Introduction
Nigeria's transport sector is set for a major transformation with the adoption of Compressed Natural Gas (CNG) as an alternative fuel. The removal of the petrol subsidy in 2023 has increased government initiatives like the Presidential Compressed Natural Gas Initiative (Pi-CNG) to promote CNG use. This shift offers numerous advantages, including reduced costs, lower carbon emissions, and less vehicle wear and tear and other benefits that appeal to both consumers and transport operators.
The shift to CNG aligns with Nigeria's broader goals of economic resilience, energy independence, and environmental sustainability. By reducing reliance on traditional fossil fuels which are mostly imported, CNG could save Nigeria billions annually and foster job creation through the development of CNG infrastructure.
Its lower carbon footprint also supports the country's commitment to global climate action and the Sustainable Development Goals (SDGs).
This move towards CNG marks a step towards a cleaner, more efficient, and economically viable future for Nigeria's transport sector. As the country navigates this transition, CNG could pave the way for a new era of sustainable energy use in transportation. This article examines the key government initiatives towards adopting CNG, the necessary compliance checks for CNG investors, benefits of CNG to the transport sector, its challenges and future considerations.
What is Compressed Natural Gas?
CNG is derived from compressing methane down to less than 1% of its volume. This is done by storing natural gas at baseline temperature and high pressure.1 This compressed state allows for a higher energy density, making it an excellent fuel option for various applications, especially in the transportation sector.
It is a cleaner and safer alternative to traditional fuels like petrol or diesel. It is cost-effective, eco-friendly and produces lower carbon emissions than traditional fuels or petrol thereby making it a good option for reducing fuel costs and lowering carbon footprint.
The Adoption of CNG in Nigeria
CNG is not a new concept in Nigeria's energy and transport ecosystem. In 2010, Nigeria Independent Marketing Company (NIPCO) launched the country's first CNG for vehicular and sundry applications in Benin City.2 However, with the removal of the petrol subsidy in 2023 by President Tinubu and the fluctuation in global oil prices, the use of CNG has gained significant attention as an alternative fuel source in the transport sector.
As part of Federal Government's Transportation policies, the Nigerian government has initiated several measures to promote the use of CNG-powered vehicles. The Key initiatives include:
- The Establishment of the Presidential Compressed Natural Gas Initiative (Pi-CNG):3 This was set up in 2023 by President Tinubu as part of its palliative intervention towards assisting the masses occasioned by transitive hardship of fuel subsidy removal policy. Its key action and objective are to assist the President in achieving its CNG goal of one million CNG vehicles by the end of 2027.4 It aims to do so through its conversion incentive program, CNG platform program to finance 200,000 (two hundred thousand) new CNG buses and tricycles, the establishment of conversion centres, refuelling and virtual gas distribution program etc. This initiative also aligns with the presidential directive by strengthening domestic manufacturing, and local assembly, and generating a significant number of jobs.
- Partnerships and Collaborations: The Government has partnered with several stakeholders in the transportation and energy sector such as Dana Motors, Portland Gas, Innoson Motors, The Depots and Petroleum Products Marketers Association of Nigeria (DAPPMAN) and the Nigerian National Petroleum Company Limited (NNPCL) and a host of others. These companies or agencies assist the government to achieve this goal by donating locally made CNG buses5 , offering free and subsidized CNG conversion to transporters6, launching applications for easy conversion to CNG7 etc. Several State governments like Lagos, Federal Capital Territory, Abia, Ondo etc are also making plans towards unveiling CNG buses, tricycles and motorcycles within their States.
- Tax Incentives: In December 2023, the Federal Government through the Ministry of Finance issued a circular titled 'Fiscal Incentives for the Presidential Gas for Growth Initiative' granting import duty and Valued Added Tax (VAT) waiver for all CNG auto vehicles and kits including the equipment used to manufacture CNG vehicles in Nigeria.8 This is to encourage the expansion of CNG vehicles in Nigeria.
- Concessionary Pricing of CNG Buses in Nigeria: The Nigerian Midstream and Downstream Petroleum Regulatory Authority has designated mobility CNG as a special status, which will serve as a subset of gas-to-commercial (GTC). The special status will grant access for CNG to gas-based industry (GBI) pricing categorisation for an initial period of five years, and renewable for another five years, in line with the provisions of the Petroleum Industry Act (PIA) 2021. The price is set at $1.57 per one million British thermal units (MMBtu), significantly lower than the $2.42 and $2.92 for power and commercial buyers, respectively.9 With these policies in place, which are expected to spur investor's confidence, there is no better time to key into the CNG transportation project.
How will the Use of CNG Transform Nigeria's Transport Sector?
The use of CNG is a game-changer in the transport sector and is viewed as an economic necessity for Nigeria. According to President of the Federal Republic of Nigeria, "Utilising natural gas to power Nigeria's transportation industry is the next way to go."
To view the full article, click here.
Footnotes
1. Axxela, 'Uses and Benefits of Compressed Natural Gas' available at https://www.axxelagroup.com/uses-and-benefits-of-compressed-natural-gas/ accessed on 13th August, 2024.
2. Dubawa, ' All you need to know about Nigeria's alternate energy' available at https://dubawa.org/compressed-natural-gas-all-you-need-to-know-about-nigerias-alternate-energy/?amp=1 accessed on 13th August, 2024.
3. Presidential CNG Initiative: https://pci.gov.ng/ accessed on 13th August, 2024.
4. Business Day, 'FG targets one million CNG vehicles for Nigerian by 2027' available at https://businessday.ng/news/article/fg-targets-one-million-cng-vehicles-for-nigerians-by-2027/?amp accessed on 13th August, 2024
5. Punch, 'Tinubu unveils CNG buses in Abuja' available at https://punchng.com/tinubu-unveils-cng-buses-in-abuja/?amp accesssed on 13th August, 2024.
6. Punch, 'FG starts free CNG conversion for commercial vehicles' available at https://punchng.com/fg-starts-free-cng-conversion-for-commercial-vehicles/?amp accessed
7. The Guardian, 'FG launches App for easy transition to CNG' available at https://guardian.ng/technology/fg-launches-app-for-easy-transition-to-cng/ accessed on 13th August, 2024.
8. PWC, ' MOF circular on VAT exemption' https://pwcnigeria.typepad.com/files/mof-circular-on-vat-exemption.pdf accessed on 13th August, 2024.
9. The Cable, 'FG secures discounted CNG prices from NMPDRA' https://www.thecable.ng/fg-secures-discounted-cng-prices-from-nmpdra/ accessed on 14th August 2024
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.