FOLLOWING President Bola Tinubu’s policy on petrol subsidy removal that had brought untold economic hardships to many Nigerians, the need for the country to adopt the Compressed Natural Gas (CNG) in its energy mix for transportation took a centre stage for economic convenience.
Tinubu, during his inaugural speech on May 29, 2023, announced that fuel subsidy is gone as it could no longer justify the ever-increasing costs due to drying resources.
The declaration, which many experts adjudged as necessary but wrongly timed, immediately saw the pump price of premium motor spirit (PMS), otherwise known as petrol, spike from about N185 to over N500 per litre nationwide.
About two months later, the price rose to about N617 per litre and later surged to over N1,000 per litre, particularly in the northern part of the country, following the intricacies of the deregulation of the downstream oil sector.
With the surge in petrol pump prices in the past year, the costs of transportation, food and other basic needs have risen astronomical, reflecting on Nigeria’s macroeconomic indicators, notably on the headline inflation.
Between May 2023 and August 2024, headline inflation figures have risen from 22.41 per cent in May 2023 to 32.15 per cent in August 2024 after easing for the last two consecutive months.
Prices of food items have been skyrocketing over the past year. For instance, major staple foods like rice have risen above N90,000 per bag of 50 kilograms compared to about N40,000 it sold at the time President Tinubu came into office.
The Tinubu-led administration’s knee-jerk approaches to cushion the impact of its policy on the increasing cost of living for the masses by providing palliatives, including focusing on CNG adoption, as an immediate and longer-term solutions, have yet to yield noticeable results.
Much ado about CNG
The CNG is methane gas that is compressed and stored in a high-pressure storage tank. It is a cleaner-burning fuel compared to gasoline or diesel and is relatively cost-effective.
It is currently sold at between N320 – N350 per litre comparable litre to PMS which has surged to over N1,000 per litre.
Two months after announcing petrol subsidy regime was gone, on July 31, 2023, President Tinubu highlighted his administration’s plans to ease the hardship placed on Nigerians.
He promised his government would invest N100 billion between July 2023 and March 2024 to acquire 3,000 units of 20-seater CNG-fuelled buses.
The buses were to be shared with major transportation companies in the states, using the intensity of travel per capita.
Among other promises, however, the purpose of the CNG to serve as an alternative to petrol with the intended objective to reduce transportation costs and commodities prices and impact positively on the country’s macroeconomic economy has yet to materialise.
Many analysts have exuded confidence that CNG would provide socio-economic benefits to the country.
Its adoption would help reduce the cost of energy, reduce exposure to fuel importation, promote cleaner energy, and encourage industrialisation.
It could also help mitigate environmental impacts, enhance energy security, and pave the way for a more sustainable and resilient energy future for the country.
Natural gas availability
According to a recent report by Anderson, an independent advisory firm, Nigeria has a proven natural gas reserve of about 206.53 trillion cubic feet.
But Nigeria’s energy sector has been predominantly fuelled by petrol and diesel, which serve primarily for transportation and non-central power generation.
The Pi-CNG target
The Presidential Initiative on Compressed Natural Gas (Pi-CNG), a component of the palliative intervention by the Tinubu-led administration, has been set up to provide succour to Nigerians following the hardships of the fuel subsidy removal policy.
The initiative’s pilot program started with 21,000 units and 10 participants in workshops.
By the end of this year, it aims to reach 150,000 units and 250 participants in workshops and to achieve one million units and 500 participants in workshops by 2027.
It aims to raise $25 million in its pilot phase, $75 million by the end of 2024, and $250 million by 2027 to support the development of CNG infrastructure in the country.
It also aims to support 100 workshops by the end of the year and 1,000 workshops in operation by 2027.
Information gathered from the Pi-CNG shows there are currently 118 conversion centres sited in some locations in 12 states out of the 36 states and the FCT.
The states are Lagos, Kaduna, Ogun, Oyo, Kogi, Nasarawa, Rivers, Edo, Delta, Kwara, Etiki, and the FCT (Abuja).
Also, a lot of private conversion centres are already up and running, including NIPCO and Portland Gas.
At a recent conversation, the programme director/chief executive officer of Presidential Compressed Natural Gas Initiative (P-CNGI), Michael Oluwagbemi, said, “Mr President has given a mandate that he wants a minimum of one million CNG vehicles on the road by 2027.”
The incentive, cost of conversion and duration
The federal government’s conversion incentive is to benefit commercial vehicles registered under an umbrella body of transport associations, according to Oluwagbemi.
The incentive is to enable mass transit vehicles to obtain the conversion kits and installation for free after the vehicles are passed for specification after pre-qualification.
Other vehicles not used purely for commercial will get a 50 per cent discount to obtain the conversion kit, he added.
This includes vehicles categorised under e-hailing, private, and LagRide cars used for both private and commercial purposes.
“The 50 per cent is because you are not fully using your vehicle for commercial purposes.
“On the other hand, you are bankable because we can see funding that you get from your right share and so we can be assured that the 50 per cent discount is fulfilled and the balance is paid back into the government purse so they can acquire more kits to cover more people,” Oluwagbemi explained.
The cost of conversion depends on some factors such as the prevailing foreign exchange rate and the variety of the car.
“A four-cylinder small vehicle might go as low as N500,000 for conversion and an SUV for as low as N1.5 million for a four or eight-cylinder vehicle,” said Oluwagbemi.
This will represent significant off-front cost for vehicle owners.
“We do pre-inspection, where we examine the vehicle, check the details of the drivers that they qualify and the status of the vehicles if it is convertible,” the head of commercial at PCNGI, Tosin Coker, said on Channels TV programme on September 17.
“Once the vehicle has been checked and passed for conversion, we schedule the day for the conversion, and it takes a few hours, and within a day, the vehicle should be ready to go,” he said.
Coker added that although drivers using CNG-converted vehicles will have to refill the cylinders more frequently than others using petrol tank vehicles, the former is undeniably more cost-effective.
Cost saving measure
The initiative has a dual objective, which includes CNG and EV (electronic vehicle), said a climate finance and policy expert, Obi Ugochukwu.
Ugochukwu, at an Arise TV programme on September 17, noted that the initiative has a policy backing with the naturally determined contribution where countries contribute to the Paris Agreement in terms of what to deliver on carbon reduction.
“Within the energy transition plan, there is also a cent of 20 per cent CNG by 2030, and 80 per CNG by 2050 with a slow progress towards EVs.
“It is a practical approach to take into consideration that we have a peculiar situation in terms of power, but that gas is plentiful,” he explained.
The other aspect is the savings whereby you save up to N400 to N500 equivalent per litre which goes to the user.
The other savings will be to the government because once you have these vehicles out there, the amount of the subsidy which the government have to put up with will go down, Ugochukwu pointed out.
He maintained that benefits to the government could help it use the money to acquire more conversion kits and also to create the infrastructure needed to support the provision of the vehicles.
Associated risk
Ugochukwu believes CNG conversion on vehicles comes with inherent risks like other gasoline and diesel.
“There is no zero risk to anything,” he said.
He explained, however, that there are minimal risks in the usage of CNG on vehicles associated with management.
He asserted that the Pi-CNG has been conscious of this aspect as it does realise that one incident could thwart the confidence in the CNG initiative.
According to Ugochukwu, CNG conversion costs about N750,000 to N1 million to be covered by the government in full or partially.
He expressed concern about infrastructure availability to enhance CNG conversion nationwide, noting that the main part of the country that has access to the gas pipelines is mostly in the south.
For the northeast and northwest parts of the country, access to gas pipelines is limited or unavailable.