In August 2023, President Bola Tinubu approved the establishment of the Presidential CNG Initiative (Pi-CNG), expected to cut down energy and transportation costs and ease the impact of fuel subsidy removal on Nigerians. But that initiative took months to commence, raising wide concerns. In this exclusive interview, Michael Oluwagbemi, programme director at Pi-CNG, shares implementation updates with Onyinye Nwachukwu, BusinessDay’s Abuja Bureau Chief, and Cynthia Egboboh, energy correspondent. Oluwagbemi says the initiative has so far attracted over $175 million in investments and delivered thousands of direct and indirect jobs. He further assures standards and that Nigerians will not be exploited—even though the government will not set prices. Excerpt….
Why did the CNG initiative take so long to take off?
Any good thing takes time because you must plan. The supply chain to get this project done is global. It’s from China, India, Portugal, Poland, and Brazil. That’s where all these products come from, and because it’s a new industry, we can’t manufacture CNG cylinders, for example. We didn’t invent CNG manufacturing kits; even before you place the order, you must plan the order. You must first understand and decide what you are going to do. Then you need to make sure that locally there’s capacity and technical resources. Technicians must be trained because you don’t want to bring a product that works for two months and breaks down and we have to call somebody in India, China, or Brazil to fix it. And so getting the technical resources ready and building the conversion centres takes time. We are starting now after we’ve been implementing really behind the scenes for eight to nine months. And very quickly, Nigerians are beginning to see that it’s getting rolling and are beginning to feel confident that this can be done. And the demand already to get converted is enormous. I’m excited about the possibility because, again, this is about the future and survival of our country. It is not sustainable for a country to borrow almost $10 billion every year in the last 15 years to subsidise a product that half of it is lost to smugglers. Another half of that half is lost to waste because you have old vehicles that pump PMS like drinking water.
So effectively, we need to find a better way, and the President has provided us with that better way. And that’s what we’re implementing. But it took us time to tick off because we must plan properly. The course we have set on now, we know exactly what we’re doing, we know where we’re going to roll out. Today (Saturday), we signed up for Edo and Delta in addition to the six states that we already signed up for, which were Lagos, Oyo, Ogun, Nassarawa, Kogi, FCT, and Kaduna.
With Edo and Delta, that means we’ve completed a corridor from Delta State all the way to Kaduna. Edo, Delta, Kogi, FCT, Nassarawa, and Kaduna are a complete travel corridor. And we now have, of course, Lagos to Oyo. In the next two weeks, we’re going to open up Kwara and Niger, and that is going to bridge that corridor. We’re going to have Lagos all the way through Niger to Kaduna, meaning we now have two corridors that collaborate, and in between, we activate Ekiti. Thereafter we’re going to open up the Calabar-Uyo corridor all the way to Benin; that will be the third leg of the corridor, and that will be our work in the next quarter.
So we are being methodological about what we are doing; we are working with the plan. We know the challenges and potential challenges, like lack of human resources, for example, and we are tackling them. We are working with different agencies, including NITT (National Institute of Information Technology) and NADDC (National Automotive Design and Development Council), to train technicians and personnel. Manufacturing is a challenge. We cannot continue to depend on importation to get this job done, so we are encouraging the establishment of manufacturing capacity in the country. That’s why we are where we are.
“We have covered the boundaries of CNG in terms of usage from just three primary states, Lagos, FCT, and Edo states, when we started this programme, to effectively eight states as of today. And we have plans already to take that eight to 17 before the end of the year.”
Are there plans to begin local manufacturing of conversion kits and CNG vehicles?
Yes. The reason we took time was the planning. One important thing we realised was around the time when the shipping route was becoming more difficult because of the Middle East crisis. And we figured out very quickly that it made no sense for us to order buses from overseas and that it was better for us to work with Nigerian manufacturers to bring in SKDs (Semi Knocked-Down), build these buses, and install conversion kits in them from their home. That’s a product of smart planning. As a result, we’ve been able to deliver the first 80 buses out of the 500 in the first four months of actually placing the order; otherwise, we would have had to wait for almost a year. Some of the manufacturers we actually reached out to in China and India even told us 15 months, some 18 months. So we encouraged local capacity from day one. Some of the vehicles are being assembled here, and some are even being significantly manufactured. We’re working with five players doing both buses and tricycles. The current five players are Jets Automobile, Meccano, Kojo Motors, DuoJet, and TGIS, and we also have more recently engaged with Innoson and Nord. I think that at the end of the day, it’s about building your local capacity. Will there be quality challenges? Yes, but at one point, China’s products were considered inferior, but they kept producing and got better at it. So we need to encourage our local manufacturers. And that’s what we’re doing.
Beyond that, we’re also looking at setting up a CNG industrial park. We are working with the Ministry of Steel, the Ajaokuta Steel Company, and NNPC that is setting up the gas industrial park in Ajaokuta. More recently, we have engaged with the Nigerian Content Development Monitoring Board, which has three existing industrial parks in Bayelsa, Cross River, and, I think, Delta State, and we’re looking at how we encourage manufacturing. We have a few manufacturers, like Leland, who are utilising their Leland yard in Ibadan to also do some kit assembly. So here and there across the country, we are beginning to see investment in this CNG value chain. And we are demonstrating our commitment to it by encouraging these manufacturers. In return, we give them some kind of partial off-take guarantee. That’s where we’re going to go now. We’re serious about converting one million vehicles in the next three years. And if we want to do that, we must have local manufacturing. We can’t manufacture our steel cylinders overseas and bring them to our ports.
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Don’t you think that converting one million vehicles in three years is quite small, considering anticipated demand?
The highest we have seen globally is 40,000 conversion averages in the first five years. This means that by attempting to do one million in three years, we are doing way more than what the world average has been able to achieve. I think because we have some advantages, we’re a big country with big problems. And we’re also a lot more entrepreneurial than most parts of the world. We’ve designed our programmes in a way that is achievable, and it is not small if you compare that to what the rest of the world has been able to do. And more importantly, that one million would have a lot of multiplier effect. One to 1.5 million vehicles in Nigeria constitute what we call the transit vehicles—meaning vehicles that move 90 percent of Nigerians, and they utilise about 80 to 85 percent of our PMS demand; it’s a Pareto rule. Just 20 percent of vehicles use 80 percent of petrol. So if we can target that one million, which is the reason why the president has launched the conversion incentive program. So if we can move the commercial vehicles, the ones that continue to move around when you’re in the office, for instance, and they’re burning the fuel, burning our future, and creating a hole in our budget, to CNG, then those one million vehicles is quite significant.
“We signed Arete mini-energy plants in Ajaokuta, and I also mentioned the Accela folks also in Ajaokuta are also developing mini-energy plants. These are real achievements.”
In specific terms, what has been achieved so far?
We need a lot of conversions to be done, as I’ve said, but we need conversion centres and we need technicians. As of this time last year, we had just seven conversion centres in Nigeria. We estimate we need 1,000 of them to achieve that one million conversions. So we set a target for ourselves that this year we’re going to have 100 conversion centres opened and available by this year; today we have about 130. So we’ve met and exceeded our target when it comes to conversion centres. We also set up for ourselves those 1,000 conversion centres, with an average of about three to five technicians, should have 400 technicians trained between that time and today. Today we’ve trained over 8,000 technicians, 500 directly to our grant partners, and again another 500 to our affiliates, including the one that we launched with the Nigerian Institute of Transport Technology and the Ministry of Labour in August. In fact, this coming week, NADDC, one of our affiliate partners, is doing another training in Ado-ekiti to train an additional 50 youth on how to convert vehicles because these conversion centres need technicians. In addition to that, we’ve been able to distribute, as I indicated so far, more than 8,000 conversion kits in the last six weeks that we started this program; another 10,000 of them are in transit, which will mean that we have sufficient kits at least to last us until December. We’re in the process now of ordering an additional 100 to 250,000 kits to allow us to continue to convert next year.
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We’ve signed up so far under the conversion incentive programme, over 75 conversion centres, because literally, as I speak to you, two states have been signed up, Edo and Delta, and I will still get the figures. We have covered the boundaries of CNG in terms of usage from just three primary states, Lagos, FCT, and Edo states, when we started this programme, to effectively eight states as of today. And we have plans already to take that eight to 17 before the end of the year. We have plans already, working with both the state government and private investors to activate CNG in Akwa Ibom State. In Port Harcourt, we already have two centres there that are doing conversions, but we need to have a dispensing station, and that should be activated by October. In Abia and in Enugu, we’re already working with them to get both dispensing and conversion centres up and running in those states. In Ekiti, as well as in Kwara states, they both already have conversion centres, two to each, and they also have dispensing stations. In Niger State, there’s one dispensing station that is going to be completed at the end of the month, and there are two conversion centres that are being developed. The government has even gone ahead to buy 200 buses there, and we are providing this dispensing capacity to ensure these buses are fuelled. In Kano State, there are two refuelling centres being developed and well over eight conversion centres that are present there, both owned by the government and private sector.
These are key achievements. We have attracted more than $175 million worth of investment. Today, in Edo State, NIPCO is launching a new refuelling station, the 10th they will be launching this year. There are 32 in their plans. Then there are three mother stations that they’ve planned as part of their own $55 million investment programme. NNPC launched six refuelling stations here in Abuja, as you recall, in June, and all six of them are now operational, and another six are being installed in Lagos, as we speak. Equipment for additional 40 is already on ground, and the installation will start next month.
BOVAS is already installed; in fact, I was speaking to the ED yesterday, and their crews are already on site between Ibadan, Osun, Ekiti, Kwara, and FCT to install eight new refuelling station sites. These are real investments. We’ve also seen a jump in terms of permitting that goes through NMDPRA, both for the modern stations. We’ve seen about 52 modern stations currently under development, requesting licences to establish and operate, and that shows that those investments are being made. They’ve already brought on stream 85 million cubic feet of gas a day in the last 12 months. I was at the Tetra Energy launch in Ijebu ode in June, and Accela also launched their own in Lagos in May. We have several of these stations, compression stations, and modern stations being planned and being developed. We also have major mini-energy projects that have been signed. We signed Arete mini-energy plants in Ajaokuta, and I also mentioned the Accela folks also in Ajaokuta are also developing mini-energy plants. These are real achievements.
In terms of assembly, the Noja TGIS plants opened their plant in May. They’re already training technicians to put together more than 200 CNG tricycles there every day. That’s the capacity of their plants; that’s real investment and real achievement. We’ve deployed about 80 of the 500 buses between Lagos, Ibadan, Kwara, and FCT, and we’re going to be doing more. The president, of course, received additional high-capacity buses from DAPPMAN, and those are being deployed vis-à-vis across the federation. Here in the FCT, we’re already working with them to plan out an EV component of our mass transit transformation program—just as you know, our program is not just CNG. We have seen them develop three new technologies in FCT. These are many of our achievements, which we are very proud of.
Our programme so far this year has created a quantum of 10,000 direct jobs and indirect jobs up to 100,000. Between establishing a modern station and doing a refuelling plant and an energy station, and all of these things, people are being employed, lives are being changed. And for me, that’s the biggest achievement of this programme. More than $12.5 billion worth of gas has been flared in the last five years, and now using it to drive our economy is one of the immense geniuses of this policy.
Is the government aware that a major concern at the moment is the conversion cost?
I remember when I got my SIM card, it was as high as N50,000, but today they are giving it out for almost free. For new technology, there is always a high adoption cost. But there is a way the market works: if something is useful, then demand for it is high, but when supply for it outstrips the demand, the price comes down. What the government doesn’t want to do, like what we did not do with telecom, is to start setting prices for players. Our job is not to set prices for the industry but to encourage more entrants into the industry. When more entrants come into the industry, there’s more supply, and then there’s competition, and the price comes down. That’s what we’re doing in the CNG industry. And we also see that new entrants are also more innovative.
For example, some entrants are already offering pay-as-you-go options for kits, so instead of you paying the kit upfront, as you top up your gas, you add a little bit of money on top of the gas for you to refund the kit money. And that’s good. Of course, we have to remember that we build progress on progress. That would not have been possible 20 years ago, before the advent of BVN and NIN. But with BVN and NIN, we can track almost everybody, and if you owe money for kits, the financial institution can get into your account and pull money. So there’s more confidence by players to offer credit, and we are seeing that.
But what we, as government, are doing directly is to say, Look, for those commercial vehicles that use the most PMS, and then eat into our budget and revenue, we will pay for them to get off our budget. And that’s the one million plus vehicles that demand 80 percent of our PMS. And for them, we’re already spending $5 to $8 million a year, depending on the size of the vehicles—the Sienna, the Sharon, the Ice Bus, or whatever.
So the one million conversion target is just federal government-driven?
The one million kits target that’s going to be distributed for free to the commercial sector, or with substantial discount to the rideshare vehicles, is federal government-driven. But we’re encouraging states to get in the game. We’ve had states like Kogi convert 30 vehicles so far, but I’ve told them that they need to do more. Kogi is the CNG capital of Nigeria; it has Ajaokuta, Obajana, and Geregu gas available. I have told them they need to do 30,000. That’s the difference between Nigeria and Egypt. When Egypt came to us and said they had done 105,000 in three years of conversion only, and they felt they had achieved a lot, we said, No, we want to do one million. And they looked at us and said, We can’t do it. The difference is that Egypt has one government; in Nigeria we have 812 governments. We have 36 states, a federal capital territory, the federal government, and 774 local governments. If I also count the LCDA, that’s probably another 1,200. So we have more opportunities to do big things than say a country like Egypt or even South Africa that operates a unitary system of government. It’s the beauty of our structure of government. Yes, it’s noisy, sometimes it’s messy, but if you organise it very well, you can do big things and solve big problems.
What’s the actual conversion cost today?
There’s no one cost depending on your type of vehicle. It ranges between N500, 000 and N1.2 m. And we have seen various products now being provided by the private sector to allow affordability. We’re also in discussions with Credit Corp. to explore ways to provide opportunities for civil servants to convert their own vehicles. That will also add to what we are already doing with the commercial sector. And we have seen interest from commercial banks, Development Bank of Nigeria, ECOWAS Bank of Infrastructure and Development, and a lot of guys with green financing. They are looking at this because, again, this is financing that will allow you to reduce your carbon footprint, eliminate greenhouse gases, and potentially even generate carbon credits. We are in endless discussions with them, but the ones we can immediately let go and let off, which is the conversion incentive programme, we have done it and we’re doing it, but we need to do more.
How do you ensure that the private sector players don’t exploit Nigerians?
It’s by regulation. State governments have the primary regulatory task in transportation. The federal government has policy as well as infrastructure commitments when it comes to the way our transportation system is organised. Constitutionally speaking, state governments are the ones that regulate transport; the federal government doesn’t get to the level of deciding how you control your parks. The constitution is very clear—that responsibility is on local and state governments. But for us as federal governments to recommend these policy actions, we are urging states to move their fleets to CNG and pass on the savings to citizens.
On our side of the ball, we are working with the unions directly to ensure they are able to enforce some kind of moderation for those commercial drivers who are benefiting from the government’s conventional incentive programme. Of course, I don’t think that enforcement should be 100 percent, but at least it’s something. Another thing we are doing is labelling those vehicles, not just for the purpose of price regulation or moderation but also for the purpose of ensuring that there’s safety monitoring. We have what we call the Nigerian Gas Vehicle Monitoring System. So every CNG vehicle in Nigeria, in the next three to six months, will carry a particular label, so you can tell this is a CNG vehicle. Of course, that means that if a passenger gets into that vehicle and the transport cost is higher, despite the fact that it’s using CNG, then you can challenge the operator to say, Look, you’re using CNG; why are you charging me this much? We will not do any form of direct enforcement of pricing on people who are using their own money to convert their car. But if you do benefit from government incentives, we expect by agreement and by moral suasion that you offer some kind of benefit to the public.
How are you engaging the states?
My first public engagement this year was with the state commissioners of transport or energy. We opened our doors to the states to consult and engage because they have different needs, and there’s no one-size-fits-all. And since then, states have been engaging us one-on-one, and depending on their needs, we have been able to also share with them based on our knowledge of the CNG sector, the latent and base infrastructure for compressed natural gas in their states, the gaps, and how to bridge those gaps. Typically, we meet them in these commissioner forums; through the Nigerian Governors Forum, the government of Kwara States, who is the chairman of the NGF, has been very helpful.
We also do one-on-one with different states. Some states are more proactive than others. The president has also, through the National Economic Council, offered every state $10 billion to acquire CNG assets, and I think that has also been helpful. Again, we cannot do enough when it comes to getting Nigeria on this track. We are bankrupting the motherland by using petrol and diesel. And for me, that’s just the truth. And whatever it takes, we need to start using CNG.
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Any incentives for private sector players, and how are you also encouraging them to participate?
For the private sector, in December of last year, the President signed off on an Executive Order that allowed the import duty exemption waiver for the CNG sector. That means that if a private sector person is building a refuelling station, they will not pay around 30-40 percent duty on the equipment they are bringing into Nigeria, which reduces the cost of operation and cost of investment and hastens the period of return on investment for them. The government is not just investing in CNG but is also saying that for every vehicle that the federal government of Nigeria buys today, the minimum must be bi-fuel; you cannot buy a pure petrol or diesel vehicle anymore, and this is now true for all MDAs. Customs, FRSC, for instance, took their memos to the Federal Executive Council; they were rejected, and the President said, Look, I want those cars to be CNG at the minimum, and that’s good for the private sector. We are stimulating demand.
That allows anybody going into the conversion space to have a guaranteed customer and revenue stream that gives them confidence to invest. Those are schemes that help investors directly or indirectly. But beyond all of this is that we have set for ourselves a sustainable framework to ensure that we move Nigeria to a gas future, and that consistency and clarity we also give by way of regulation. In March, 86 guidelines were released by the Standard Organisation of Nigeria. That gives the industry confidence that there is a rule to enter and exit the industry. And I think the federal government’s overall incentive programme for the gas sector is going to be very positive.
What has been put in place to ensure standards?
In June, we got together with the principal regulators, NADDC, SON, FRSC, and NMDPRA, and set up a one-stop-shop window for regulation for the CNG industry and the autogas industry, which can also be LNG vehicles or LPG vehicles. I called it the Nigerian Gas Vehicle Monitoring System. We did a pilot this week, on Monday actually, and it was quite successful to show that we are creating a system where every vehicle that goes to refuel is inspected to see whether it’s within the boundaries of regulation. And if it’s not and has not used a SON-approved kit or a SON-assisted kit, not done at an NADDC-accredited or certified centre by an NADDC-accredited technician, then it cannot fly our route. And FRSC is going to enforce that, and NMDPRA will ensure that it enforces that rule at the refuelling station. This is all to ensure safety.
Do you fear that gas availability may be a challenge at any point?
No, gas is not any more of a problem than what petrol or diesel is. It’s 18 times less explosive than petrol. Natural gas is available, and we are wasting, burning, and flaring it. We currently utilise only 40 percent of our gas production. 30 percent is rejected into the reserve. If we move 1 million vehicles, we need about 182.5 million scoffs of gas a day. That is less than 2.3 percent, or 2.6 percent, of our current domestic production. So we have the gas; it’s not a problem. What we need to do is ensure we utilise the gas so that we can create jobs.
