New Telegraph

MAN: Unstable forex rates raising natural gas price

Manufacturers Association of Nigeria MAN

The Manufacturers Association of Nigeria (MAN) has again lamented the persistent instability in the country’s official foreign exchange rate at the parallel market, saying it is causing increase in price of natural gas, thereby having severe hit on manufacturing firms’ cost of production.

In addition, MAN also raised the alarm that the payment for gas consumption at dollar conversion rates of the Central Bank of Nigeria (CBN) was affecting Nigeria’s manufacturing firms and factories systematically.

 

The association hinted that Nigeria now had the highest gas price in the world and that it was invariably stifling production of goods locally and also affecting local manufacturers’ ability to compete favourably in sub-Saharan African markets.

 

The National Chairman of Non-Metallic and Mineral Products Sectoral Group of Manufacturers Association of Nigeria, Sir. Afam Mallinson Ukatu, disclosed these to New Telegraph and explained that the nonunification of gas price in terms of paying in local currency or pegging it at a fixed rate because it is meant to be for manufacturers, was causing uncertainty in the country’s manufacturing sector at the moment.

 

Ukatu noted that the absence of fixed rate for gas purchase for local manufacturers from gas providers was causing distortions in production planning, mostly caused by the devaluation of naira. He said as at today, the devaluation of naira and with dollar continuously going up, the rate of gas had increased with the manufacturers at the receiving end.

 

He stated that there was need to have a system whereby local manufacturers pay for gas consumption in naira at a fixed price and not by conversion dollar official exchange rates. He said: “We have been advocating a means of unification of gas prices in terms of paying in local currency or pegging it at a fixed rate because it is meant to be for manufacturers.

 

“Anytime manufacturers are getting gas at a fixed rate of ₦400 per dollar for instance, we can plan with it, but as at today, the devaluation of naira and with dollar continuously going up, the rate of gas has increased and the manufacturers are at the receiving end.

 

“Therefore, there is need to have a system whereby we pay for gas consumption in naira at fixed price and not by conversion to CBN official exchange rates.

 

“But if government can give it as a rebate to the manufacturers, it will be a welcome decision. The truth about this is that not all the gas concessionaires are getting it at the same rate. “Some are getting it cheaper based on the arrangement they have made over time.”

Ukatu continued: “We, the manufacturers, are trying to see how we can get a cheaper source of gas and a cheaper means of production.

 

“There is need for a survey to find out how genuine manufacturers are paying for gas and to compare it to what other people are paying.

 

“There is the need to have a level playing field; otherwise Nigerian manufactur- ers would be worse off.” Speaking further, Ukatu noted Nigeria’s natural gas was now the highest in the world from the current international price of $2.5 to $7.65 and this will bring more collapse of industries in Nigeria.

 

Consequently, the 35 per cent price variation against the global benchmark price of the product is brewing uncertainty in the country’s industrial sector, as gas providers operating in the gas sector have resulted to sell natural gas to manufacturers at dollar rate since the Shell Petroleum Development Company (SPDC) sells gas to Nigerian Gas Company (NGC) at about 9 cents, NGC sells to other franchisers at $2, and the same franchisers sells to the manufacturers at $7.38.

 

Besides, the Federal Government and Central Bank of Nigeria had directed that business transacted in Nigeria must be in local currency, but this twist happening in the country’s gas sector has contravened the laws governing business transactions in the country.

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