As far back as 2019, BudgIT, a leading civic organization that uses technology to track public expenditure and engage the citizenry, noted that the over ten trillion naira (N10 trillion) spent from 2006 to 2018 on subsidizing imported fuel could have been used to construct 27,000mw of solar-powered electricity for steady power supply or 500,000 new houses for families through mortgage at N20 million per house or construct a well-equipped 2,400 units of 1000-bed hospitals across 774 LGAs or educate and skill up Nigerians with global-standard quality tertiary education and sought-after skills. It concluded that “Nigeria is dancing on the edge of a razor blade by continuing its subsidy regime.” As a matter of clarity, subsidising of premium motor spirit (PMS), otherwise known as petrol, entails “paying the difference between the cost to produce and the cost charged to customers in order to make it affordable.”
In 2012, former President Goodluck Jonathan’s attempt to withdraw the subsidy was greeted with strikes, days of protests and shutdown of the entire system. He buckled and relaxed the policy. The cesspool of corruption in the oil sector continued unabated. Through fraudulent deals, emergency billionaires emerged among the cartel of oil marketers. Even former President Buhari who hitherto described the subsidy regime as a scam could neither stop the sleaze nor rehabilitate any of the four refineries to jumpstart local refining of crude oil. As the elephant in the room, all the three leading presidential candidates in 2023 election vowed to end the subsidy cycle.
Thus, in an off-the-cuff remark during his inauguration, President Bola Tinubu ended the subsidy regime. The removal of subsidy had immediate consequences: astronomical cost of PMS, increased cost of transportation and attendant hike in prices of goods and services, but it freed up gargantuan revenue for all tiers of government. One of the measures introduced by the administration to ameliorate the harsh effects is the planned roll out of compressed natural gas-powered vehicles. CNG (compressed natural gas) refers to “natural gas stored under high pressure to power vehicles,” instead of the traditional gasoline or diesel fuel. Its components are: fuel tanks, regulators and injectors that enable the efficient combustion of natural gas. The origin of natural gas-powered vehicles is traceable to the periods of World War I and World War II occasioned by the shortage of gasoline. Out of necessity, advanced countries like France, Netherlands, Germany and England had gas-bagged vehicles.
The high cost of gasoline also propelled Iran, Pakistan, Argentina, Brazil and China into opting for CNG-powered vehicles. Since the 1950s, the Sichuan Province in China had led the promotion of CNG vehicles. By 2014, China was leading worldwide with over 4,411 million CNG vehicles and 4,455 natural gas stations. Presently, Nicor Gas Company in Illinois State of the United States of America notes that, out of the over 15 million CNG vehicles worldwide, 135,000 are on US roads. Locally, “it is estimated that Nigeria has about 5,000 fuel-powered (petrol and diesel) vehicles that have been converted to CNG over the past 10 years.” In August 2023, the federal government announced its target of “over 11,500 new compressed natural gas-enabled vehicles and 55,000 CNG conversion kits for existing PMS-dependent vehicles.”
By 2027, FG intends to achieve a conversion of one million vehicles to CNG. A committee under the Presidential Compressed Natural Gas Initiative (PI-CNG) was put in place to ensure the development of intra-state mass transit systems built on CNG through wholesale conversion, retro-fitting and new purchase. President Bola Tinubu has also directed MDAs to acquire only CNG vehicles. Nigeria’s government said that it intends to save at least US$4.4 billion annually from fuel importation with a successful implementation of CNG initiative. On the other hand, PriceWaterhouseCoopers (PWC) records that “Official statistics estimate that Nigeria could potentially save N10 trillion every year, if all the vehicles in Lagos, Port-Harcourt and Abuja are converted to use CNG, instead of the conventional petroleum products.”
Consequently, Nigeria Customs Service has been directed to immediately apply a zero per cent duty on CNG vehicles, as well as LPG and CNG equipment components, conversion and installation services, and all equipment and infrastructure related to the expansion of LPG, including conversion kits. The benefits are in multiple respects. First, CNG vehicles are cost-saving in the face of current inflationary pressures. Second, it is more eco-friendly, reduces emission and leaves a lower carbon footprint. Third, it promotes energy security by ensuring less dependence on oil. Fourth, it reduces noise pollution. Five, it ensures increased vehicle efficiency by less frequent routine maintenance. Already, Nigeria’s Ministry of Labour and Employment has projected 25,000 new jobs in the CNG value chain – manufacturing, installation, maintenance and logistics. But beyond the question of how the job projection was arrived at, government should be intentional about technology transfer to local technicians.
There should be adequate sensitization to young people and artisans by the PI-CNG and the National Orientation Agency (NOA) to grab the opportunity and reduce unemployment and under-employment. The declaration of free conversion of unionized commercial vehicles to CNG by FG is a welcome development. Government should package incentivized and well-monitored training programmes through appropriate agencies to meet the 25,000 jobs target. To guard against limited CNG refilling stations, there should be a massive setting up of CNG sites across the country, not just in Lagos and Abuja. It is heartwarming that NNPC is planning to set up three LNG stations and over 100 CNG sites, but there should be irresistible incentives for more private investments, given the urgency. Besides, the range limitation of CNG vehicles and the need for frequent refueling makes ubiquity of CNG stations more compelling.
The maximization of Nigeria’s gas value chain will be boosted by a legislative backing for the national gas policy document and protection of private investments from policy summersaults. With proven gas reserves of 202 trillion cubic feet (tcf), the country parades 9th position in the world. Although largely untapped, PWC notes that the “proven gas reserves can stimulate an estimated Gross Value Added (GVA) of US$18.3 billion annually to the domestic economy.” This is a big cash cow for a nation in dire straits. We must get it right now. Affliction should not rise up a second time. Fossil fuels will soon dissipate.