Nigeria’s ambitions to shift towards a gas-powered economy face major roadblocks due to the steep upfront infrastructure investments required, hampering President Bola Tinubu’s vision for cleaner and more affordable energy.
Since entering office in 2023, President Tinubu has prioritised reducing Nigeria’s historical over-reliance on expensive imported fossil fuels like petrol and diesel. However, it realises the country must pivot towards sustainable natural gas to power future economic growth.
The removal of petrol subsidies has highlighted the pressing need for alternative transport fuels, with pump prices skyrocketing by over 240% since May 2029. Most Nigerians can no longer afford petrol, triggering widespread hardship.
Tinubu unveils a plan to convert vehicles to CNG.
To alleviate these pressures, the Tinubu administration recently unveiled the Presidential Compressed Natural Gas (CNG) Initiative. This seeks to transition 1 million Nigerian vehicles to run on CNG by 2027.
The programme director, Michael Oluwagbemi, highlighted that successfully achieving a CNG transition would significantly lower transportation costs for regular Nigerians while also capitalising on Nigeria’s abundant natural gas reserves.
The initiative has also approved attractive incentives like import duty waivers and VAT exemptions to encourage private sector investors to fund the estimated 40,000 auto-gas conversion centres and 750,000 jobs required.
However, investor caution stymies Nigeria’s CNG infrastructure rollout.
Despite government incentives, investors remain reluctant to provide the capital expenditure needed to develop Nigeria’s fledgling CNG value chain.
The high fixed costs of building CNG fueling stations aligned with strict safety standards and converting existing petrol and diesel fleet vehicles to run on CNG deter market entry.
For example, Ogun State has only managed to convert 15 buses to CNG since 2021, well short of their 2,000 vehicle target. Similarly, NNPC’s much-heralded partnership with NIPCO Gas will only deliver 35 CNG stations nationwide by 2025.
Expert: Subsidies and Standards Key to Unlocking CNG Potential
According to Independent Petroleum Marketers Association of Nigeria (IPMAN) executive Surajudeen Bada, encouraging private CNG investment requires further government fuel subsidies and industry regulations.
Bada highlighted that most vehicle owners baulk at high conversion costs of upwards of N500,000 per vehicle. Without standards mandating OEMs to manufacture CNG-compliant models, demand remains muted.
Resolving these consumer accessibility and cost challenges will be instrumental for investor confidence in building out a nationwide CNG refuelling network.
With gas reserves topping 200 trillion cubic feet, Nigeria possesses immense potential to follow global energy transition patterns towards gas-powered transport and cooking. Unlocking affordable capital to develop the associated infrastructure will determine the speed at which this shift occurs.