Stories by Adewale Sanyaolu
The Plan by the Federal Government to grow the domestic Liquefied Petroleum Gas (LPG) market may have received the desired boost as the Nigerian Liquefied Petroleum Gas Association (NLPGA) and some consortium of Banks, investors and operators in the LPG market are partnering to tap into the over $10bn investment opportunities to be unlocked by the national LPG policy of the Federal Government.
The NLPGA made the call during its annual CEOs’ Breakfast Meeting held in Lagos, where LPG producers, marketers, IFC, UBA, Sterling Bank and other stakeholders brainstormed on the investment opportunities that are expected to be catalysed by the national LPG policy.
The Federal Executive Council (FEC) had in July, approved a new National Gas Policy in a bid to unlock the potential of the 187 trillion cubic feet of proven gas reserves in the country.
The FEC approved document builds on the policy goals of the Federal Government for the gas sector as presented in the 7 Big Wins initiative developed by the Ministry of Petroleum Resources and the National Economic Recovery & Growth Plan (ERGP 2017 – 2020).
The policy articulates the vision of the Federal Government, sets goals, strategies and an implementation plan for the introduction of an appropriate institutional, legal, regulatory and commercial framework for the gas sector, which is intended to remove the barriers affecting investment and development of the sector.
The NLPGA Strategy
NLPGA’s Executive Secretary, Mr. Joseph Eromosele, explained that the overall goal of the LPG policy was to promote the wider use of LPG in domestic, power generation, autogas and industries while increasing national consumption to five million metric tonnes in five years.
According to him, over $10bn can be generated if 50 per cent of the current kerosene and firewood users in the country switch to cooking gas by 2019. This, he added, offered huge investment opportunities for LPG players.
“Only 5 percent of the Nigerian population utilises LPG for cooking while 56 percent depends on firewood and 27 percent on kerosene. Over 30 million households and more than 100 million Nigerians depend on firewood as a source of energy for cooking but this has come with collateral damage to human health, environment (deforestation) and the economy. With the LPG policy, we will be able to drive broader penetration of LPG into homes, especially the low-income households in rural areas.
Over $10bn will be generated for the economy from the switch of 50% kerosene and firewood users by 2019. Estimated 500,000 – 1,000,000 jobs will be created in the LPG value chain within the next two years with the planned Kerosene to LPG switching programme.”
According to the Deputy President, NLPGA, Mr. Nuhu Yakubu, the policy also aims to use LPG to displace LPFO and diesel as popular fuel among industrial users while deepening applications in agriculture and commercial establishments.
“The policy will also promote the use of LPG for off and on grid power generation. It will provide the environment for the use of LPG in the automotive industry with a target conversion of 10 per cent of the country’s vehicle population. These are investment opportunities for industry stakeholders,” he added.
FG’s worry
The Programme Manager, National LPG Expansion Implementation Plan (Office of the Vice-President), Mr. Dayo Adeshina, lamented that 18 states in northern Nigeria are currently suffering from desertification and deforestation because several millions of the citizens rely on firewood for cooking.
If the situation continues unchecked, Adeshina warned that states in the southern part of the country could soon start experiencing deforestation, a development he said shouldn’t be allowed.
He, therefore, noted that only increased utilisation of LPG could halt deforestation, which is fast encroaching into new areas of the country. Adeshina added that to deepen LPG usage, more investments were needed in local gas cylinder manufacturing and urged NLPGA members to begin to look at the direction especially with a national LPG policy now in place.
He decried the shutdown of two cylinder manufacturing plants in Nigeria, adding that some investors had signified interest in manufacturing cylinders in-country.
CEO’s, stakeholders submission
CEOs present at the breakfast meeting noted that though the nation’s total domestic LPG consumption had grown from just below 70,000 tonnes in 2007 to 500,000 tonnes in 2016, the improvement in the domestic consumption of LPG only translated to a per capita consumption of only less than 2.5kg. This, they said, was low compared to the per capita consumption in selected African countries like South Africa at 7.28kg, Ghana at 9.45kg, and Morocco at 66.27kg.
Some factors responsible for this as identified by the CEOs include the massive inadequate supply of LPG equipment, high cost associated with the acquisition of cylinders and LPG stoves, insufficient number of jetties and LPG inland storage facilities, excessive import duties and VAT on LPG equipment, and inadequate road and transport network facilities.
They also complained about the lack of access to long-term funds for LPG project in the country while blaming the banks in this regard.
However, representatives of some of the banks at the meeting enlightened the LPG operators on what they needed to do to attract funding from the banks.
All the stakeholders at the meeting expressed confidence that the LPG policy would spur a revolution in the LPG industry and urged the government to ensure that the policy is fully implemented to the benefit of all and sundry in the country.