Opportunity as Nigeria Pivots to Gas For Homes and Vehicles

THE PUBLIC SPHERE with Chido Nwakanma


When you drive into a fuel station soon, you would have many choices, rather than the current two. The options will include a pump for Compressed Natural Gas (CNG), Liquefied Natural Gas, Auto-gas, Premium Motor Spirit, or diesel. The Department of Petroleum Resources (DPR) gave the marching order on 6 September asking stations to retrofit and add a pump for CNG.
The DPR order is part of a federal government push for implementation of the National Gas Expansion Programme. Under the NGEP, Nigeria is finally awakening to the reality of its status as a gas country and the need to utilise this resource that it has wasted for most of 50 years. The government is indicating seriousness in pushing this alternative.
DPR ordered 9000 fuel retail outlets to “commence the upgrade of their facilities to allow them to dispense gas to vehicles”. The release from the agency did not disclose the timeline for this to happen. However, the 9000 stations represent 27 per cent of all stations in the country. They fall into category one of those capable of doing the transition now.
DPR Director Mr Sarki Auwalu said the directive aims at deepening the utilisation of domestic Liquefied Petroleum Gas (LPG), Compressed Natural Gas, Liquefied Natural Gas and Autogas as alternative fuels. Earlier in February 2020, Mrs Muinat Bello-Zagi, DPR Operations Controller, Abeokuta Field Office spoke at a meeting of CNG operators. She informed them that CNG is cheaper, safer, environment-friendly, and abundant in Nigeria.
The experts list other benefits of CNG to include 50 per cent cheaper than PMS or diesel, lower cost of vehicle maintenance, safety, and environmental friendliness. In sum, it is beneficial and cost-effective.
Government is putting the might of finance behind this policy push. Central Bank of Nigeria is offering N250b in low-interest credit to drive the National Gas Expansion Programme. The CBN is granting loans to large and medium-scale enterprises at reduced interest rates of five per cent (5%) up to end-February 2021 and nine per cent after that. The loans have a tenor of ten years each.
The N250billion facility would “stimulate finance to critical sectors of the economy”, this time in the gas value chain. The National Gas Expansion Programme seeks to propel better utilisation of gas in Nigeria. Gas has for many years been a wasting asset, part of the reason for the establishment of the phenomenally successful Nigeria Liquefied Natural Gas company at Finima, in Bonny Island and the aluminium smelter plant at Ikot Abasi, Akwa Ibom State (ALSCON). The unique proposition of ALSCON was that it would convert waste (gas flare) to wealth!
The Central Bank said the loans would go to two categories of investors. Aggregators, manufacturers, processors, and wholesale distributors will get funds under the Power and Airline Intervention Fund. Small and medium-scale enterprises and retail distributors shall receive funds through the NIRSAL Microfinance Bank.
Firms in the first category can get term loans of up to N10billion and working capital support of a maximum of N500million. Small and medium scale enterprises can access term loans of N50million maximum and operating capital support of up to N5million.
Nigeria’s gas reserves of 188 trillion cubic feet are underutilised because of a “historical non-viability of domestic, commercial production and utilisation of gas”. Investment is low in the sector. Though gas is abundant, Nigerians do not use Compressed Natural Gas for their vehicles nor enough of Liquefied Petroleum Gas for domestic energy.
Who would get the N250b CBN loan for gas utilisation?
Firms that would access the N250b CBN support for National Gas Expansion are those involved in or set up to drive gas utilisation. According to the apex bank, “eligible activities” include plants for the manufacturing of gas cylinders, or for converting vehicles to use gas rather than petrol, establishment of tanks to retail LPG and the establishment or expansion of micro-distribution outlets or service centres for sale of LPG.
The Federal Government believes that the policy would drive diversification of the economy by adding value to one of the underutilised resources of the country.
Nigeria is déjà vu land for policies
Dr Rotimi Olaniyan must have a hearty laugh reading about the DPR directive and the CBN support. Rotimi was my colleague at Cadbury Nigeria in the 1990s. As a young manager in 1994, Rotimi bought a cute Mitsubishi two-door vehicle that used hybrid energy. It was like stepping into a strange land with its CNG cylinder in the boot of the car. Hybrids were already in general commercial use across the world. But the land that had an abundance of gas neglected to use it, and Rotimi’s car was often an oddity.
The policy shift is commendable. The flip side is implementation. Will it happen or change once oil prices move up again? Will Nigeria stay the course on the matter of the utilisation of gas in a manner that confirms our real status as a gas-rich country obsessed with petroleum?
The only thing new in this policy is the financing support. The DPR “Guidelines for the design, construction and operation of Compressed Natural Gas Refuelling Stations” has a 2010 date. Yes, ten years ago! Nothing happened until now.
Opportunities abound in the policy thrust. Auto and mechanical engineers would reap from investing in auto conversion as would those who go into the production of composite cylinders and ancillaries to enable the penetration of LPG, CNG, LNG and Autogas. It is a weighted risk given that if the government does not give it the required push, the policy would be stillborn. It must work, though, because Nigeria needs the diversification now.

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