Certain statistics would irk the average Nigerian. One of them is that Nigeria is the country with the largest proven gas reserves in Africa and 9th largest reserves in the world, yet the country imports about 70% of its Liquefied Petroleum Gas (LPG).
LPG, which is known to be able to tackle clean cooking challenges, power vehicles and machinery, serve as a component for industrial production, and agricultural processes and provide a key component for refrigerators. Also, a vibrant LPG market is certain to provide jobs for millions of Nigerians.
One would wonder why, with the enormous benefits to be had from LPG, Nigeria has a largely untapped LPG market and seems hardly bothered about it, while it continues to import LPG from other countries- including from Trinidad and Tobago.
Various problems trail Nigeria’s LPG market. Primarily, there are the key problems that typically pervade the country’s oil and gas industry, like lack of infrastructure and an uncertain regulatory and policy framework. Other specific challenges include the continuous subsidies allocated to kerosene, a close and much dirtier alternative to LPG for cooking.
With kerosene being subsidised, and LPG having significant importation costs as well increased costs resulting from the LPG infrastructure gap, the end-user price for LPG is not attractive. One report by the Nigerian LPG Association reveals that Nigeria spends over $1 billion per annum on kerosene subsidies.
Apart from kerosene, we see wide usage of coal and firewood as cooking fuels. A United Nations Framework Convention on Climate Change (UNFCCC) report reveals that Nigeria has one of the highest deforestation rates in the world as a result of burning wood as fuel.
This is not surprising, as research by the Clean Cooking Alliance shows that 94% of Nigerians (about 181 million people) do not have access to clean cooking and still continue to use dirty fuels for cooking.
Another challenge facing the domestic LPG market is the issue of standardisation of LPG cylinders, which are the most common means of storing LPG. With substandard cylinders flooding the market, safety concerns remain on the rise. Added to that, with a lax regulatory environment for procurement, route to market and consumer outlets for LPG in Nigeria, the concerns are further exacerbated.
Investments in LPG are needed to drive the market and make it more available domestically. However, investors will remain wary until the legal and policy framework for the market is standardised. There is no doubt that a significant investment gap exists for LPG in Nigeria.
According to the Programme Manager in charge of LPG Penetration and Implementation at the Office of the Vice President, Mr Dayo Adesina, “The federal government is targeting the consumption of five million tonnes of LPG by Nigerians in 2023, a project that requires about $750 million worth of LPG transport and retailing infrastructure across the country to achieve.” In order to make this happen, however, policy, regulation and investment have to meet.
While the National Gas Policy so neatly identifies the challenges the domestic LPG market is facing with possible solutions, the challenges still remain four years later. No one will invest in building jetties, distribution storages, LPG plants or depot terminals when the roads for trucking are bad, the railway systems are yet to materialise or the alternative fuel source is still heavily subsidized. The government needs to be very active in creating an enabling environment for any investment to thrive.
The government promised under the National Gas Expansion Plan to deliver at least one million autogas vehicle conversions by the end of 2021. At least half of these vehicles will be LPG-powered, so investment is needed to build autogas filling stations and other infrastructure, but the doing business and regulatory framework have to be favourable.
Additionally, the Department of Petroleum Resources (DPR) should work closely with the Standards Organisation of Nigeria (SON) to establish effective monitoring on gas cylinder production and/import throughout the LPG value chain to ensure substandard products are removed. This will improve the safety of LPG usage and positively affect perception on customers’ side. This may involve banning consumer ownership of gas cylinders as once proposed by the Federal Government, and transiting to market ownership. In urban areas, States should put in place mechanisms for gas reticulation, as that will both ensure safety and ease of use for consumers.
The director of LPG Summit Group, Neasa Haplak, at the Annual LPG International Conference in 2019 indicated that “with the 2019 demand of about one million tons per annum (mtpa), and growth projection of about two mtpa for 2020, Nigeria remains one of the fastest-growing LPG market in the world.”
With such a ready market and the many advantages LPG has for our economy and environment, the case for significant policy and regulatory support for the industry is made.