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In the wake of the soaring prices of Liquefied Petroleum Gas (LPG) and Compressed Natural Gas (CNG) in Nigeria amidst disruption to the operations of the Nigeria LNG due to flooding, Experts in the oil and gas sector have said that the N250billion intervention by the Central Bank of Nigeria (CBN) for domestic gas expansion was commendable.
This was even as they called for more investment in domestic gas infrastructure, stressing that the intervention meant to boost gas supply, must be an elixir for private sector-led investment.
Before now, the National Gas Expansion Programme (NGEP) was introduced to make CNG the fuel choice for transportation while LPG is the fuel choice for cooking, captive power and small industrial complexes.
The framework for the implementation of the intervention facility for the NGEP established by the Central Bank of Nigeria introduced a 250 billion naira facility to help stimulate investment in the gas value chain.
While the objectives were to improve private financing access, stimulate investments in infrastructure, adopt CNG and LPG, develop gas-based industries such as petrochemical, and boost employment, stakeholders stressed the need for more operators to be able to access the funding.
As of June 2022, National Bureau of Statistics (NBS) data had shown that the average retail price for refilling a 12.5kg cylinder of cooking gas increased by 121.2 per cent to N9,486 in June 2022 Year-on-Year. On a month-on-month basis, it also rose by 8.7 per cent from N8, 726 in May.
The price of CNG, which the ministry of petroleum had projected would be below N100 per litre, is already trading above N400 per cent as most products are imported, causing the disparity between naira and dollar to drastically affect the pump prices.
With the challenges expected to go worse due to the disruption of Nigeria LNG’s operations owing to flooding and disruption to the gas market globally following the Russia and Ukraine war, Nigeria has been forced to import over 55 per cent of LPG as the demand intensifies in the country.
Despite the huge gas deposit in the country, Nigeria has had to rely on smaller African countries like Algeria, Equatorial Guinea and others to meet its demand.
The prevailing situation linked to lack of investment had reportedly forced the CBN to inject about N250 billion loan to leapfrog the Federal Government’s domestic gas expansion programme.
Reacting to the development, the President of the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), Dr Prince Billy Harry said while the N250 billion funding made available by CBN remained an elixir, the conditions for accessing it were too stringent.
He noted that the apex bank must understand the dynamics of the situation in which most of the small-scale indigenous companies in the petroleum marketing sector operate.
According to him, unless the conditions are lowered to accommodate the marketers, the projected objectives of the intervention could remain a mirage.
Harry said there was a need for more investment in LPG and CNG, adding that a huge gap exists in gas infrastructure in the country.
He said there was a need for the CBN to work with associations in the sector to drive the agenda of domestic gas utilisation, stressing the country has everything it takes to stop the importation of LPG.
“Nigeria has huge gas resources and should not be importing gas. I think the intervention by the CBN is commendable but more is needed. The infrastructure needed to unlock gas is huge,” Harry said.
On his part, Director, Energy, Utilities, and Resources, Associate PricewaterhouseCoopers, Habeeb Jaiyeola, stated that it was high time for the government to stop the importation of LPG, stressing that the CBN N250 intervention remained a critical elixir towards the plan.
He said if complemented with existing gas infrastructure investment like the AKK pipeline, the provisions in the Petroleum Industry Act and other initiatives, the country is at the advantage of meeting local demand for LPG.
Amidst plans to meet net-zero goals as well as Sustainable Development Goals and the Paris Climate Change pact, Jaiyeola urged industry players to take advantage of the N250 billion Central Bank of Nigeria (CBN) intervention facility to address the bottlenecks in the domestic gas market while urging sustainable finance into the gas sector.
“The move by the CBN is laudable and the intent of the fund is also quite comprehensive and seeks to ease funding challenges for all players within the LPG value chain,” Jaiyeola said.
Also, the Programme Manager, National LPG Expansion Implementation Plan, Dayo Adeshina said the intervention was critical for the sector, noting that there was a need to tweak the plan to ensure that players in the sector seamlessly access the loan.
He noted that the objectives of the intervention would be achieved if commercial banks stop treating the loan as commercial loans.
“To access the loan, it is your commercial banks that will approach the CBN but unfortunately the banks were treating it as commercial loans. Typically, they would ask for the same things they ask when you ask for normal loans; equity contribution, security and all.
“All these slowed down the number of people whose balance sheets can allow them to access the loan. That is being looked at to see how associated bottlenecks can be resolved to make it easier for people to access,” Adeshina said.
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