22 — Vanguard, TUESDAY, JULY 6, 2021 A decade of Gas: Impos<strong>in</strong>g VAT on LPG will scuttle development — OGSPAN By Udeme Akpan THE Oil and Gas Service Providers Association of Nigeria, OGSPAN, has urged the Federal Government not to impose the Value Added Tax, VAT, on Liquefied Petroleum Gas, LPG. Accord<strong>in</strong>g to OGSPAN, the planned imposition of VAT on LPG would stifle, demand, utilisation, <strong>in</strong>vestment and growth of the sector <strong>in</strong> the country. In an <strong>in</strong>terview with Vanguard, yesterday, National President of the association, Colman Obasi, said: “As a stakeholder <strong>in</strong> the sector, we were delighted when the Federal Government previously excluded operators <strong>in</strong> the LPG sector from pay<strong>in</strong>g the VAT. “<strong>We</strong> were even more delighted when it declared January 1, 2021 to December 31, 2030, as ‘The Decade of Gas Development for Nigeria’, with emphasis on LPG. “Specifically, the official launch of The Decade of Gas was declared by President Muhammadu Buhari, on March 29, 2021, also recognised 2021 as ‘Year of Gas'. “However, hav<strong>in</strong>g taken these steps, we were shocked to learn that the Federal Government is currently consider<strong>in</strong>g impos<strong>in</strong>g VAT, targeted at <strong>in</strong>creas<strong>in</strong>g its revenue.” Accord<strong>in</strong>g to him: “A Presidential directive was issued on July 11, 2005, to remove VAT on LPG. But the approved memo erroneously had the word 'import' left on it, because at the time imports were the only s<strong>our</strong>ce of gas. “This meant that the Federal Inland Revenue Service, FIRS, charged VAT on locally produced LPG but there was no output VAT, so the VAT cost was absorbed as a loss by <strong>in</strong>dustry players. “Industry operators fought for 14 years to reverse this situation and the M<strong>in</strong>ister of F<strong>in</strong>ance f<strong>in</strong>ally removed the VAT on 'domestically produced gas' under a gazette issued <strong>in</strong> 2019, thus stopp<strong>in</strong>g the FIRS from charg<strong>in</strong>g VAT on LPG under a loophole that was created <strong>in</strong> error. “The FIRS itself, under several subsequent letters (now available <strong>in</strong> the public doma<strong>in</strong>) advised companies that neither <strong>in</strong>put nor output VAT was payable on LPG, <strong>in</strong> l<strong>in</strong>e with other petroleum products." TUESDAY, JULY 6, 2021 Electricity: N1.5trn <strong>in</strong>ves estment turns s<strong>our</strong>, , power coys suffer <strong>in</strong>adequate e capacity • 8 years after, DISCOs still reject load •196m Nigerians lack access to electricity By Pr<strong>in</strong>ce Okafor NIGERIA’S electricity challenges cont<strong>in</strong>ue to worsen, as power generat<strong>in</strong>g, transmission and distribution companies suffer from <strong>in</strong>adequate capacity, despite <strong>in</strong>vestments totall<strong>in</strong>g N1.5 trillion sunk <strong>in</strong> the sector s<strong>in</strong>ce the privatisation exercise. Accord<strong>in</strong>g to lead<strong>in</strong>g lab<strong>our</strong> centres <strong>in</strong> the electricity sector, this stagger<strong>in</strong>g amount has done noth<strong>in</strong>g to add a kilowatt of electricity to exist<strong>in</strong>g capacity s<strong>in</strong>ce 2013. For <strong>in</strong>stance, households across the nation still experience blackouts for days, weeks, months and even years, as the eleven electricity distribution companies still reject power load, while the power sector is yet to ma<strong>in</strong>ta<strong>in</strong> adequate sp<strong>in</strong>n<strong>in</strong>g reserves, thus lead<strong>in</strong>g to persistent system collapses. An x-ray of the nation’s power grid stability, which is a po<strong>in</strong>ter to the current challenges, shows that from 2013, when the electricity privatisation process was completed, till date, the country has witnessed 131 grid collapses; a situation that experts and operators said would persist. A breakdown shows that the nation witnessed 72 total system collapses and 52 partial collapses. In addition, it has been tales of woes across the country, as it was gathered that power evacuation, especially <strong>in</strong> the Eastern axis, constitutes great challenges as bulk power is usually stranded with<strong>in</strong> the region, ma<strong>in</strong>ly due to lack of adequate l<strong>in</strong>e capacity to evacuate Ibom and Gbara<strong>in</strong> power generation. The Adiabor-Itu 132kV l<strong>in</strong>e has been out of operation for reconductor<strong>in</strong>g for more than a year now, and is yet to be completed. There is load limitation of more than 100MW on Aba/Itu 132kV l<strong>in</strong>e. This calls for urgent attention. Replacement of burnt relay/ control room at Afam V 330kV T/ S to enable the evacuation of power from 2 X 138MW GT19 and GT20 Afam V GS units, replacement of damaged Ben<strong>in</strong>/ Delta 132kV towers (Nos 41 & 42) and 150MVA 330/132kV <strong>in</strong>ter bus transformer at Delta Ts that has excluded Delta 132kV and Effurun 132kV Ts from the national grid are highly recommended. Also, Delta/Ben<strong>in</strong> 132kV l<strong>in</strong>e needs to be provided with a turn<strong>in</strong>/turn-out capability to enable reliable supply of power to Amukpe 132kV T/S. Investments On the contrary, evidence shows that the power sector has not lacked <strong>in</strong>vestments across all its value cha<strong>in</strong> over the years. A breakdown of <strong>in</strong>vestments <strong>in</strong> the sector s<strong>in</strong>ce 2010 shows that the World Bank, <strong>in</strong> 2010, advanced a loan of $300 million (N108.6 billion) to the country, for the Nigeria Electricity and Gas Improvement Project, NEGIP, which ended <strong>in</strong> December 2018. The Japanese Agency for International Cooperation, JICA, gave 1.317 billion Japanese Yen or $12.4 million (about N4.5 billion) grant for the Transmission Company of Nigeria, TCN, to <strong>in</strong>stall capacitors and switch gears at the Apo (Abuja) and Keffi (Nasarawa State) substations <strong>in</strong> April 2018, which have been <strong>in</strong>augurated. The TCN also raised another $1.661 billion (N601.3 billion) multilateral loan to <strong>in</strong>crease capacity through the Transmission Rehabilitation and Expansion Programme, TREP. Irrespective of the amount spent, so far, former Executive Chairman and Chief Executive Officer of Nigeria Electricity Regulatory Commission, NERC, Dr. Sam Amadi, warned that Nigeria would still suffer more system collapses because the system is irregular. In a chat with <strong>our</strong> correspondent, Amadi said: “The national grid will always collapse from time to time, s<strong>in</strong>ce power supply goes off and on due to several external factors. “System collapse can only end if the necessary attention is given to it. The power system is frail, and taken for granted by the regulatory board, so once there is a disturbance, collapse happens. S<strong>our</strong>ce: NERC “Because the system is frail and it does not have enough sp<strong>in</strong>n<strong>in</strong>g reserve to carry power when someth<strong>in</strong>g goes off, or when everybody is on one network and there is a breach on one end, it collapses. It is a matter of <strong>in</strong>capacity. <strong>We</strong> do not have enough sp<strong>in</strong>n<strong>in</strong>g reserve and redundancy, except this is fixed and we create a robust system.” Amadi noted that there is no clarity on the total cost of system collapse. He said: “Basically there is no clarity on the accountability of system collapse, but what we planned before we left was to fix the system such that <strong>in</strong>dividuals bear the cost of fix<strong>in</strong>g the system. “For example, if the power system collapses due to the <strong>in</strong>ability of a particular DISCO not able to take load properly, they would have to compensate other parties <strong>in</strong> the power cha<strong>in</strong> for their losses. At this po<strong>in</strong>t there is no clear monetary or f<strong>in</strong>ancial clarity of system.” 196m Nigerians lack access to electricity React<strong>in</strong>g to the state of the nation’s power sector, Secretary- General of the National Union of OIL MARKET WATCH Bonny Light $74.16 Brent $76.23 OPEC Basket $74.84 WTI $75.24 MARS $73.11 (As of July 5, 2021) Electricity Employees, NUEE, Joe Ajaero, lamented that the country is currently generat<strong>in</strong>g 4,000 megawatts, MW, or a little above that. The global <strong>in</strong>dex is a million people to 1,000MW, and the people that fall under that are classified as suffer<strong>in</strong>g from power poverty. If we take f<strong>our</strong> million people by the global <strong>in</strong>dex; say 4,000MW for f<strong>our</strong> million people, what we will be hav<strong>in</strong>g is 196 million people without access to electricity. “Former President Olusegun Obasanjo's government spent over $16 billion try<strong>in</strong>g to revive electricity. Then, globally, with a billion dollars, we could have 1,000 megawatts. That money could have ord<strong>in</strong>arily given Nigeria 16,000MW, assum<strong>in</strong>g we did not have any pole, l<strong>in</strong>e or anyth<strong>in</strong>g. But we missed it. “Then we now moved <strong>in</strong>to the Energy People Projects, EPP. At a stage, almost $11 billion was spent, down to President Goodluck Jonathan's era. <strong>We</strong> did not have the desired results. “After privatization <strong>in</strong> 2013, the Federal Government of Nigeria has pumped about N1.5 trillion <strong>in</strong>to the private sector, as grants. You sold y<strong>our</strong> house, and you are giv<strong>in</strong>g money to the buyer to pa<strong>in</strong>t it? N1.5 trillion, no matter how we th<strong>in</strong>k of it, could have given us over 20,000MW. However, <strong>in</strong> a chat with Vanguard, the former manag<strong>in</strong>g director, Transmission Company of Nigeria, TCN, Mr. Gur Mohammed, disclosed that the privatisation process was built not to work, as the nation sold its 60 per cent stake to unqualified <strong>in</strong>vestors that have no record of successful projects <strong>in</strong> the past. Accord<strong>in</strong>g to him: “I was part of the team that started the Power Sector Reform Programme <strong>in</strong> 2007, and I was called to be the secretary of the team dur<strong>in</strong>g President Umaru Musa Yar'Adua's adm<strong>in</strong>istration. I decl<strong>in</strong>ed the offer, because I already knew the programme would never work. “The DISCOs accuse the TCN of be<strong>in</strong>g the weak l<strong>in</strong>k <strong>in</strong> the power cha<strong>in</strong>, and its wheel<strong>in</strong>g capacity was around 5,000MW but, currently, it can boast of a wheel<strong>in</strong>g capacity of over 8,000MW, why are we still witness<strong>in</strong>g load rejection as <strong>in</strong>adequate poor distribution to households?”
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