When will Nigeria gain economic freedom?

on   /   in Business 8:26 pm   /   Comments

By GABRIEL OMOH

`The disclosure on Thursday last week that Nigeria is now importing Low Pour Fuel Oil (LPFO) is, to say the least, alarming. The way the country is going, very soon Nigeria will be importing water that is abundantly available in the country. Nigeria in the recent past used to export LPFO to generate foreign exchange.

economyBut today, many industries in the country are said to be importing LPFO. LPFO is mainly used in industries as fuel for generation of power or for firing their heaters.

Allocation of the product was made to industries through marketers when the refineries were fully operational. LPFO at the time was mainly exported but now, the country has to import the product. In a country where power supply is erratic and insufficient, industries resort to use of gas and LPFO to generate power.

Unfortunately, a country that is blessed by God with abundant crude oil and gas cannot find its feet to produce enough gas and LPFO to power industries. Yet, Nigeria is aspiring to become a leading economy among the comity of nations.

Dangote Cement PLC which raised the alarm over  continued short supply of gas and LPFO in the country said very clearly that the situation has gone from bad to worse in the last six months. Lamenting the shortage of gas and LPFO supply in the country, Mr Devakumar V G Edwin, Managing Director, Dangote Cement said that if the situation is allowed to continue much longer, it will have adverse effect on industries and the recently privatised power sector.

But Nigerian officials who play to the gallery would always want Nigerians to believe that everything is working and that there is hope that things will soon improve.

While Dangote Cement officials raised alarm over the non-availability of gas, the Bankers’ Committee through Jubril Aku wants Nigeria to believe that the banks will come to the nation’s rescue by helping the power sector offset the N25 billion inherited by the power firms from the PHCN legacy firms that has become a challenge to increasing gas supply for power generation.

The Committee said: “Today, there are enough incentives for the gas companies to produce gas and that is necessary because when you look at the 26 generating stations in Nigeria, they are all gas-dependent. So we feel that is one major incentive that would help the gas companies to begin to produce locally.

Another incentive has to do with the legacy debt. The legacy PHCN had accumulated about N25 billion and the gas companies have always been agitating that the debt be paid otherwise they would not produce so as not to begin to accumulate new debts.

The Bankers’ Committee is willing to support an initiative where a special purpose vehicle (SPV) would be set up that would provide loans to clear that debt and over time, the loans would be recovered from the multi-year tariff order (MYTO) and direct deductions.”

This is a trap that would enslave electricity consumers by the banks in an effort to recover their loans. Nigerian banks do not have long-term capital to invest in long-term projects. Setting up a special purpose vehicle by the banks will be a short-term measure that will not resolve the outstanding issue.

The question is: Where are the results of similar interventions in the past? There was intervention in textile, aviation and SMEs? What is the state of these sectors as of today?

Most industries in Nigeria rely on gas supply and LPFO to power their plants as public power supply has become a standby thing, are now suffering as a result of inadequate gas and LPFO supply causing them to produce far below their installed capacity. If firms in the real sector are not producing enough to meet local needs, Nigerians will continue to depend on import for a long time to come.

From what is happening in the country now, the most unfortunate of it all is the fact that LPFO which was supplied to industries from Kaduna and Warri refineries is now being imported by companies. Why is Nigeria going round in circles?

Why can’t Nigeria get just one good head as a leader to break this jinx? Importation of fuel and other things that can be produced locally is appalling and disheartening. Where is this government’s gas master plan? When are Nigerians going to begin to see results? Motions without movement of various administrations in this country is sickening.

Nigeria recently privatized the power sector. The generating companies made huge investment in the various power plants but unknown to many, gas supply will become a hindrance to moving forward. Today, many are struggling to pay through their noses.

The privatization raised the hopes of Nigerians on regular power supply, but that is now far-fetched as hope for gas supply looks very dim.

Many of the power-generating companies (GENCOs), are already facing difficult times as a good number which borrowed money from banks are finding it difficult to meet their obligations to the banks because they cannot generate enough power due to lack of gas. Some of the loans taken by these power operators may go bad and the Asset Management Corporation of Nigeria (AMCON) may be called upon to buy off these non-performing loans in banks. But AMCON has already foreclosed further purchase of non- performing loans in Nigerian banks.

Failure of these loans to perform portend great danger to the banking industry and the economy as a whole. If the situation is not nipped in the bud, another round of banking crisis may rear its ugly head with its attendant consequences.

Every Nigerian should be concerned at this development as it will hinder the prospects of job creation and further compound the unemployment situation in the country.

The unemployment situation in the country is already bad but this situation  may cause companies to begin to retrench workers and push more Nigerians into the labour market. So the nation must be prepared for more robberies and militancy by youths from across the country.

Let Nigeria’s refineries begin to work. The National Assembly should open up the oil sector to private investment by passing the PIB bill, and then Nigeria will be free from the shackles of the greed that has held the nation to ransom.

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