The on-going crisis in Russia and Ukraine has caused a major disruption in the global gas market. This has further increased the global price of gas, even as the demand for cooking gas, otherwise known as Liquefied Petroleum Gas (LPG), has continued to soar in Nigeria. Unlike past years when majority of Nigerians resort to the use of kerosene and firewood to cook their meals, more households have advanced with many more discarding what is probably viewed as an ancient mode of cooking in the present generation, to embrace the use of LPG or cleaner energy in their homes in order to address the dangers of pollution. Recall that the African Refiners and Distribution Association (ARDA) and other experts in the Liquefied Petroleum Gas (LPG) sector had earlier warned of imminent danger if Africa fails to quickly adopt modern clean energy. It was revealed that over 850 million Africans still depended on solid fuels (biomass) for cooking, but the greatest worry was that as long as there was no strategic effort to transit to a cleaner energy for cooking, solid fuels might continue to kill over 600,000 Africans yearly due to household air pollution. But despite the huge gas deposit in the country, unfortunately, Nigeria is unable to meet the growing demand of gas with ease and currently imports over 55 per cent of the domestic LPG demand. The country has had to rely on smaller African countries like Algeria, Equatorial Guinea and others to meet the growing demand.
Intervention
Worried over the trend, last year, the Federal Government announced that the Central Bank of Nigeria (CBN) would provide a N250 billion intervention facility for the national gas expansion programme. This intervention had become necessary, following a lack of investment. Besides leapfrogging the Federal Government’s domestic gas expansion programme primarily aimed at encouraging the use of gas in place of firewood and charcoal for domestic cooking, it is also expected to make Compressed Natural Gas (CNG) the fuel of choice for transportation and to power small industrial complexes, as well as allow indigenous players advance the sector. Giving further insight into the intervention facility, CBN explained that objectives of the facility were being implemented in collaboration with the Ministry of Petroleum Resources to improve access to finance for private sector investments in the domestic gas value chain, stimulate investments in the development of infrastructure to optimise 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 and related activities as recommended by the Ministry of Petroleum Resources. Commemting on the funding, the apex bank 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.
According to CBN, the term loan for manufacturers, processors, wholesale distributors and others 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. Also, small and medium enterprises (SMEs) and retail distributors’ term loans will 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. Experts in the industry who gave their various thoughts on the loan facility by CBN to change the gas narrative in the country, avered that although the N250 billion loan was critical to repositioning the gas market, Nigeria must realise the urgent need to address the huge gas infrastructure gap in the country, and work towards ending importation of gas as soon as possible. Given the on-going attempt by Nigeria to increase domestic LPG consumption to five million metric tonnes (mmt), one of the experts, Habeeb Jaiyeola, the Director, Energy, Utilities and Resources, with PricewaterhouseCoopers’s Associate, maintained that complementing CBN’s N250 billion intervention with existing gas infrastructure investment, like the AKK pipeline, the provisions in the Petroleum Industry Act and other initiatives was the only road map capable of plac ing Nigeria at an advantage of meeting local demand for LPG. While insisting that the N250 billion remains a critical elixir towards the plan, Jaiyeola further urged industry players to take advantage of the intervention facility to address the bottlenecks in the domestic gas market and also ensure sustainable finance into the gas sector, if the plans to meet net-zero goals as well as Sustainable Development Goals and the Paris Climate Change pact must pull through to reality. “The move by CBN is laudable and the intent of the fund is also quite comprehensive and seeks to ease funding
Experts in the industry who gave their various thoughts on the loan facility by CBN to change the gas narrative in the country, avered that although the N250 billion loan was critical to repositioning the gas market, Nigeria must realise the urgent need to address the huge gas infrastructure gap in the country, and work towards ending importation of gas as soon as possible. Given the on-going attempt by Nigeria to increase domestic LPG consumption to five million metric tonnes (mmt), one of the experts, Habeeb Jaiyeola, the Director, Energy, Utilities and Resources, with PricewaterhouseCoopers’s Associate, maintained that complementing CBN’s N250 billion intervention with existing gas infrastructure investment, like the AKK pipeline, the provisions in the Petroleum Industry Act and other initiatives was the only road map capable of plac ing Nigeria at an advantage of meeting local demand for LPG. While insisting that the N250 billion remains a critical elixir towards the plan, Jaiyeola further urged industry players to take advantage of the intervention facility to address the bottlenecks in the domestic gas market and also ensure sustainable finance into the gas sector, if the plans to meet net-zero goals as well as Sustainable Development Goals and the Paris Climate Change pact must pull through to reality. “The move by 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.”
Aligning with the importance of the intervention facility and call for increased investment as far as gas was concerned, the President, Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), Dr. Prince Billy Harry, stressed the need for the apex bank to work with associations in the sector to drive the agenda of domestic gas utilisation to address the huge gap existing in the nation’s gas infrastructure. Harry, who noted that there was no sense if the current LNG production in the country is focused on export market, maintained that Nigeria had everything it takes to stop importation of LPG. “Nigeria has huge gas resources and should not be importing gas. I think the intervention by CBN is commendable, but more is needed. The infrastructure needed to unlock gas is huge,” he noted. On his part, the Programme Manager, National LPG Expansion Implementation Plan, Dayo Adeshina, noted that although the CBN intervention was critical for the sector, there was need to tweak the plan towards ensuring industry players have seamless access to the loan; especially if commercial banks stop treating the loan as commercial loans. “To access the loan, it is your commercial banks that will approach 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.”
Last line
Meeting domestic LPG need has been a major challenge to the Federal Government, especially with the astronomical rise in price of kerosene and the need to curtail the use of firewood in order to discourage tree felling and other forms of environmental degradation. From the current intervention by the apex bank, it is assured that if the disbursement is devoid of corruption, an improvement in meeting domestic needs is bound to occur.