Subsidy removal: Pressure turns on N250bn autogas fund

The growing demand for palliatives following the subsidy removal makes now the most auspicious time to implement Nigeria’s N250 billion autogas intervention fund, a crucial part of the policy on the alternative fuel, analysts have said.

Keen to avoid using a national register with doubts about its credibility, President Bola Tinubu has delayed doling out cash to millions of Nigerians as palliatives, a plan analysts have warned would fuel inflation, which is already at double digits.

This creates the need for a holistic plan for an inclusive palliative programme that helps the poor without harming the economy, and analysts say intervention in the transport sector helping people to move will add the most value.

Launched in December 2020, the autogas project seeks to reduce the country’s high reliance on petrol and promote the use of gas as a cleaner and cheaper energy source for vehicles.

At the take-off stage, the federal government planned to convert up to one million vehicles – mostly passenger and haulage vehicles that run on Nigerian roads – by the end of 2021 as pilot, but that has not been achieved.

Sources familiar with the programme confided in BusinessDay that accessing the Central Bank of Nigeria’s intervention fund has been a herculean task.

“The Gas Intervention Fund is one of the several direct intervention programmes by the government and warehoused at the central bank; however, it was fraught with inconsistencies and lack of transparency,” Kelvin Emmanuel, chief executive officer of Dairy Hills Limited, said.

He added, “The real changes investors want to see other than the FX reform, which is a major step forward, are the deregulation of gas prices, review of the requirement for securing an offtake agreement for gas from Nigeria Gas Marketing Company, and an increase in the number of midstream high-pressure transmission pipes to enable offtake and distribution easy.”

Speaking at the sixth Nigeria International Energy Summit in Abuja, Gabriel Aduda, permanent secretary, ministry of petroleum resources, when asked for an update, simply said that over 1,000 vehicles had been converted, most of which are government-owned.

But many worry why this particular project, which was aimed at helping drive the utilisation of the country’s enormous gas reserve, would fall short of expectations.

BusinessDay’s inquiries with members of the Nigerian Association of Liquefied Petroleum Gas Marketers, the Independent Petroleum Marketers Association of Nigeria (IPAMAN) and the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN) showed none of their members have been able to access the fund.

When asked by our correspondent on Monday whether PETROAN had started accessing the N250 billion facility for gas expansion, a senior executive of the association who pleaded anonymity replied, “No, not at all. That is a promise that has not been delivered because the process of delivering it is just very complex.”

“That is a project that is difficult to access because the CBN is not helping matters. Also, the process is not giving the kind of guarantee to access the money. So, they need to meet with stakeholders to re-engineer the process,” he added.

For IPMAN, the union is demanding immediate access to the N250 billion intervention fund, which they see as a viable alternative to petrol following the eliminatiin of the subsidy regime by Tinubu.

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“Our partners, Gas Analytics & Solutions Ltd, have an agreement with the independent Petroleum Marketers Association of Nigeria to co-locate natural gas dispensers on our network of over 30,000 filling stations in Nigeria,” Chinedu Okoronkwo, national president of the IPMAN, told journalists two months ago.

He added: “This collaboration with IPMAN presents the most economic and expedient platform to deploy the necessary infrastructure to support a fast national roll-out of CNG (Compressed Natural Gas) for vehicles.

“What is left is the support of the Central Bank of Nigeria to provide access to the Gas Expansion Fund for vehicles, Keke, and truck owners to access loans to finance the acquisition of natural gas conversion kits.”

In the different scenarios captured by the government, the N250 billion auto gas intervention fund anticipated that starting from 2020, 200,000, 300,000 and 500,000 cars could be converted in the first, second, and third year respectively or 500,000 vehicles would be converted in about 18 months and the other 500,000 within 19 to 36 months.

“The project has not been able to deliver on its set targets so far for varying reasons such as lack of decisive implementation, inadequate infrastructure (gas development infrastructure and vehicle-capacity infrastructure), lack of sufficient investment in Nigeria’s petroleum sector, among others,” Ayodele Oni, partner, the energy practice group at Bloomfield Law Practice, said.