Labour, FG head for showdown over electricity tariff

  Labour, FG head for showdown over electricity tariff

In February, the Federal Government and Organised Labour, among others, agreed that there would a reduction in electricity tariff in December 2021, as well as end sale of gas  to the 

Generating Companies, GENCOs, in foreign currency, (Dollar) instead of local currency.

However, barely four months to December, the body language of government does not seem to be ready to honour the agreement.      

Consequently, Organised Labour through the Nigeria Labour Congress, NLC has sounded a note of warning to the Federal Government that the agreement reached with Labour that the N15 per kilowatt-hour, KWH by December 2021, must be respected, saying the “posture of the Federal Government to flout agreements is completely unacceptable and would be resisted.”

NLC in a statement by its President, Ayuba Wabba, also demanded a 40 percent reduction of gas price to the GENCOs, contending that instead of the $2.50 per standard cubic feet, SCF, it should be $1.50.

While rejecting the reported Government approved reduction of domestic gas price for GENCOs from $2.50 to $2.18, SCF, Labour noted that it did not only fall short of expectation, it equally breached the agreement both parties reached earlier in February 2021 that gas must be sold to the GENCOs in local currency as against the Dollar.

  “Congress demands of the Federal Government to reduce the pricing of domestic gas supply to GENCOs to less than $1.50 per SCF. We also demand that payment for gas by GENCOs should be denominated in Naira. Furthermore, the Gas Companies should be included in the Central Bank of Nigeria (CBN) and Nigerian Electricity Service Industry, NESI, payment waterfall to guarantee payments for gas and contract sanctity with GENCOs.

“Congress demands that the Federal Government should respect the agreement it reached with Labour on electricity tariff. Congress remains implacably committed to the ultimate reduction of electricity tariffs by N15 per kilowatt-hour by December 2021 as contained in the agreement. Congress hereby serves notice that the posture of the Federal Government to flout agreements is completely unacceptable and would be resisted.”

Explaining NLC’s position, the statement said among others noted,  “It is significant that the incessant increase of electricity tariff was one of the several issues discussed between the representatives of the Federal Government of Nigeria and Organised Labour, herein after referred to as the Principals, on 28th September 2020. Specifically, an agreement was reached at the meeting to set up a Federal Government of Nigeria, FGN-Organised Labour Technical Committee on Electricity Tariff.

The Technical Committee thus set up on 28th September 2020 had a clear mandate to review several critical issues in the power sector and to suggest reforms that will provide succour to Nigerians over the short and long term.

“The Technical Committee submitted its final report to the Principals at the close of January 2021. The meeting of Principals convened on 22nd February 2021 and discussed the report. The Principals accepted among other recommendations that “necessary actions should be taken to use efficiency to bring the gas price to below $1.50 per MMB.”

“Indeed, the public will recall that at the close of the meeting, Dr Chris Ngige, Minister of Labour and Employment, made a statement to the media that the electricity tariff will go down considerably. According to media report of February 23, 2021, the Minister of Labour and Employment stated that “Nigerians will witness a reduction in the cost of electricity tariff, Minister of Labour and Employment Chris Ngige said on Sunday night. The minister said the Federal Government and organised labour agreed on the reduction in the cost of gas sold to Generating Companies to $1.50 as against the $2.50 it is sold to GENCOs.”

“Congress also wishes the Nigerian public to know that about 80per cent of electric energy generated in Nigeria is from thermal stations, which are powered by natural gas. In fact, the GENCOs consume over 70per cent of domestic gas production. Whereas the GENCOs are required to pay as much as $2.50 per standard cubic feet (SCF), other gas users, however, get the same at lower rates, ranging from $1.50 to $1.70 per SCF. The worn explanation for the incongruous high differential was the lack of timely payment by the GENCOs for the gas supplied.

“In other words, the lack of payment discipline and certainty was implicated as a major contributing factor that despite GENCOs account for over 70 percent of the consumers of domestic gas, rates are higher for power generation.

To redress the invidious situation, the Principals resolved that Gas Companies should be integrated into the Central Bank of Nigeria (CBN) payment waterfall of the Nigerian Electricity Sector Industry (NESI) to guarantee payments for gas and contract sanctity of GENCOs.

“Congress has gone into this lengthy detail to underpin her position that the gas price reduction for GENCOs announced by the Minister of State for Petroleum is a flagrant repudiation of the kernel of the agreement between the Federal Government and Organised Labour, as it falls far short below expectation.

“Congress reiterates the abundant evidence presented to the Technical Committee and the meeting of the Principals that the pricing of domestic gas for GENCOs in US dollars represents the quintessence of underdevelopment of Nigeria’s energy sector. Therefore, the dollarisation of domestic gas supply to local power generating companies similarly feeds neatly into the debate of the commodification of the indigenous resources to forcibly incorporate the developing countries into spawned dependency. Hence, Congress rejected the denomination of domestic gas pricing to GENCOs in foreign currency. Rather, Congress insisted on a payment regime in Naira not only for domestic gas but also, all energy associated products, which should be denominated in local currency.”

“To be fair to Government representatives, the meeting of the Principals was convinced by the argument of Congress. Thus, the Principals unanimously accepted that the current practice of gas pricing in US dollars would be discontinued to enable gas supply to GENCOs to be made payable in Naira.

“From the foregoing, Congress is increasingly hard put to repose confidence on the discussions and agreement at the meetings. The resolutions of the Principals cannot certainly be the basis for the minuscule gas price reduction announced by Minister Timipre Sylva.”