Experts Urge Government to tackle Nigeria’s Gas, Electricity Sector Challenges

Experts Urge Government to tackle Nigeria’s Gas, Electricity Sector Challenges

 

Experts in the energy sector have called on policymakers to have a sweeping policy review for the prospect of an improved energy market in the country as the world continues to take measures aimed at improving the negative impact of the coronavirus pandemic on the global economy. This request came up at a webinar organised by the Covenant University Centre for Economic Policy and Development Research (CEPDeR) with the theme, 'Post-COVID: Natural Gas Utilisation and Energy Market Prospects in Nigeria'.

The Group Managing Director Eraskorp Limited, Dr Ekpen Omonbude, speaking on the subject of oil price changes and Nigeria's electricity market, gave a bleak overview of the current situation. He noted that the Government's ability to generate funds had dwindled in recent years, forcing its hand to embrace more radical solutions like removing gasoline subsidy.

According to him, despite losing more than half of oil revenues between 2013 and 2018 as a result of lower oil prices, successive governments had continued to pay fuel subsidies, which was almost equivalent to half of the revenues generated within that period. Dr Omonbude said the drop in oil revenues from a high of about $25 billion in 2013, to less than $15 billion in 2018, had contributed significantly to the Government's fiscal deficit that had continued to widen with prices dropping almost three-fold in the same period.

He noted that abolishing the subsidy as announced earlier this year as well as other positive developments like the Nigerian gas flare commercialisation programme (NGFCP), and power sector interventions such as the Siemens deal, were steps in the right direction. He, however, said there was the need for a more aggressive push towards the use of gas, as 80% of power generation currently comes from gas, while oil and hydro (water) make up the rest.

On his part, Professor Subhes Bhattacharyya, from the Institute of Energy and Sustainable Development at De Montfort University, Leicester, United Kingdom, spoke on price balancing as it relates to electricity pricing linkage to natural gas. Professor Bhattacharyya said the cost of fuel, purchased power, employee wages, interest charges amongst other costs had necessitated that electricity availability must be well adjusted with the revenue from customers, government subsidies as well as supplier credit. As a result of the tight fix with operational inefficiencies such as reliability and quality of electricity supply, he advised an abolishment of the Multi-Year Tariff Order (MYTO) system.

While responding to some of the challenges plaguing the sector, a Senior Manager, Nigerian Bulk Electricity Trading (NBET), Mrs Abimbola Ojo, echoed Professor Bhattacharyya's point on cost recovery. According to her, if power tariffs are reflective of the cost, it would reduce the current market liquidity constraints and the debt overhang, which discouraged the supply of gas to power plants by upstream producers.

Mrs Ojo, a First-Class and Best Economics graduate, Class of 2007, Covenant University, encouraged policy and lawmakers to speedily enact relevant laws within the Petroleum Industry Bill (PIB), which would have a ripple effect on the gas supply industry when finalised.

Dr Shawn Mu of the Centre for Energy Petroleum and Mineral Law and Policy (CEPMLP), University of Dundee, said that setting up multiple institutions to reduce the losses in transmission and collection was vital to a sustainable energy market outlook. He noted that the coronavirus pandemic had hit oil demand harder than gas.

Dr Mu, a member of the International Association for Energy Economics (IAEE), explained the volatility in the crude oil market, the long-term trend of oil prices, and discussed implications of global Liquefied Natural Gas (LNG) trade.

Earlier in his welcome, the Chair, Covenant University's Centre for Economic Policy and Development Research (CEPDeR), Professor Evans Osabuohien, said the webinar's goal was to influence policy matters in the energy sector and enhance processes that would engender growth in the country. Professor Osabuohien noted that as many of the Centre's past and future events, it was in pursuance of the mission of CEPDeR to link Research to policy and practice.

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