Nigeria's fuel sector is undergoing significant transformations as it grapples with the repercussions of removing fuel subsidies, which have led to dramatic increases in petrol prices and exacerbated the cost-of-living crisis. The situation has prompted both manufacturers and the government to explore alternative energy solutions, highlighting the growing adoption of compressed natural gas (CNG) as part of Nigeria's ambitious energy reforms.
According to the Manufacturers Association of Nigeria, energy costs constitute 30-40% of production expenses, and with the recent fuel subsidy removal, petrol prices surged over threefold. This dramatic change has compelled manufacturers to pivot to natural gas to mitigate their rising operational costs. The federal government has recognized the vast potential within the country’s natural gas reserves, estimated to exceed 200 trillion cubic feet, and is spearheading initiatives to encourage the adoption of CNG.
The push for CNG is encapsulated by the launch of the Presidential Compressed Natural Gas Initiative (PCNGI) by President Bola Tinubu, whose administration aims to convert one million commercial vehicles to CNG by 2026. Michael Oluwagbemi, CEO of PCNGI, noted, "About 100,000 cars have been converted so far, with more than $200 million already invested." The use of CNG promises to reduce transportation costs significantly, potentially alleviating the financial burden on numerous businesses across the country.
Sectors heavily reliant on fossil fuels are now re-evaluing their energy strategies due to high diesel prices. The prevailing price for diesel has recently fallen from approximately N1,700 to N1,350 per litre, following the commencement of diesel sales from the Dangote refinery. This development has been hailed as instrumental for manufacturers who depend on diesel, offering them some respite against the broader economic challenges.
Jide Pratt, the country manager of TradeGrid, noted improvement is visible as infrastructure develops, especially with new pipelines and processing facilities supporting CNG transport. By focusing on enhancing access to gas, Nigeria could not only stabilize its energy supply but also stimulate economic growth by providing clean energy solutions.
The data from the Gas Exporting Countries Forum (GECF) indicates domestic gas consumption surged to 518.42 billion cubic feet (bcf) in 2023, marking its highest level in ten years. Power generation remains the largest consumer of this gas, accounting for 45% of total consumption. The GECF report highlights the fact, saying, "Nigeria's domestic consumption rose by a notable 13.2%, reflecting enhanced access to energy and sustained economic growth, where industrialization and urbanization have driven higher gas demand."
Looking north, Kogi State governor Usman Ododo expressed support for initiatives aimed at bolstering the gas sector, stating, "This project will benefit the host community, especially the Eastern and Northern parts of Nigeria." Projects like the small-scale liquefied natural gas initiative aim to promote cleaner energy and increase industrial activity, aligning perfectly with Nigeria's economic restructuring goals.
Analysts explain the long-term strategy is to not just shift fuel sources but to make Nigeria less tied to foreign fuel imports. Vortexa data revealed the country could see gasoline imports hit their lowest levels since 2017 as the Dangote refinery improves local production capacity. Samantha Hartke, an analyst at Vortexa, noted, "A large part of the slowdown in Nigeria's gasoline imports is due to the ramp up of the Dangote refinery. Northwest Europe will have to find alternative homes for its gasoline supplies." This local production not only impacts pricing but also builds resilience against global market fluctuations.
Nonetheless, significant hurdles remain. Manufacturers face challenges not only in energy supply but also with inflation and currency instability, which complicate logistics and production costs. Zheng Wei, managing director of Tiget Business International Limited, shared insights on the transition to natural gas to maintain operational viability, noting the gas plant setup saves substantial operational costs compared to diesel, providing cleaner electricity and fostering sustainability.
The efforts to adjust to these energy changes form part of a larger narrative within Nigeria's drive for fuel independence and economic stability. The interplay between rising costs, government initiatives, and the strategic development of local resources signifies not just challenges but also opportunities within Nigeria's fuel sector. With stakeholder commitment and infrastructural improvements, Nigeria looks to carve out its energy future—less dependent on imports and more focused on leveraging its abundant natural gas resources to stabilize its economy.
The recent advancements signal the beginning of what could be termed Nigeria’s energy revolution. Through strategic government initiatives, increased local production from entities like Dangote, and broad-based industrial adoption of natural gas, the future may very well hold promise for both the economy and the citizens needing reliable energy sources.