Stakeholders seek Leeway as FG, CBN address autogas loopholes

Pricing, Soft Loans, Safety, PPP, Critical To Sustainable Implementation

While the Federal Government and the Central Bank of Nigeria move to address loopholes to fast track a recently launched auto gas policy, energy experts, yesterday, called for a holistic plan that would create sustainable energy mix in the country.

Minister of State for Petroleum Resources, Timipre Sylva, had told journalists that the government would work with the Central Bank of Nigeria (CBN) to ensure full implementation of the Auto Gas Policy.

CBN, as part of efforts aimed at stimulating finance to critical sectors of the economy, had introduced a N250 billion intervention under the National Gas Expansion Programme.

The apex bank had noted under the implementation framework of the intervention that low level of investment in the industry has resulted in the minimal production and utilisation of Compressed Natural Gas (CNG) and Liquefied Petroleum Gas (LPG) as clean alternative sources of domestic energy in Nigeria.

Given the removal of subsidy on Premium Motor Spirit, President Muhammadu Buhari on December 1, 2020, had launched the Auto Gas Policy to reduce the impact of high cost of petrol price in Nigeria.

While the subsidy removal has been challenging given kick back by labour unions, the auto gas programme did not go as planned due to inherent challenges, especially lack of capacity to enable Nigerians convert vehicles to run on gas as well as limited retail auto gas dispensing stations.

Speaking on the policy, Sylva said: “If you have a critical mass of vehicles, may be one million converted to use gas, you must also have a commensurate amount of filling stations that are enabled to fill the one million cars converted.

“So, you cannot do one aspect of it in exclusion, they must go hand in hand, if not, the whole programme will not make sense.

“We are working right now with the Central Bank of Nigeria to ensure that we are able to bring in conversion kits for a critical mass of vehicles.

“And then also give soft loans at the same time to downstream operators to fix their filling stations, so that when we fit the two together, it will work.

Principal Partner, Nertier, Patrick Okigbo said: “Nigeria needs to sustain its move to gas-powered vehicles,” stressing that the initiative would provide cheaper and cleaner fuel for the country’s environment.

While Nigeria currently boasts of about 206 trillion standard cubic feet of proven natural gas with dismal local utilisation, Okigbo said: “We need to use our abundantly available natural gas.”

Renowned energy expert, Prof. Wunmi Iledare, insisted that gas market expansion through corporate social investment to create employment remained on the right track.

He, however, urged meaningful accountability, adding, “CBN must avoid bail out without responsive accountability back to CBN.”
Speaking on the move, PwC’s Associate Director, Energy, Utilities and Resources, Habeeb Jaiyeola, said across the world, government interventions are being used to catalyse economic development.

“In many cases government interventions are quite critical in controlling cost of borrowing in developing sectors. The CBN intervention remains a positive tool for the development of the domestic gas sector,” he said.

However, the payback has to be enforced to ensure the fund remains available for further critical interventions, Jaiyeola noted, adding that further sensitisation on the autogas initiative would be needed for its acceptability. “This is a highly technical area where safety is of high importance especially where a mechanical item is made to run on fuel feedstock different from its original design.

The global acceptability of this needs to be obtained, especially from the original manufacturers. Possible negative impact needs to be identified as well to enable informed decision prior to implementation,” he added.

Appropriate pricing system needs according him must be instituted to enable the forces of demand and supply determine the price and enable adequate returns on investment.

An energy expert, Michael Faniran, noted that one of the imperatives of the auto gas policy remained the need for people to convert their vehicles so that it could use both petrol and gas.

“This is an additional cost to the vehicle owners. As such, government needs to create incentives aimed at vehicle owners, in the form of loans or tax credits, to offset part or all of the cost of conversion of vehicles and even for retail outlets to build dispensing units for CNG.

“The intervention by the CBN is a welcome idea as it will jumpstart the adoption of the auto gas by vehicle owners and retail outlets, and also build critical market mass. However, this is not sustainable,” Faniran noted.

He insisted that there was for need for public-private partnership (PPP) type of fund to finance vehicle and retail outlets conversion kits to guarantee sustainability, adding that the CBN could disburse the funds through a special purpose vehicle with private sector players.

For private sector to come in, Faniran noted that there must be a very clear enabling policy and government must have a well thought out and bankable plan to attract the private sector.