How Nigeria can end importation of cooking gas with CBN N250b intervention

With over 206 trillion standard cubic feet of natural and intervention fund of N250 billion by the Central Bank of Nigeria, (CBN), oil and gas stakeholders in the country have called to importation of cooking gas otherwise called Liquefied Petroleum Gas (LPG).

Amidst soaring price and disruption to gas market globally following the Russia and Ukraine war, Nigeria currently import over 55 per cent of LPG to growing demand for the products in the country.

Despite the huge gas deposit in the country, Nigeria have had to rely on smaller African countries like Algeria, Equatorial Guinea and others meet demand.

The prevailing situation linked to lack of investment had forced the CBN to inject about N250 billion loan to leapfrog the Federal Government domestic gas expansion programme, which aimed that encouraging use of gas in place of firewood and charcoal.

Last year, the Federal Government revealed that the CBN would provide N250 billion intervention facility for the national gas expansion programme aimed at making Compressed Natural Gas (CNG) the fuel of choice for transportation and Liquefied Petroleum Gas (LPG), domestic cooking, captive power and small industrial complexes.

The CBN had stated that the objectives of the facility being implemented in collaboration with the Ministry of Petroleum Resources were to improve access to finance for private sector investments in the domestic gas value chain; stimulate investments in the development of infrastructure to optimize the domestic gas resources for economic development; Fast-track the adoption of CNG as the fuel of choice for transportation and power generation, as well as LPG as the fuel of choice for domestic cooking, transportation and related activity recommended by the Ministry of Petroleum Resources.

On funding, the CBN had stipulated that aggregators, manufacturers, processors, wholesale distributors and related activities would be funded under the Power and Airline Intervention Fund (PAIF) while small and medium-scale enterprises (SMEs) and retail distributors were to be funded by NIRSAL Microfinance Bank (NMFB) under AGSMEIS.

The term loan for manufacturers, processors, wholesale distributors, etc. will be determined based on the activity and will not exceed N10 billion per obligor while working capital is set at a maximum of N500 million per obligor.

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Small & Medium Enterprises (SMEs) and Retail Distributors term loans would be determined based on the activity and will not exceed N50 million per obligor with working capital pegged at a maximum of N5 million per obligor.

Prince Billy Harry, the president, Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), said while the N250 billion funding made available by CBN remained an elixir, there was need for more investment, adding that huge gap exists in gas infrastructure in the country.

Harry said there was need for the CBN to work with associations in the sector to drive the agenda of domestic gas utilisation, stressing the country has everything it takes to stop importation of LPG.

“Nigeria has huge gas resources and should not be importing gas. I think the intervention by the CBN is commendable but more is needed. The infrastructure needed to unlock gas is huge,” Harry said.

Given growing gas demand in Nigeria, Harry said there’s no any sense if the current LNG production in the country is focused on export market.
While Nigeria is attempting to increase domestic LPG consumption to five million metric tonnes (mmt), Habeeb Jaiyeola, PricewaterhouseCoopers’s Associate director, Energy, Utilities, and Resources, stated that it was high time for government to stop importation of LPG, stressing that the CBN N250 intervention remained a critical elixir towards the plan.

If complemented with existing gas infrastructure investment like the AKK pipeline, the provisions in the Petroleum Industry Act and other initiatives, Jaiyeola stated that the country’s stand at the advantage of meeting local demand of LPG.

Amidst plans to meet net-zero goals as well as Sustainable Development Goals and the Paris Climate Change pact Jaiyeola urged industry players to take advantage of the N250 billion Central Bank of Nigeria (CBN) intervention facility to address the bottlenecks in the domestic gas market, while urging sustainable finance into the gas sector.

“The move by the CBN is laudable and the intent of the fund is also quite comprehensive and seeks to ease funding challenges for all players within the LPG value chain,” Jaiyeola said.

The African Refiners and Distribution Association (ARDA) and other experts in the Liquefied Petroleum Gas (LPG) had earlier warned of imminent danger if Africa fails to quickly adopt modern clean energy as over 850 million Africans still depend on solid fuels (biomass) for cooking.

Without strategic efforts towards energy transition, especially for cooking, the experts had said solid fuels might continue to kill over 600,000 Africans yearly due to household air pollution.

Dayo Adeshina, programme manager, National LPG Expansion Implementation Plan, had said the intervention was critical for the sector, noting that there was need to tweak the plan to ensure that players in the sector seamlessly access the loan.

He noted that the objectives of the intervention would be achieved if commercial banks stop treating the loan as commercial loans.

“To access the loan, it is your commercial banks that will approach the CBN but unfortunately the banks were treating it as commercial loans. Typically, they would ask for the same things they ask when you ask for normal loans; equity contribution, security and all.

“All these slowed down the amount of people whose balance sheets can allow them access the loan. That is being looked at to see how associated bottlenecks can be resolved to make it easier for people to access,” Adeshina said.

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