GAS SHORTAGES, A FOREX CRISIS, AND INCREASED UNEMPLOYMENT

Nigeria's unemployment issue may worsen in the next weeks due to supply constraints to companies in Lagos and Ogun States, Daily Sun has learned, unless immediate action is made to improve gas supply to industry.

In Nigeria, the three main recipients of gas are the electricity industry, the commercial sector (which includes the manufacturing sector as a component), and gas-based businesses.

According to the National Bureau of Statistics (NBS), Nigeria's jobless rate increased from 27.1% in the second quarter of 2020 to 33.0% in the first quarter of 2021, placing it second among all economies in the world with the highest unemployment rate.

In separate interviews with Daily Sun, other stakeholders claimed that the supply problems, which started in January, had caused a further decline in capacity utilization in the manufacturing sector, which has already been fighting to survive.

In an odd letter of protest to its gas distributor, a well-known Pentecostal church on the Lagos–Ibadan Expressway bemoaned how the gas supply interruption was also harming its day-to-day operations.

It voiced worry that gas supply disruptions had persisted unabatedly and had started to seem embarrassing.

Industry watchers claim that the disruption in gas supplies to the industrial sector—often referred to as the development's engine—would increase the strain on foreign exchange since more businesses that previously relied on gas will have to switch to diesel.

In June 2022, Nigeria's inflation rate increased even further, rising to 18.6% from the previous month's 17.71%. The fifth straight month of growth, and the greatest level in 65 months (more than 5 years). In January 2017, when it was 18.72 percent, Nigeria's inflation rate last reached the 18.6 percent cap.

Because they are unable to purchase the same amount of goods as before, Nigerians have had to watch as their income has lost purchasing power every month. Rising energy costs are unavoidable as a result of factories being compelled to transition to more expensive alternative energy sources, and inflationary pressure is predicted to continue growing, indicating even greater inflation rates.

Nigeria's manufacturing sector contributed 10.20 percent more to the nation's GDP in the first quarter of 2022 than any other industry, including oil and gas, which contributed 6.63 percent, according to latest data from the NBS.

The Manufacturers Association of Nigeria (MAN) projected that the industry had generated around 1.64 million employments overall as of the end of the first half of 2019.

The Lagos-Ogun axis, which is home to over 2,000 businesses and provides over 70% of manufacturing jobs, is at the center of this industry. This industrial cluster has a significant impact on economic growth and fuels the expansion of the manufacturing industry.

Olam, Chellarams, Ok Foods, Coleman Cables and Wire, Guinness Nigeria Plc, British American Tobacco, Nestle Nigeria Plc, Bhojraj, and Nigerian Breweries Plc are a few of the sectors impacted by the interruption in gas supplies.

According to Mr. Ogagbano Adejo-Ogiri, executive secretary of the Association of Local Distributors of Gas (ALDG), in a position paper made available to Daily Sun, they have identified insufficient gas production by the gas producers and, more importantly, a deprioritization of gas supply to the commercial sector in favor of the power and gas-based industry sector. They have also identified the Nigerian Gas Corporation's (NGC) nontransparent application of the Network Code's provisions generally

The Association had contended that theft of crude oil and attacks on gas and oil pipeline infrastructure had a negative impact on the supply and production of gas.

“Anytime our vital oil evacuation pipes are tampered with, associated gas output, which is connected to oil production, is no longer available.” There have been gas supply shortages and rationing of the available gas supply as a result of this gas output becoming curtailed.

They were concerned that since the commercial and manufacturing sectors are paying a disproportionate share of the cost of these gas supply cuts, businesses that rely heavily on natural gas to function may be left in the dark.

Mr. Sudharshan VP, Group General Manager, Sumal Food, Ibadan, producers of chewing and bubble gum, biscuits, and chewing gum, stated the past three months had been challenging for manufacturers.

He claimed that due to what he characterized as low pressure, his business and, therefore, other firms, had not been receiving an adequate amount of gas from its suppliers.

Having to rely on diesel, which costs about N800 per litre right now compared to N118-120 for Standard Cubic Feet (SCM) of gas supplied through pipeline and N165-170 SCM supplied through cascade (tanker), he claimed that the lack of gas supply to industries had increased their operational costs. He added that running their business on diesel was unsustainable.

“In order to address gas supply challenges and have sources of gas supply for our domestic market, we need to begin thinking about strategic gas storage.” A Floating Regasification & Storage Unit (FSRU) incorporating LNG into our domestic gas supply mix, for example, might boost the gas supply to Lagos.

Finally, and most significantly, the Network Code must be implemented in a transparent manner because it appears to be the main cause of the supply limits that the industrial industry is currently experiencing.