May 28, 2021

How CBN’s N250bn gas plan will boost LPG consumption – experts

Godwin Emefiele, CBN Governor.

By Obas Esiedesa, Abuja

Energy experts have held that the N250 billion gas expansion fund set up by the Central Bank of Nigeria (CBN) would push the consumption of the Liquefied Petroleum Gas, LPG, in the country to over five million metric tonnes, mmt, by the end of this year.

The experts also stated that the increased gas consumption would address disasters associated with cooking with firewood.

With over 203 trillion standard cubic feet of gas deposit, Nigeria has one of world’s lowest proportion of gas usage. Last year, gas utilisation, especially cooking gas, in the country moved from about 400 metric tons four years ago to over one million metric ton on the backdrop of the removal of subsidy from kerosene.

The experts noted that financial incentives remained critical to government aspiration of increasing cleaner energy use in the country.

Speaking on the apex bank intervention, Gas Processing & Evaporative Cooling Specialist, Eju Magose Abraham, said: “We have enough to do in the domestic gas space. What is happening internationally in the near future should not affect us, because there’s a lot we can do with our resource”.

Abraham pointed out that the process of obtaining the loan, however, must be transparent and seamless while the conditions must not also be stringent so that people will not be discouraged.

He noted that unless people who actually need the loan are able to access without any political affiliation or high level connection, the projected objectives of the loan may be elusive.

On his part, PricewaterhouseCoopers’s Associate Director, Energy, Utilities, and Resources, Habeeb Jaiyeola said the CBN intervention remained a welcomed development to facilitate investment in the domestic LPG sector and achieve the desired retail penetration.

According to him, “The intent of the fund is also quite comprehensive and seeks to ease funding challenges for all players within the LPG value chain”.

Jaiyeola explained that while the fund remains a loan with set payback period, its application has to be strictly monitored to ensure the most critical sections of the LPG value chain are targeted for maximum impact.

He added that the payback has to also be enforced to ensure the fund remains available for further critical interventions.

Jaiyeola insisted that appropriate pricing system for LPG sector must be instituted to enable the forces of demand and supply determine the price and enable adequate returns on investment.

He said: “Safety of LPG for domestic use also remains a concern. This is largely due to shortages of reliable infrastructure and need for standardization and monitoring to avoid distribution of adulterated products within the retail markets.

“LPG penetration requires relatively high investment, leading to prevalence of unsafe makeshift distribution facilities within the retail channels. Also some residential facilities may not have considered appropriate and safe domestic gas location within the facility resulting in several accidents”.

He noted that while the use of kerosene, charcoal and wood remains prevalent, sensitization of the advantages of LPG would help to improved its acceptability and penetration.

Also speaking, Programme Manager, National LPG Expansion Implementation Plan, Dayo Adeshina pointed out that 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.

Adeshina added 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 access the loan. That is being looked at to see how associated bottlenecks can be resolved to make it easier for people to access,”.

He noted that five million metric tons was achievable, adding although, the impacts of Covid-19 affected implementation, the Federal Government has been working to address inherent bottlenecks.

He said: “We are not worried about being able to meet the projection. There are so many projects and so many combination of things that we’re doing on our side. On the government side, national LPG expansion implementation in conjunction with the industry.

“So, hopefully there’ll be improvement as people begin to get back into full operations, There are several initiatives, even on the funding side and the supply side as a condition of things that would help us achieve the 5 million metric tons.”

Central Bank of Nigeria (CBN) recently announced that it has set aside N250 billion intervention facility for the national gas expansion programme. The aim was to make Compressed Natural Gas, CNG, the fuel of choice for transportation and Liquefied Petroleum Gas, domestic cooking, captive power and small industrial complexes.