In May, the newly appointed president, Bola Ahmed Tinubu, decided to eliminate fuel subsidy that had traditionally maintained affordable fuel prices for Nigerians. Since then, fuel prices have skyrocketed, with Nigerians currently paying over N600 for a litre of petrol, a significant increase from the previous N185 official pump price before the subsidy removal.
The sudden surge in the price of petrol, a vital energy source in Nigeria, set off an immediate chain reaction that impacted individuals and businesses. Market prices for goods soared, and transportation costs became unaffordable, forcing citizens to pay twice as much as they had been paying before.
As the overall operational costs associated with fuel purchases rise, Nigerians find themselves compelled to explore alternatives to cope with the expensive fuel prices. From embracing solar energy to utilising gas, citizens are seeking more cost-effective options. We previously explored how the removal of the fuel subsidy has fuelled the transition to gas-powered generators in Nigeria. Interestingly, equal attention is being drawn to gas-powered vehicles.
President Tinubu recently announced an investment of N100 billion between July 2023 and March 2024 to acquire 3000 units of 20-seater CNG-fuelled buses has been made. However, beyond governmental procurement, a trend of personal acquisition of gas-powered vehicles and the conversion of existing fuel-based vehicles to gas among Nigerians has emerged.
These vehicles are economically advantageous and boast a cleaner environmental energy footprint compared to their petrol-powered counterparts. Although still nascent, there exists significant potential for a higher adoption rate. First, Nigeria has substantial gas reserves, ranking the 9th largest globally with approximately 209.5 trillion cubic feet (tcf) of verified gas reserves. The federal government asserts that Nigeria presently contributes to 33 per cent of the total gas reserves across the African continent. Secondly, the population is readily open to embracing alternative energy sources beyond expensive traditional fuels.
It has been reported that transitioning from petrol to Compressed Natural Gas (CNG) has the potential to save Nigeria up to N3 trillion annually. But this relies heavily on widespread commercial adoption. To achieve this goal, the government must take significant strides to encourage the acceptance of gas-powered vehicles. And one pivotal strategy involves the establishment of robust CNG station projects and necessary infrastructure.
To begin with, unlike our traditional petrol stations, CNG filling stations are essential infrastructure for a successful transition to CNG-powered vehicles as they provide the necessary fuel supply for vehicles to operate effectively. But in Nigeria, CNG stations are not prevalent and are relatively scarce in the country. And this may make it difficult for Nigerians to access convenient refuelling options for their vehicles.
For instance, the Managing Director of Nigerian Bottling Company Ltd (NBC) Matthieu Seguin, in this report disclosed that the unavailability of CNG filling stations across the country was affecting the seamless transition of some of its trucks from diesel-powered to CNG. He noted that among their fleet of 10 CNG trucks the company has, one became stranded after moving beyond the designated area due to the absence of available refuelling stations for a refill. According to him, there are ten CNG trucks under NBC’s pilot scheme but plans are underway to increase the number as soon as more CNG filling stations come on board.
We have seen a comparable challenge in the adoption of electric vehicles (EVs), where the scarcity of charging stations in the country has been evident. Encounters like these can discourage citizens from embracing renewable energy options, be it EVs or gas-powered vehicles.
Commendably, the government is charting a path of development in this direction. The Nigerian National Petroleum Company (NNPC) Limited recently partnered with NIPCO to construct 35 CNG stations across the country to support intra-city and inter-city transportation by the end of 2024. This will be further complemented by an additional 56 stations to be deployed by NNPC Retail across the country. Upon becoming fully operational, these stations are poised to cater to the refuelling needs of more than 200,000 vehicles daily.
These aspirations are lofty yet attainable. But, history has shown that projected delivery dates for projects or infrastructure in Nigeria are not always met. This situation raises concerns, as it could impede the swift expansion of CNG adoption.
In a similar vein, the existence of essential infrastructure such as efficient gas transportation pipelines remains crucial. The seamless distribution of gas to different locations including states, storage terminals, or depressurization points, all in service of CNG stations, is notably facilitated by the presence of pipeline infrastructure. As an example, the northern region of Nigeria, facing a shortage of gas supply, would profit from initiatives like the Ajaokuta–Kaduna–Kano Natural Gas Pipeline, which regrettably remains pending.
Moreover, the introduction of free import duties and tax incentives can catalyze expediting the use of Compressed Natural Gas (CNG) in Nigeria. Currently, the conversion kits essential for CNG-powered vehicles are brought into the country through imports due to the absence of local manufacturing. Predictably, this scenario culminates in a costly import process, exacerbated by the Naira’s volatile exchange rate against the Dollar, and further amplified by the imposition of import duties and taxes.
Enacting a policy aimed at reducing or eliminating these expenses would substantially alleviate the financial strain on individuals and enterprises seeking to adopt CNG technology. These initiatives would result in a decrease in the overall cost of conversion kits, making CNG technology more appealing and accessible.
Similarly, a notable reduction in taxes, especially regarding the importation of CNG-powered vehicles, is essential. This move goes beyond merely stimulating demand for CNG vehicles, such tax reductions would serve as a compelling incentive for manufacturers to channel investments into the production and importation of a more significant number of CNG-powered vehicles. Collectively, these strategies possess the potential to expedite a shift towards cleaner energy alternatives within the realm of transportation.