Despite Nigeria’s huge gas field, reliance on smaller African countries to meet its gas needs is still high. With an intervention fund of 250 billion naira from the CBN, industry players have called for an end to the importation of cooking gas. REGINA OTOKPA Reports
The current crisis in Russia and Ukraine has caused a major disruption in the global gas market. This further boosted the global price of gas, even as demand for cooking gas, otherwise known as liquefied petroleum gas (LPG), continued to soar in Nigeria.
Growing demand for LPG
Unlike years past when the majority of Nigerians resorted to the use of kerosene and firewood to cook their meals, more and more households have moved on and many more have abandoned what is probably considered an old mode of cooking in the current generation, to adopt the use of LPG or cleaner energy in their homes to deal with the dangers of pollution.
Recall that the African Refiners and Distributors Association (ARDA) and other experts in the liquefied petroleum gas (LPG) sector have previously warned of imminent danger if Africa fails to quickly adopt the clean energy.
It was revealed that over 850 million Africans still depended on solid fuels (biomass) for cooking, but the biggest concern was that until there was a strategic effort to switch to cleaner energy for cooking, solid fuels could continue to kill more than 600,000 people. Africans every year due to household air pollution.
But despite the huge gas deposit in the country, unfortunately, Nigeria is unable to easily meet the growing demand for gas and currently imports more than 55% of domestic LPG demand. The country has had to rely on smaller African countries like Algeria, Equatorial Guinea and others to meet the growing demand.
Worried about this trend, last year the Federal Government announced that the Central Bank of Nigeria (CBN) would provide a N250 billion intervention facility for the national gas expansion programme. This intervention had become necessary, following a lack of investment.
In addition to overtaking the federal government’s domestic gas expansion program aimed primarily at encouraging the use of gas in place of firewood and charcoal for domestic cooking, it is also expected to do compressed natural gas ( CNG) the fuel of choice for transportation and for powering small industrial businesses. complexity, as well as enabling Indigenous actors to advance the sector.
Giving a deeper insight into the intervention facility, the CBN explained that the objectives of the facility were implemented in collaboration with the Ministry of Petroleum Resources to improve access to finance for private sector investments in the supply chain. value of domestic gas, boosting investment in infrastructure development to optimize national gas resources for economic development, accelerating the adoption of CNG as the fuel of choice for transportation and power generation, as well as LPG as fuel of choice for domestic cooking and related activities, as recommended by the Ministry of Petroleum Resources.
Regarding financing, the apex bank had stipulated that aggregators, manufacturers, processors, wholesale distributors and related activities would be financed by the Electricity and Airlines Intervention Fund (PAIF), while small and medium enterprises (SMEs) and retail distributors were financed by the NIRSAL Microfinance Bank (NMFB) under the AGSMEIS.
According to CBN, term lending for manufacturers, processors, wholesale distributors and others will be determined on the basis of activity and will not exceed N10 billion per debtor, while working capital is set at a maximum of N500. million naira per debtor.
In addition, term loans to small and medium enterprises (SMEs) and retail distributors will be determined on the basis of activity and will not exceed 50 million naira per debtor with working capital set at a maximum of 5 million. naira per debtor.
Industry experts who gave their various thoughts on the CBN loan facility to change the gas narrative in the country, asserted that while the N250 billion loan is key to repositioning the gas market , Nigeria must realize the urgent need to address the huge gas infrastructure deficit in the country and work to end the importation of gas as soon as possible.
Considering Nigeria’s ongoing attempt to increase domestic LPG consumption to five million metric tons (mmt), one of the experts, Habeeb Jaiyeola, the Director of Energy, Utilities and Resources, with PricewaterhouseCoopers associate, argued that complementing CBN’s 250 billion naira intervention with existing investments in gas infrastructure, like the AKK pipeline, provisions of the Petroleum Industry Act and other initiatives were the only roadmap capable of putting Nigeria in an advantageous position to meet the local demand for LPG.
While insisting that the N250 billion remains a key elixir for the plan, Jaiyeola further urged industry players to take advantage of the ease of intervention to address bottlenecks in the domestic market. gas sector and also ensure sustainable financing in the gas sector, if plans to meet net zero targets as well as the Sustainable Development Goals and the Paris Climate Change Pact are to come to fruition.
“CBN’s decision is commendable and the intent of the fund is also quite comprehensive and aimed at alleviating funding challenges for all players in the LPG value chain.”
Aligning with the importance of the intervention facility and calling for increased investment in gas, the President of the Petroleum Products Retail Outlet Owners Association of Nigeria (PETROAN), Dr Prince Billy Harry, underscored the need for the apex bank to work with industry associations to push forward the domestic gas utilization agenda to close the huge gap in the country’s gas infrastructure.
Harry, who noted that there was no sense if current LNG production in the country was focused on the export market, argued that Nigeria had everything it needed to stop the import of LNG. LPG.
“Nigeria has huge gas resources and should not import gas. I think CBN’s intervention is commendable, but more is needed. The infrastructure needed to unlock the gas is huge,” he noted.
For his part, the Program Manager, National LPG Expansion Implementation Plan, Dayo Adeshina, noted that while CBN intervention was essential for the sector, there was a need to amend the plan to ensure industry players have transparent access to lending; especially if commercial banks stop treating the loan as a commercial loan.
“To access the loan, your commercial banks will approach the CBN, but unfortunately the banks were treating it like commercial loans. Typically, they ask for the same things they ask for when you apply for normal loans – equity, security and all.
“All this has slowed down the number of people whose balance sheets can allow them to access the loan. This is examined to see how the associated bottlenecks can be resolved to facilitate people’s access.
Meeting the nation’s LPG needs has been a major challenge for the Federal Government, especially with the astronomical rise in the price of jet fuel and the need to reduce the use of firewood to discourage the felling of trees and other forms of environmental degradation.
From the current intervention of the apex bank, it is assured that if the disbursement is free of corruption, an improvement in the satisfaction of national needs is inevitable.