Despite its consistent evolution, the Liquefied Petroleum Gas, LPG sector is still haunted by some challenges that deserve the attention of the government and other parties.
In this interview with Udeme Akpan, the President of Nigeria Liquefied Petroleum Gas Association, Mr. Nuhu Yakubu, provide an insight into issues as well as proffer solutions. Excerpts.
Without wasting much time, please can you tell us about Nigeria’s energy endowment?
Well thank you for having me on your show. Yes, Nigeria is heavenly endowed with abundant energy resources from solar to hydrocarbon and mineral resources and then water resources. In this case we are talking about hydrocarbon resources and its derivatives, including Liquefied Petroleum Gas (LPG), which is in abundance in Nigeria. Infact Nigeria has so much LPG produced in the country that we export quite a reasonable volume of LPG to international market. Yes indeed, we are endowed with gas resources and that include LPG.
If we are so well endowed, why do many people still prefer to use kerosene and firewood?
It is a matter of preference and sometimes it is a matter of affordability. In addition, customs and traditions sometimes hold down communities from switching over from dirty fuels like firewood and kerosene. There are cases where home/property owners and landlords enshrine in their tenancy agreements that gas is not allowed for use in their properties because they fear that gas can be explosive, even though that is far from the truth.
There are also issues bordering on affordability. Some people consider LPG as a rich man fuel or elite cooking fuel, and as such won’t even bother with finding out the cost, nor examine cost versus benefits. However, pricing remains another factor.
Specifically, the pricing of LPG is different from other fuels. Until recently when pricing is now being attended to by a few retail operators, LPG has largely been priced in set quantities. For example, 6kg set quantity and the popular 12.5kg set quantity, 50kg set quantity as against the competing fuels like kerosene, petrol, charcoal and firewood; especially in the case of kerosene that is easily retailed into little bottles, which is not the case with LPG. However, that has been tackled by systems and technologies that allow LPG to be traded in whatever retail quantities that customers can afford.
What are the dangers associated with the use of dirty fuels because most Nigerians do this out of ignorance?
The negative side effects of the use of dirty fuels are quite much. For example, according to WHO, death associated with inhalation of fumes from dirty fuels is more than the death from HIV, Tuberculosis and malaria put all together. That is a quite serious statistics which we all should be concerned about, considering that many women and children are till today still needlessly exposed to this dangerous situation, which is no fault of theirs. Compared with LPG which burns clean, with minimal carbon residue and emissions, reason why it is referred to as clean energy. There are also environmental impacts that arise from the use of dirty fuels, including greenhouse gas emissions, which cause environmental pollution with attendant negative multiplier effect, damage to our health as well as depletion of the ozone layer.
You begin to see population migration from regions where desertification has encroached and taken over hitherto arable lands, to regions where they can survive. And that includes both humans and animals, in search of arable farm land and grazing fields for animals.
You tend to see communal clashes often and again in countries like Nigeria where human migration has been heavy from arid or semi arid region or towns which have experienced a lot of tree felling to forest regions because they are actually seeking for survival. There are consequences to this, and more importantly, national security, as communal boundary and grazing lands conflicts become more pervasive, as human beings must seek survival.
Do we have the capacity to meet demand locally should demand continue to rise?
LPG used today is largely produced in the country. The Nigeria LPG market has actually been sufficiently supplied. There is a mix of both locally produced and imported LPG, thus fuelling sustained growth to the extent that Nigeria is now marked as one of the fastest growing LPG markets in the World.
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In terms of figures, what is the domestic demand for LPG in Nigeria?
The demand level is between 650,000MT and 700,000MT yearly. The demand will continue to rise based on many developments, including trading infrastructure build out and fiscal and general policy incentives that the government has introduced to encourage investment in infrastructure, as well as to improve supply and demand of LPG in Nigeria. We think that the demand can easily rise to about five million tons per annum given our population size, and sustained fiscal and regulatory incentives of government.
If the demand keeps on rising, do we have the capacity to meet it?
Yes, there is assurance by the Nigerian LNG Limited to increase supply, with rising demand. The NLNG has about a million tonnes of LPG dedicated to the Nigeria market. I am sure, when train 7 comes on stream; we are going to see more LPG volume supply dedicated to the Nigeria market. Moreover, Nigeria LNG Limited is not the only producer of LPG in Nigeria. We also have the Nigerian National Petroleum Corporation, NNPC. In addition, we also have other International Oil Companies like ExxonMobil, Chevron and indigenous oil and gas producing companies, including marginal producers that are currently producing and supplying the product to the local market.
How do you embrace the recent removal of Value Added Tax, VAT by the Federal Government?
Of course, we embraced it whole-heartedly. As you know, the quest for VAT removal on LPG has been on for a while. It is only recently that the federal government finally considered it appropriate to reverse the unfair application of VAT on LPG. We had argued that other refined products like PMS, AGO and DPK do not have VAT levied on their sales transactions. Being a pass through cost, LPG retailers were saddled, burdened and saddened by their inability to pass on VAT charge to consumers, even when VAT was paid on bulk LPG traded. This is because the consumers were not used to paying VAT on petroleum products. Hence the LPG traders were made to suffer the consequences of paying VAT for all bulk LPG procured for retailing, yet was unable to pass on the cost to retailed customers, effectively meaning five per cent loss on every molecule of LPG retail trade.
LPG was unfairly treated until the VAT waiver was granted. The traders will surely pass on the VAT waiver to consumers, with attendant reduction in bulk supply prices of LPG, with multiplier effect on the retail price of LPG. It is a welcome development; the implication of that removal of VAT will lead to some reasonable reduction in market price of LPG so you would have started observing that the price of LPG has been on a downward trend.