• Saturday, March 02, 2024
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Potential 5m tonnes LPG market suffering on account of policy bottlenecks

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The liquefied petroleum gas (LPG) industry in Nigeria has yet to see significant growth, largely due to lack of government intervention and existing bottlenecks such as high tariffs on imported LPG equipment, BusinessDay has learnt.

Industry stakeholders have stressed the need for government to boost the growth of the industry, as it will help reduce the consumption of kerosene, which poses health risks to Nigerians, as well as gulps whopping sums from government’s coffers in terms of subsidy. They added that with over 160 million people in the country, increased utilisation of LPG for cooking and transportation would boost government’s revenue and create more jobs for Nigerians.

Last week, the Nigerian National Petroleum Corporation (NNPC) while explaining the reason for  kerosene scarcity in the country at an investigative public hearing at the National Assembly, said it was because of diversion and pipeline vandalism.

The corporation called for collaboration to encourage the sale of LPG, otherwise known as cooking gas, adding that it stepped up the supply of LPG from 65,000 metric tonnes in 2011 to 250,000 metric tonnes in 2013.

But unfavourable government policies, inadequate storage and transportation infrastructure and subsidy on kerosene are said to be major factors fuelling low investment in LPG, which contributes only about 5 percent of cooking fuels and is still used only minimally in industries in the country.

Dayo Adesina, president, Nigeria LPG Association (NLPGA), said “We have enough capacity in terms of the product itself, but we don’t have enough cylinders in the country. The Nigerian LNG, which is the largest supplier, is now supplying 250,000 tonnes and says it is ready to do one million tons.”

He said they have to import cylinders because many of the cylinder manufacturers in the country have shut down, adding that the high tariff on imported cylinders should be reduced. “Government needs to urgently reduce tariff on imported cylinders and other LPG equipment. Cylinder manufacturing plants have shut down because of the challenges of manufacturing in the country.

“We have a potential of 5 million tons market considering our population if LPG is made the cooking fuel of choice. The revenue potential is also huge. The industry is ready, but government needs to play a big role to make the environment attractive for investors.”

Soala Ariweriokuma, general manager, economic research and data management department, NNPC, who spoke with BusinessDay recently on the sidelines of a conference in Abuja, stressed the need for adequate discharge mechanisms for the commodity to be safely taken and distributed to the consumers. “But we do not have sufficient terminals, storage facilities and pressurised transportation vehicles that can take the commodity from the source to the ultimate consumers.”

He said in the context of what is happening in the United State with the shale gas, which is coming in large volumes, Nigeria needs to engage its gas in a proportion that can sufficiently compensate for the shortfalls in export of liquefied natural gas (LNG) to the United States and Europe.

“We have the population in Nigeria and our initial studies in-house in NNPC indicate that if we push for greater penetration of LPG in the commercial, industrial and domestic sectors, we will be in a position to sufficiently mitigate the impact of the shortfalls of LNG exports to the US and elsewhere. So we have a task to push this area and ensure that we really fully monetise the use of gas in the Nigerian economy,” said Ariweriokuma .

Yinka Omorogbe, former NNPC legal adviser and professor of law, Nigerian Institute of Advanced legal Studies, Abuja noted that 122 million Nigerians, representing 75 percent of the population, rely on traditional biomass for cooking.

“Nigeria ranks fourth on the worldwide list, after India, China and Bangladesh. For sub-Saharan Africa, it tops the list, representing nearly 20 percent of the 696 million people cooking with traditional biomass in 2011.

“ Again, it should be remembered that amongst the 25 percent of the Nigerian population that does not use biomass, there are millions, mainly in urban areas, who rely primarily on kerosene, which is less efficient than LPG, and which has negative health effects.

By: FEMI ASU