate governance.
Also Speaking at the Retreat, Dr. Dauda Garuba from Natural Resource Governance Institute said to interrogate transparency and accountability in oil and gas sector governance in Nigeria (NRGI), the core challenge included dependence on resource rents (enclave economy) and price volatility, deepening governance problem resulting in failure of highly prized natural resources to translate into economic development (Mis‐governance, corruption & conflicts), Non‐renewability requiring improved accountability and mitigation of potential revenue waste .
He listed the way forward to include prevention of leakages in public funds, improvement in public service delivery and access to basic social services, prevention of conflicts and vulnerability to poverty and access to private investment and finance for economic growth.
Dr. Garuba maintained that the three realities about Oil and Gas Sector is the most investigated sector in contemporary Nigeria, probably with the least reform efforts and regrettably the least responsive to even the minimal reform efforts ever made.
Speaking on Natural Resources, Oyindamola Adedekun from Facility for Oil Sector Transformation (FOSTER) said wealthy countries designed systems and instruments of saving and stabilization over the last two decades. Ghana saved almost $1 billion, Libya saved $66 billion while Nigeria saved only $1.4 billion and there has been no addition since as the governors are in court to stop Excess Crude Account.
Accountability according to her should be at all levels and there should b increased transparency and accountability, adding that a constitutional stabilization mechanism improves management of social instruments.
NERC to open customer complaints offices in 2017
In the face of dwindling electricity available to consumers, the Nigerian Electricity Regulatory Commission, NERC, has said it will set up 19 customer complaints forum offices across the country this year.
Head, Public Affairs Department, Dr. Usman Abba Arabi, said on Monday that the customer care offices were for electricity consumers to report their dealings with the distribution companies.
“The monitoring and enforcement actions have been intensified by the Commission to ensure that the electricity industry operators, especially the DisCos comply with the rulings of the NERC Forum Offices and other regulations. A lot of the defaulting DisCos, including the TCN, some GENCOs have been sanctioned by the Commission. Most of these defaulters have either fully paid the fines or applied for reconsideration. These regulatory oversights of the Commission have tremendously increased the rate of voluntary compliance by the electricity industry operators, especially on issues bordering on customer complaints”, he said.
On rumours doing the rounds that Commission favours the Discos over Nigerians, NERC as the sector regulator on power pursuant to the Electric Power Sector Reform EPSR Act 2005, said it is tasked with the responsibility of providing fair regulation to all stakeholders, including electricity consumers and operators as contained in Section 32&36 of the EPSR ACT 2005.
“Specifically, the Commission is by the law under the EPSR ACT to provide a cost reflective tariff for the operators based on prudent costs and create an enabling environment, while at the same time protect the interest of electricity customers to ensure they get value for money. The Nigerian Electricity Regulatory Commission is saddled with the responsibility of protecting the interest of both consumers and well as investors when it comes to the issue of electricity pricing as well as electricity supply in Nigeria. The allegation that the Commission is siding with the operators is simply untrue” he said.
The Commission also debunked report that only an increase in electricity tariff would guarantee steady power supply in the Country. “NERC’s position remain that in view of the economic recession in Nigeria and poor remittance level by electricity distribution companies (DISCO’s) multiple restraining orders from the courts as a result of litigations by some DISCOS that constrains the Commission, and the Nigerian Bulk Electricity Trading Company from enforcing the Market Rules on Discos and other market operators amongst others, increase in tariff is not imminent at this time”, it said.
NERC said it is working with the Ministry of Power, Works and Housing and other stakeholders to implement innovative ways to address the liquidity gap and other issues militating against improved electricity supply through both regulatory and policy interventions not excluding the appropriate intervention of the Federal Government as was executed in other jurisdictions that have implemented similar power reform programme.
There is no doubt that the electricity sector has not achieved the projected level of improvement due to various reasons that are attributable to the operators’ deficiencies and beyond.
Within the past one year, the macroeconomic indices such as the rate of inflation and exchange rate have steadily gone up.
This increase has affected the prices of all other commodities in the country. The purchasing power of Naira has crashed to all time low within the last couple of months.
According to Arabi, the MYTO methodology (pricing methodology) mandates the Commission to carry out a minor review of the Tariff bi-annually and adjust these exogenous factors that are beyond the control of the investors and the regulators. “The official exchange rate in the country has risen from N198.97 to over N305.05 to a dollar. Kindly note that the unofficial (black market) exchange rate is about N500 to a USD. This alone is bound to trigger an increase in electricity tariff given the fact that all equipment, spare parts, meters used for the generation, transmission and distribution of electricity in Nigeria are imported. Electricity is therefore a product like any other product that is affected by changes in micro economic indices”, he said.
He said that the rate of inflation has risen to 18.55% as at 1st February 2017 as against the 8.3% used in the tariff computation.
Similarly he said, the available electricity generation has dropped from the projected 7,199MW in 2017 to under 4,000MW.
The drop in power generation is due to vandalism of key facilities and this has created volumetric risk in the Nigerian Electricity Supply Industry (NESI), he said.
“The Commission is not oblivious of the economic hardship faced by Nigerians as we are also suffering the same fate with our fellow countrymen. We pay the same electricity tariff like every other Nigerian but we also have a duty of ensuring that the operators recover their prudently incurred cost thus the need for the tariff review at an appropriate time and manner with the aim of ensuring that the electricity market remains operational”.
Over 80% of the electricity generated in Nigeria is from gas fired power plant. The gas price is indexed to the US$ as the generators pay the gas suppliers in Dollars.