In the wake of fuel subsidy removal, Nigerians turned to Compressed Natural Gas [CNG],otherwise known as Liquified Natural Gas [LPG] or cooking gas as an alternative fuel. Prices then averaged N6,000 for 12.5kg which was quite affordable at that time with petrol prices pegged between N615 and N640 per litre across the country. But little did they know that within a few months things will go awry, as the commodity reacts to market trends. Energy commodities are being imported as a result of non-functional refineries which creates room for price volatility. With the Naira reeling due to FX shortages, the price of cooking gas spiked above 20% as the price of a 12.5kg cooking gas which costs N8,230 in Abuja and other cities across the country few weeks ago increased to N10,300 recently. Worst still, the price of the commodity, along with petrol and diesel, are expected to hit the roof on account of rising oil prices projected to hit $150 per barrel by year-end – no thanks to the conflicts in Ukraine and the Middle East. Thus, the price of cooking gas could jump to N18,000 per 12.5kg by December.
Presently, the average price of cooking gas evidently shows the cost of government’s inaction. Nigerians are currently facing the grim consequences of government policies that lack adequate planning and the result of bold decisions that are bereft of detailed aftermath management as millions are thrown into poverty following a badly managed intervention programme. The impact of this is that it removes any pretence that the average consumer could see savings from converting their petrol generators to run on LPG.
But it seems the government is shrugging off its lethargy in the face of growing public discontent and economic shutdown. The National Economic Council (NEC), led by Vice President, Kashim Shettima, has belatedly commenced work on interventions and is reportedly devising a strategy to reduce the impact of subsidy removal on Nigerians. The establishment of the Presidential Compressed Natural Gas Initiative (PCNGI) is believed to be a step towards that direction even though it came three months after the fuel subsidy removal.
The Tinubu administration’s new policy drive seeks to revolutionise the transportation sector, by targeting over 11,500 new CNG-enabled vehicles and 55,000 CNG conversion kits for existing PMS-dependent vehicles. It is expected to simultaneously bolster manufacturing, local assembly and job creation in line with the President’s renewed hope agenda.
Swift action is however required to restore hope of ordinary Nigerians who would not be able to buy gas and may turn to firewood and charcoal for household energy needs.
And, reverting to firewood and charcoal will be an unfortunate case of one step forward, two steps backward for Nigeria as it will be a serious setback to the country’s hopes of fulfilling its 2050 net zero climate change commitment. Many observers have adduced that President Tinubu’s removal of fuel subsidy was partly motivated by the need to reduce Nigeria’s carbon discharge and appease global environmentalists who are pressurizing developing countries to curb greenhouse emissions by ending fuel subsidies.
Whether intended or not, the policy has impacted substantially on the country’s transportation landscape. Following the rise of petrol pump price to N620 per litre, many motorists – both private and commercial – were forced to abandon their vehicles, drastically affecting vehicular movements in urban and rural areas. As a result, both inter-city commuting and inter-state travels were massively curtailed thereby reducing carbon emissions in the country.
Undoubtably, cooking gas can play an important role in reshaping Nigeria’s post-fuel subsidy economy especially in the fields of transportation and energy security. But to achieve this goal, the economic models need to be restructured.
Consumption of LPG in Nigeria, over the past ten years, has increased almost five times from 300,000 tons to 1.4 million tons. It has been projected that liquefied petroleum gases will continue to replace kerosene, firewood, waste and manure as fuel in the household sector (used primarily for cooking) and a veritable substitute to petrol and diesel in transportation. Currently, the main obstacle to using this environmentally friendly and much safer household fuel is its availability and the lack of infrastructure – such as receiving terminals, storage facilities and delivery means. The overall trend, however, is positive. Nigeria is opening new LPG terminals. Despite the fact that Nigeria exports LPG to world markets, it is largely dependent on imports from abroad. For example, while the country is a net exporter of LPG 500,000 tons of its domestic volume of LPG are imported (mainly from the United States).
Nigeria is forced to import cooking gas, despite the fact that it also exports the product. Nigeria is home to Nigeria LNG – one of the world’s largest LNG plants, which also produces LPG. In 2022, 700,000 tons were exported, while only 400,000 tons were sent to the domestic market. Despite the promises of the Nigerian National Petroleum Company (NNPC) Limited to sell 100% of the LPG that it produces domestically, these resolutions will be difficult to implement in the medium term.
As a rule, large tankers export LPG from the Nigeria LNG plant (as well as from other Nigerian terminals) and then the same LPG (under the same brands and sometimes completely identical) is imported to Nigeria but in smaller batches and via other ports. For the shareholders of the plant (which, in addition to the NNPCL, include Shell, Eni and Total), it is inconvenient and unprofitable to use small tankers to ship LPG and Nigeria does not have any infrastructure for receiving and unloading large tankers (the almost non-existent storage facilities are one of the greatest obstacles to the import and export of any energy carriers to and from Africa). The infrastructure was built in such a way as to ensure exports and sometimes imports but by no means does it meet the needs of domestic consumption.
In addition to infrastructure issues, the unpreparedness of investors and policymakers also prevents the smooth takeoff of CNG conversion for the transportation sector. The key potential consumers of this product are low-income segments of the population who spend most of their money on food and basic needs. Nigerians simply would not have enough money to buy the necessary equipment and upgrade their vehicles to CNG-powered engines, which costs about N400,000.
The Federal Government recently announced through the Minister of State Petroleum Resources [Gas], Ekperikpe Ekpo, that it would convert 10 million petrol-powered vehicles to CNG powered vehicles in the next three years. He noted that the ministry is working with the organized private sector to roll out over two million CNG conversion kits for free within the next nine months in order to push the utilization of CNG as the main fuel for vehicles nationwide. He said that the key benefits of the initiative include creating over 100,000 jobs for Nigerians, increasing government savings from reduced subsidy payout for the importation of Petroleum products and reducing carbon emission following the utilization of clean gas to drive internal combustion engines.
Despite all the challenges, LPG or CNG will become a game changer in post-fuel subsidy era in the long term. The facets of Nigerian society should appreciate the role of LPG in an evolving global energy landscape. Since it is essential in mitigating carbon emission and for preserving our ecosystem as well as improving the quality of life for the people, Nigerians have no other choice but to embrace it. The tasks before us will entail investments in the construction of necessary infrastructure and ensuring the constant availability of the product.