FG’s N5bn Gas Fund Dormant at GACN as Shortages Cripple Power Generation, Supply

Peter Uzoho

About N5 billion federal government’s gas-to-power fund meant to settle gas suppliers is currently lying idle at the Gas Aggregation Company of Nigeria Limited (GACN) despite the complaints by generation companies (Gencos) of the lack of gas to run their plants, THISDAY’s finding has revealed.
The failure of the GACN, THISDAY learnt was to pay oil companies supplying gas to thermal power plants. While the fund remains dormant in its account, this has worsened Nigeria’s poor electricity generation and delivery to people’s homes and businesses.

GACN was established in 2010 by the federal government in furtherance to the National Domestic Gas Supply and Pricing Regulation 2008, for the implementation of the Nigerian Gas Master Plan (NGMP) and management of domestic supply of gas to the market.
The company was set up to ensure adequate supply of gas to the strategic sectors of the domestic market including the power sector, for the purpose of enhancing natural gas usage to achieve the much-desired industrialisation in Nigeria.

Lack of gas supply to thermal plants had been one of the biggest problems bedeviling the nation’s power sector and remained unresolved for till date.
Gencos have repeatedly blamed their inability to ramp up power generation from the current 4,500 megawatts (mw) on the reluctance of the gas companies to supply them gas without upfront payment and without clearing the N1 trillion legacy debt.
The Gencos had also complained of non-payment of their N1.6 trillion debt being for energy generated and other contractual obligations.
The gas producers have also been calling on the federal government to pay up the legacy debts owed them for gas supplied to thermal power generating companies, amounting to about $1 billion.
They said defraying the debt in addition to introducing a free market pricing regime for the gas sector would guarantee the continuous operation of thermal power generating companies in the country.

“It is very clear that upstream players are not happy with the legacy debt that they are being owed for gas supplied for power, close to a billion dollars.
“My appeal to the federal government is: let’s find a way and pay this money so that there will be peace”, President of the Nigerian Gas Association (NGA) and Managing Director of Shell Gas Limited, Mr. Ed Ubong, had said at a recent forum.
However, THISDAY gathered that the N5 billion currently lying waste in the account of GACN was the balance of the money the federal government sent to the GACN for payment of gas supplied by gas companies that supply gas to the power market.
According to findings, the Nigerian Bulk Electricity Trading Plc (NBET) used to receive this gas funds from the federal government and settles gas suppliers before the GACN pressured the system and became the custodian of the fund.  

A top official at the NBET, who pleaded to remain anonymous, told THISDAY that despite the outstanding N5 billion that had been with the GACN, gas supply has continued to be a challenge to power generation as Gencos complain of lack of gas to run their plants and generate power.
The official, who blamed the Nigerian Electricity Regulatory Commission (NERC) for being the cause of the problem, said the regulator forced NBET to sign an agreement with the GACN, which the NERC has not bothered to ask whether the deal was producing the expected result.

The source explained, “So, when NERC came up with this instruction to NBET to sign an agreement with GACN, they had an MoU they signed. On an average, our gas bill is about N18 billion, but what was done was that they transferred N32 billion to GACN, and so, after they had made two tranches of payment, what was left sitting idle in their account was about N5 billion.
“Now, the thing is that, are we going to get the money back? Yes, we are going to get the money back because what will happen is that, in subsequent gas payment, we are going to claw back that.
“But the question really is, why are you making payments to GACN? There is no extra value that GACN is providing to the process. Why can’t this money be paid directly from NBET to the gas suppliers?”

THISDAY’s findings further showed that before the fielding of GACN to become the custodian of the gas fund, NBET was the one paying Gencos their money based on the invoice they presented and the Gencos would pay all their service providers including the gas companies.
But when the gas companies started complaining that Gencos were not paying them and Gencos on their part complained of non-payment by NBET, the official said the bulk trader developed a model to address that.

“So when we pay the Gencos for energy generated, we also pay directly to the gas suppliers for gas supplied, whether it’s Seplat or anyone else. But all of a sudden, GACN said they want us to be giving them the money for gas, so that they will be paying to the Gencos. It doesn’t make sense.  It’s like introducing another third party to a contract,” the source said.

Noting that there is no value that GACN was bringing to the table, the NBET top official said it was initially thought that GACN being the representative of the gas companies might have more influence to ensure that gas was guaranteed.

She said government keeps funding inefficiency in the nation’s power sector and that nobody was being held accountable for policy failures, adding that GACN could not use the N5 billion in its account to ensure that there was enough gas for power generation.