November 29, 2016

FG spent $1bn on kerosene subsidy in 2015 – Osinbajo


By Michael Eboh
Vice President Yemi Osinbajo, Tuesday, lamented the low usage of Liquefied Petroleum Gas, LPG, also known as cooking gas, in Nigeria, while he disclosed that the Federal Government spent $1 billion on kerosene subsidy in 2015.

Using current Central Bank of Nigeria’s, CBN, exchange rate, the $1 billion spent on kerosene subsidy translates to about N310 billion.
Osinbajo stated this at the ‘Domestic LPG Implementation Stakeholders Workshop’ in Abuja, organized by the Office of the Vice President, Ministry of Petroleum Resources and the Nigerian Liquefied Natural Gas, NLNG.


Osinbajo explained that in spite of the fact that Nigeria’s total domestic LPG grew from a low of 50,000 metric tonnes per annum (MTPA) to approximately 400,000 MTPA in 2015 due to NLNG’s intervention, Nigeria’s per capital consumption of 2.5 kilogrammes (KG), however, remains low compared to its peers in Africa.

He said, “The low level of LPG consumption in Nigeria has resulted in heavy dependence on kerosene and firewood as primary domestic cooking fuels in majority of approximately 36 million Nigerian households.

“This reliance on kerosene and firewood has substantial economic effect. Government has had to take in huge subsidies, with over $1 billion spent in 2015 on kerosene subsidy. A significantly high rate of deforestation continues to be recorded as over 95.76 million metric tonnes of firewood was used in 2015.”

According to him, the low consumption of LPG was irrespective of the superior health, environment and energy costs of LPG over other competing fuels, such as kerosene.

Furthermore, in what appears to be an irony, Osinbajo stated that most of the LPG produced in Nigeria, today, is exported, while he declared that despite the huge export and the fact that our consumption level is low, over 40 per cent of our domestic consumption in 2015 was imported.

He maintained that the huge importation of LPG for domestic consumption impacts negatively on the country’s foreign exchange outlay and also limits domestic supply of LPG.

The Vice President further disclosed that LPG has considerable benefits, which include the fact that it is more cost-effective; and provides better health benefits than firewood and kerosene, both of which has been identified has the cause of more than 50 per cent of over 93,000 deaths.

He added that the Federal Government is considering a number of interventions in the LPG industry that would among others lead to a significant reduction in the rate of deforestation and create millions of direct and indirect employment opportunities for Nigerians.

In addition, he said, “As part of this administration’s commitment to grow the domestic LPG industry, an inter-ministerial committee on the expansion of domestic LPG in Nigeria has been set up, and I have the privilege of chairing that committee.

“This committee would oversee the implementation of identified interventions under the domestic LPG expansion framework, starting with the conversion of additional four million households to LPG use as cooking fuels within two years, progressing to 10 million households over five years and eventually converting additional 21 million households over 15 years, by addressing the challenges inhibiting market penetration.”

Also speaking, Minister of State for Petroleum Resources, Mr. Ibe Kachikwu, highlighted the need to culminate all the various gas and LPG policies with the regulatory framework that would boost the business environment.

He added that a successful implementation of the intervention strategies would require an investment of up to $25.2 billion over the next couple of years, adding that the investment would be used in providing infrastructure among others.

Speaking in the same vein, Managing Director of Nigeria LNG, Mr. Tony Attah, stated that to unlock the potentials of the LPG industry, the Federal Government should intervene by removing fiscal and regulatory bottlenecks necessary for creation of a conducive business environment for private sector investment in all segments of the value chain.

According to him, an aggressive and well-coordinated market expansion strategy should lead to the growth of the Nigerian LPG market at annual growth of up to 32 per cent from the current level of 400,000mtpa to over three million mtpa in five years.