In West Africa, amid power supply challenges due to lack of gas reserves, the Nigerian Gas Association (NGA) has now listed foreign exchange (forex) as another potential threat to the unstable sector.
Earlier this month, the association called on the Central Bank of Nigeria (CBN) to include gas producers and suppliers in the 60% forex platform.
According to local media the Guardian, the NGA underscored that gas producers, suppliers and transporters are the most critical element of the gas-to-power value chain as they are the foundation for the survival of the power and manufacturing sectors.
President of NGA, Dada Thomas, stated that: “Gas investments and loans are largely denominated in US dollars and must be repaid in US dollars. Unfortunately the same CBN in 2015 forced gas suppliers, whose contracts are denominated in US dollars, to be paid in naira at the official exchange rate without making it possible for them to access US dollars at the official rates to repay their loans.
Thomas continued explaining that this situation subjects the gas sector to unacceptable currency investment or income mismatch and forex exposure.
“Today, this, along with the illiquidity of the entire gas-to-power sector, is the biggest threat to future investment in the domestic gas sector,” he said.
Gas sector lacking investor confidence
Media quoted Thomas stating that foreign and local investors have expressed their unwillingness to invest in the gas sector due to the fact that they “can’t get their money back or out”.
Meanwhile, a statement from the association also highlighted that 80% of grid power is from thermal power plants and the country runs the risk of being plunged into total darkness, if the gas conundrum is not resolved quickly.
“It is of no use providing relief for the GENCOs (generation companies) and DISCOs (distribution companies) and ignoring the source of their main input, which is the gas from the gas suppliers.
“This will ultimately lead to the collapse of the gas-to-power sector, which is an intricately interwoven value chain as no gas is equal to no power and ultimately no economic diversification”, Thomas concluded.