Energy experts have called for a holistic plan that would create a sustainable energy mix in Africa’s biggest economy, while the Federal Government and the Central Bank of Nigeria (CBN) move to address loopholes to fast track a recently launched autogas policy.
CBN, as part of efforts aimed at stimulating finance to critical sectors of the economy, had introduced a N250 billion intervention under the National Gas Expansion Programme.
The apex bank had noted under the implementation framework of the intervention that low level of investment in the industry has resulted in the minimal production and utilisation of Compressed Natural Gas (CNG) and Liquefied Petroleum Gas (LPG) as clean alternative sources of domestic energy in Nigeria.
Given the removal of subsidy on Premium Motor Spirit, President Muhammadu Buhari on December 1, 2020, had launched the AutoGas Policy to reduce the impact of high cost of petrol price in Nigeria.
While the subsidy removal has been challenging given a kickback by labour unions, the autogas programme did not go as planned due to inherent challenges, especially lack of capacity to enable Nigerians convert vehicles to run on gas as well as limited retail autogas dispensing stations.
Speaking on the policy, Minister of State for Petroleum Resources, Timipre Sylva said, “If you have a critical mass of vehicles, maybe one million converted to use gas, you must also have a commensurate amount of filling stations that are enabled to fill the one million cars converted.
“We are working right now with the Central Bank of Nigeria to ensure that we are able to bring in conversion kits for a critical mass of vehicles,” Sylva explained at an industry event.
He noted that there are also plans to give soft loans at the same time to downstream operators which will allow them to fix their filling stations to operate optimally.
Speaking on the move, PwC’s Associate Director, Energy, Utilities and Resources, Habeeb Jaiyeola, said across the world, government interventions are being used to catalyse economic development.
“In many cases, government interventions are quite critical in controlling the cost of borrowing in developing sectors. The CBN intervention remains a positive tool for the development of the domestic gas sector,” he said.
However, the payback has to be enforced to ensure the fund remains available for further critical interventions, Jaiyeola noted, adding that further sensitisation on the autogas initiative would be needed for its acceptability.
“This is a highly technical area where safety is of high importance especially where a mechanical item is made to run on fuel feedstock different from its original design,” he added.
Appropriate pricing system needs according to him must be instituted to enable the forces of demand and supply determine the price and enable adequate returns on investment.
Another energy expert, Michael Faniran admitted that the application of autogas policy means additional cost to most Nigerians which means the government needs to create incentives aimed at vehicle owners, in the form of loans or tax credits, to offset part or all of the cost of conversion of vehicles and even for retail outlets to build dispensing units for CNG.
“The intervention by the CBN is a welcome idea as it will jumpstart the adoption of the autogas by vehicle owners and retail outlets, and also build critical market mass. However, this is not sustainable,” Faniran noted.
He insisted that there was a need for a public-private partnership (PPP) type of fund to finance vehicle and retail outlets conversion kits to guarantee sustainability, adding that the CBN could disburse the funds through a special purpose vehicle with private sector players.
For the private sector to come in, Faniran noted that there must be a very clear enabling policy and the government must have a well thought out and bankable plan to attract the private sector.