Subsidy Removal: CNG As Alternative Fuel for Motorists

For many years, petrol subsidy was an albatross to the Federal Government, as trillions of Naira was spent annually importing refined petroleum products into Nigeria.

Between 2018 and 2022, petrol  worth N13.588 trillion was imported into the country based on figures from the National Bureau of Statistics (NBS). In 2018, petrol worth N2.848 trillion was imported into the country.

In 2019 and 2020, N1.712 trillion and N2.007 trillion worth of petrol was imported, while N4.563 trillion worth of petrol was imported in 2021. In the second quarter of 2022 alone, the figure was N2.455 trillion.

Efforts to stop the waste associated with subsidy by successive governments failed because of opposition by labour unions. At least 90 percent of the movement of goods, people and services is done by road, and most of the vehicles used are petrol-powered.

Organised labour had argued that removing subsidy on petrol without  putting the country’s refineries in good condition or providing cheaper alternative fuel would worsen the economic hardship most Nigerians are facing.

According to Nigerian National Petroleum Company (NNPC) Limited, Nigeria spent N1.4 trillion on petrol subsidy in 2021. In June 2022, a document sent to Federal Government by NNPC Limited showed that Nigeria spent N1.274 trillion  ($3 billion) on fuel subsidy in the first five months of 2022.

Although Federal Government made a provision of N443 billion for a subsidy for January to June in the 2022 budget as appropriated, the government succumbed to pressure from organised labour to keep up with fuel subsidy taken into account the current realities, increased hardship in the population, heightened inflation, and also that the measures that needed to be taken to enable a smoother exit from the fuel subsidy were not yet in place.

The organised labour had planned a protest on January 27, 2022 following the Federal Government earlier plans to remove fuel subsidy in line with the provisions of the Petroleum Industry Act (PIA). The organised labour later shelved their planned protest after discussing with the government.

“Provision was made in the 2022 budget for subsidy payment from January till June. That suggested that from July, there would be no subsidy.

“The provision was made sequel to the passage of the Petroleum Industry Act (PIA), which indicated that all petroleum products would be deregulated.

“Sequel to the passage of the PIA, we went back to amend the fiscal framework to incorporate the subsidy removal. However, after the budget was passed, we had consultations with a number of stakeholders and it became clear that the timing was problematic.

“We discovered that practically, there is still heightened inflation and that the removal of subsidy would further worsen the situation and impose more difficulties on the citizenry.

“Mr. President does not want to do that. What we are now doing is to continue with the on-going discussions and consultations in terms of putting in place a number of measures,” former Minister of Finance, Budget and National Planning, Zainab Ahmed had said in January 2022 while announcing the suspension of the planned removal of petrol subsidy.

“We, therefore, need to return to the National Assembly to now amend the budget and make additional provision for subsidy from July to December 2022 to whatever period that we agreed was suitable for the commencement of the total removal,” she added.

Former President Muhammadu Buhari’s administration continued with the payment of subsidy until May, when the life of the administration came to an end. However, after taking oath of office, the new President, Bola Tinubu, not ready to continue to bear the burden,  in his inaugural speech announced the removal of petrol subsidy. Although many industry players see it as a step in the right direction, the policy has exposed many Nigerians to harsh economic realities.

In his Democracy Day speech to Nigerians in June, Tinubu had said that the decision to remove petrol subsidy “is one decision we must bear to save our country from going under and take our resources away from the stranglehold of a few unpatriotic elements.”

He stressed that the decision  will “free up for collective use the much-needed resources, which had hitherto been pocketed by a few rich.”

While appealing to Nigerians for understanding, Tinubu had said: “Painfully, I have asked you, my compatriots, to sacrifice a little more for the survival of our country. For your trust and belief in us, I assure you that your sacrifice shall not be in vain.

The government I lead will repay you through massive investment in transportation infrastructure, education, regular power supply, healthcare and other public utilities that will improve the quality of lives.”

Since the removal of petrol subsidy, current price of petrol has moved from N184 per litre to about N620 and as high as even N700 per litre in some parts of the country. This has led to hike in transportation fare and food items.

Adopting Compressed Natural Gas (CNG), which is a gas mainly composed of methane and produces less emission, experts say, is cheaper than even firewood, and will not only create relief for the government and its citizens but it is environmentally friendly.

In Niger-Delta region you see billions of tonnes of gas flare being wasted daily, these are huge amounts that should be accruing to our GDP but we are wasting it because there is no market for it.

“So we are asking the government to create the market. How do you create the market?

“What Egypt and India did was to give soft loans to be paid back within stipulated periods from there you can get vehicles to use gas instead of fuel,” said the President of the Independent Petroleum Marketers Association of Nigeria (IPMAN), Chinedu Okorokwo, in June.

CNG conversion programme

To ameliorate the suffering of many Nigerians as a result of petrol subsidy removal, the Federal Government and the organised labour held a meeting on June 5, and agreed on a seven-point resolution to cushion the effect of the subsidy removal.

Parts of the demands of the organised labour include an increase in the minimum wage from N30,000 to N150,000 and adoption of CNG as an alternative fuel.

• “The Federal Government, the TUC, and the NLC to establish a joint committee to review the proposal for any wage increase or award and establish a framework and timeline for implementation.
• “The Federal Government, the TUC and the NLC to review the World Bank Financed Cash transfer scheme and propose the inclusion of low-income earners in the programme.
• The Federal Government, the TUC and the NLC to revive the CNG conversion programme earlier agreed with Labour centres in 2021 and work out detailed implementation and timing,” the Chief of Staff to the President, Femi Gbajabiamila, who led the government side, had disclosed at the end of the meeting.

The two parties said the cost and efficiency of the CNG would bring a better and long-lasting solution to the constant fluctuation in petrol prices in the global market.

The CNG is the cleanest burning fuel operating today, bringing about less vehicle maintenance and longer engine life.

However, this is not the first time CNG as an alternative fuel is being discussed. In fact, in the December 2020, former President Buhari launched the National Gas Expansion Programme and National Autogas Roll-out Initiative, and noted that the development would enable domestic utilisation of the country’s abundant gas reserves.

The  programme is expected to enable no less than 40 per cent vehicles plying Nigerian roads to run on CNG, with at least  conversion of one million vehicles.

“Therefore, the roll-out of the National Gas Expansion Programme, Auto-gas Initiative is coming at the right time, especially in light of global crude oil market fluctuations coupled with the full deregulation of the local PMS market.

“These developments have made it imperative to focus on gas as an alternative fuel to move Nigeria from the conventional dependence on white products for automobiles and prime movers of industrial applications to cleaner, more available, accessible and affordable energy source.

“The outcome will not only cushion the effect of the downstream deregulation that this government has to painfully implement, but also create new markets and enormous job opportunities for our people.

“I therefore encourage everyone to embrace gas in form of LPG, CNG and LNG as an alternative fuel for automobiles and other prime movers,” Buhari had said.

But about three years since the launch of the programme, no significant  progress has been made.

NNPC, NIPCO partner on CNG

As part of its commitment to providing cheaper alternative fuel to motorists, the NNPC recently announced a strategic partnership with NIPCO Gas Limited to deploy CNG stations across the country.

“This landmark collaboration aims to expand our CNG infrastructure, improve access to CNG, and accelerate the adoption of cheaper and cleaner alternative fuel for buses, cars and Keke NAPEP, which will significantly reduce the cost of transportation and engender sustainable national economic growth,” said NNPC Limited in a statement.

Under the NNPC-NIPCO strategic partnership, 35 state-of-the-art CNG stations will be constructed nationwide, including three (3) Mother stations.

Once fully operational, the stations can service over 200,000 vehicles daily, thereby significantly reducing the cost of automobile fuel for Nigerians and the cost of transportation.

According to NNPC Limited, the project will be rolled out in phases. The first phase, comprising 21 CNG stations, will support intra-city transportation and be ready by the first quarter of 2024; While the second phase, comprising 35 CNG stations, will support inter-city transportation and will be ready by late 2024. This will be further complemented by an additional 56 stations to be deployed by NNPC Retail across the country.

NIPCO Gas Limited is currently operating 14 CNG stations across Nigeria and has converted over 7,000 vehicles to run on CNG.

“NIPCO’s technical competency and field experience will bolster this initiative’s success and amplify its positive impact on the Nation’s economy.

“This initiative will leverage Nigeria’s abundant natural gas resources to bring multiple benefits to Nigerians, including access to cheaper fuel, reduced cost of transportation, reduced carbon emissions, create new business value chains and streams of job opportunities.

*NNPC Limited expects further private sector participation by oil marketing companies to broaden CNG penetration and availability.

“NNPC Limited remains committed to reliably delivering energy while continuously creating value for Nigeria’s prosperous future alongside our partners,” the statement added.

According to the Group Chief Executive Officer of NNPC Limited, Mele Kyari, CNG is a suitable and cheaper alternative fuel for motorists with lower emission impact.

“With CNG, Nigerian motorists can afford a cheaper and environmentally friendly fuel to supplement PMS consumption and enhance domestic energy security,” Kyari said at a press briefing

With this new partnership,  Nigerians are looking forward to an affordable alternative fuel  in CNG, as the hike in pump price bites harder.