Nigeria’s flood disaster that is rapidly escalating across its states has created further economic challenges for the country. In addition to over 600 deaths, more than 1.4 million displaced persons, and submerging farmlands across Nigeria, the flood is set to exacerbate the country’s insufficient revenue generation.
Bloomberg reports that Nigeria Liquefied Natural Gas (NLNG) Ltd. has declared force majeure on shipments from its Bonny Island liquefied natural gas facility after supplies were cut off by flooding.
“The notice by the gas suppliers was a result of high flood water levels in their operational areas, leading to a shut-in of gas production which has caused significant disruption of gas supply to NLNG,” Bloomberg quoted the company spokesman Andy Odeh as saying by email on Monday.
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This comes at the heels of growing shortfalls in Nigeria’s crude oil production, which has seen the country’s revenue significantly drop in the past few years, forcing Africa’s largest economy to depend on borrowing to fund its budgets.
Bloomberg noted that NLNG, which can produce 22 million tons of LNG a year, was already falling short of its production capacity due to difficulties securing adequate feedstock.
The force majeure means that the operation of NLNG, which is a joint venture between the state-owned Nigerian National Petroleum Co., Shell Plc, TotalEnergies SE and Eni SpA, will reel on the mercy of the flood until further notice.
The statement shared by the company said that it is “reviewing the situation with gas suppliers to ascertain the extent of the disruption to its operations,” and that it will try to “mitigate the impact of the force majeure to the extent reasonably possible.”
This development means that Nigeria’s budget, which it has much counted on the proceeds from NLNG operation to finance, will suffer further deficit.
Financial analyst, Kalu Aja, said the floods are now the defining economic story, nothing comes close.
“It’s like someone pressing a “pause” button on commerce,” he said. “This isn’t good.”
On the impact the NLNG’s force majeure will have on the budget, Aja told Tekedia: “NLNG input to budget is via dividend and taxes.
“Gas Taxes are going to fall because output has fallen, this cements that narrative.
“Dividends will also be depressed; MD of NLNG said they have list $7b in sales so far, Portugal looking for another supplier.
“Overall, this hits federal government’s independent revenues as well as federation revenues paid via loss of gas taxes.”
The impact of the floods, especially in the oil producing states, is devastating and the federal government is seen as not doing anything of significance to mitigate it despite receiving billions of naira in ecological funds.
Meanwhile, Social Economic Rights & Accountability Project (SERAP), a non-profit organization fighting for social and economic justice, said it is suing the government.
“We’re suing the Buhari administration and Nigeria’s governors over the ongoing flooding in parts of the country, with catastrophic effects, and to pursue accountability on how trillions of ecological funds have gone down the drain, and ensure justice for the victims,” it said.
Update: NLNG Statement
We are still in operation!
Our attention has been brought to media reports, following the issuance of a statement declaring Force Majeure on Monday 17th October 2022, that operations at its facilities have been shut down due to flood.
To correct some misinformation on the declaration, we would like to clarify:1. The Company’s plant is in operation though at a limited capacity, due to reduced gas supply from some of its upstream gas suppliers.
2. None of NLNG’s assets on Bonny Island or in any of its host communities are impacted by the flood. The Force Majeure is as a consequence of a similar notice by Upstream Gas Suppliers due to the impact of flood in their production facilities.
3. NLNG is working with all critical stakeholders on mitigating the impact on product deliveries.
4. NLNG continues to supply LPG to the domestic market for now from the limited production.We continue to monitor the situation with Upstream Gas Suppliers and are evaluating the impact of the flood on its business.