Lagos — The Federal Government has approved new gas pricing for manufacturers. This is part of the renewed efforts to ensure that gas pricing is competitive for the producers, consisting of International Oil Companies (IOCs); transporters; local distribution companies and the end users, largely made up of manufacturers.

Speaking yesterday in Lagos at a seminar on "Gas to Power: Prospects and Challenges," organised by energy correspondents, the Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, disclosed that President Goodluck Jonathan has approved the new pricing regime.

"Between the producer and wholesaler, pricing will be based on indexation to Low Pour Fuel Oil (LPFO) but unlike the past which was uncontrolled, the new price is capped at $3 per million cubic feet. This provides a major protection for the downstream pricing arrangement between the wholesalers and their end user manufacturing customers," she said.

The gas producers include Shell, Chevron, Total, Pan Ocean and the Nigerian Agip Oil Company (NAOC), among others, while the wholesaler or transporter is the Nigerian Gas Company (NGC), a subsidiary of the Nigerian National Petroleum Corporation (NNPC).

"Between the wholesaler and the end user manufacturers, the price will be negotiated on a 'willing buyer, willing seller' basis. This will ensure transparency in the pricing, which should then reflect the true cost of distributing and marketing of gas. This effectively delinks the end user from the LPFO indexation," she added.

The minister however noted that the negotiated price would be subject to regulatory oversight to protect the manufacturers from any abuse by the pseudo monopoly Local Distribution Companies, consisting of Shell Nigeria Gas, Oando, Falcon Gas, among others.

She disclosed that President Jonathan had focused on the expedited repositioning of the gas sector to create sustainable investment environment that incentives gas supply for power.

Also speaking, the Minister of State for Power, Mr. Nuhu Wya disclosed that it was appropriate for power suppliers to recover their costs and make profit, hence the need for further review.

He noted that NERC is currently reviewing the whole sale power market tariff structure to support investment in the sector.

"It is hoped that the regulator will provide cost reflective tariffs that will enable suppliers of power cover their costs and provide some profit as envisaged by the regulator in the Multi-Year Tariff Order (MYTO)," he said.

Citing statistics from the Manufacturers Association of Nigeria (MAN), the Deputy Governor of the Central Bank of Nigeria (CBN), in charge of Financial System Stability, Dr. Kingsley Chiedu Moghalu said 60 million Nigerians, who own power generating sets spend N1.5trillion yearly to fuel them.

Moghalu, who represented the Governor of CBN, Mallam Sanusi Lamido Sanusi at the event, stated that the 213th Monetary Policy Committee (MPC) meeting of the CBN had underlined the need to catalyse financing of the real sector of the economy such as power.

He said the MPC had decided to continue with the quantitative easing policy by providing a N500 billion facility for investment in emergency power projects dedicated to industrial clusters, in accordance with Section 31 of the CBN Act of 2007.

Moghalu said the fund would be channeled through the Bank of Industry for on-lending to the Deposit Money Banks (DMB) at interest rate of one per cent, for disbursement to power projects with a tenor of 10 to 15 years, at concessionary interest rate of not more than seven per cent.

According to him, the Africa Finance Corporation (AFC) had been appointed to serve as Technical Adviser (TA) on the power projects.

"Eligible power projects to be financed could be promoted by private or public sector sponsors, or combination of both, and may be structured either as profit -oriented business or a public service, provided that contracted cash flows or financing support exists to ensure repayment of principal and interest, as well as long term viability," he said.