Crusoe Osagie
7 November 2009
Lagos — The Manufacturers Association of Nigeria has raised an alarm over the possible termination of industrial operations in about 150 manufacturing companies in Lagos as a major gas supplier, Gaslink Nigeria Limited, yesterday began implementing its threat to cut supply to manufacturing concerns.
A statement issued by the association said industrial production had stopped in the Iganmu Industrial Estate in Lagos where the first customers to be affected by the move by the Oando subsidiary, Gaslink, to cut off liquefied petroleum gas supply to companies had been effected.
The decision my Gaslink, which is the operator of the Greater Lagos gas pipeline project, to disconnect its customers arose from a disagreement between the company and manufacturing concerns over the new tariff structure for LPG.
The manufacturers are said to be dependent on gas for almost 100 percent of their operations.
MAN indicated that manufacturing giants including Nigeria Breweries Plc, Nigeria Bag Manufacturing Company Plc and Sunflag Nigeria Limited are some of the companies affected and have been completely cut off from the Gaslink gas network.
"Industrial production has stopped in all manufacturing companies in Iganmu Industrial Estate in Lagos because Gaslink Nigeria Limited has suspended supply of gas to manufacturers in the estate as a first step in the implementation of its notice to cut off more than 150 industrial users of gas in Lagos, the nation's industrial hub," MAN said in its statement.
"Major industries affected by the stoppage of gas supply include Nigeria Breweries Plc, Nigeria Bag Manufacturing Company (BAGCO) and Sunflag Nigeria Limited.
"Gaslink's action is believed to be in anticipation of expected deregulation of the downstream sector of the petroleum industry," MAN stressed.
When contacted, an officer in the Corporate Affairs Department in NB Plc, Eden Vindah, confirmed that gas supply to the brewing giant had been stopped.
He, however, disclosed that his company had anticipated the move by Gaslink and had taken measures to stock up on diesel, which NB Plc has resorted to as a temporary alternative.
Also, explaining the rationale for Gaslink's decision to stop gas supply, Oando's Public Affairs managers, Odion Aleobua, said the number of industrial customers which Gaslink serves are just about 90 "and so it is illogical for MAN to say the company is targeting 150 firms for the gas supply cut."
Aleobua explained the company had given manufacturers notice two months ago of its intention to review the tariff structure for gas.
He explained that the price had been reviewed upwards from N21.65 per standard cubic feet to N63.27 per standard cubic feet, and that industrial consumers had been notified accordingly.
"But instead of them to comply or enter into negotiations with Gaslink, they refused and ignored it completely," he stated.
When asked if Gaslink is being compelled to review its tariff structure as a result of an increase in the price of LPG by the Nigerian Gas Company, he said the company was forced to raise tariffs as result of the rising cost of infrastructure which had made it impossible for Gaslink to sustain the old price regime.
MAN, however, stated that by Monday, November 9, over 150 manufacturers in Lagos State would have stopped production because of the suspension of gas supply from the Oando subsidiary.
If Gaslink proceeds to extend the suspension of gas supplies to other industrial estates in Lagos, major multinationals and manufacturers that could be affected include Cadbury Nigeria Plc, Unilever Nigeria Plc, Guinness Nigeria Plc, Nestle Plc and Berger Paints, among dozens of other industrial outfits.
The manufacturers' umbrella body said in anticipation of the looming crisis that would accompany the deregulation of the oil sector, the National Council of the Manufacturers Association of Nigeria at its meeting last Wednesday, deliberated on the issue of benchmarking the price of gas against the price of LPFO and resolved to convey the fears of manufacturers to President Umaru Yar'Adua in order to elicit urgent intervention by the government.
"In a recent development, government has approved that with respect to the supply of gas to the cement industry, the price of gas should no longer be benchmarked against the price of LPFO and manufacturers believe that the concession should be applicable to all manufacturers," MAN said.
The statement explained that MAN's president, Alhaji Bashir Borodo, in a letter dated November 4, 2009 intimated President Yar'Adua about the current problems associated with the supply and prices of LPFO and gas faced by manufacturers across the country.
Borodo in the letter to the president pointed out that between May and July 2009, the price of LPFO increased three times. "The price changed from N25.40 to N48.00, then to N57.00 and later to N64.00 per litre," he said.
He recalled that in the last quarter of 2008, the price of gas was increased by about 200 percent by Gaslink, which gas users reluctantly accepted in the interest of the economy.
Borodo added that it took the intervention of the Senate Committee on Gas Resources and in accordance with the Gas Sales and Purchase Agreement (GSPA) to resolve the issue amicably, leading to the eventual increase by 15 per cent.
He complained that gas suppliers enjoy complete monopoly within their franchise areas and in this regard MAN believes that the monopoly status is responsible for the frequent and arbitrary increase in price implemented by the gas supplier.
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