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Energy

FG to save N1 trillion annually from petrol subsidy removal

The Minister noted that the removal of fuel subsidy will save Nigeria up to a trillion every year.

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FG estimates that alternative petrol, CNG would cost N97 per litre, New PIB amends royalties by oil firms as Sylva clarifies position on scrapping of NNPC, autogas, FG to establish petroleum depot, oil and gas logistic centre in Akwa Ibom

The Federal Government has disclosed that it expects to save as much as N1 trillion ($2.6 billion) annually, and create massive jobs following the removal of fuel subsidy.

The disclosure was made by the Minister of State for Petroleum Resources, Timipre Sylva, during an interaction with newsmen in Abuja on Thursday, September 11, 2020.

READ: FG to give up majority stakes in its 4 refineries, to be privately managed

Sylva said, “It is time for Nigerians to face reality and do the right thing. What is deregulation going to do? It is going to free up a lot more money. At least from the very beginning, it will save us up to a trillion, and more every year. Already, we have taken off the budgetary provision for the subsidy which is about N500 billion in the budget.

“Also, we have taken off the excess forex price that special rate that was given to NNPC which also came at a cost. So, all the money that we used to defend the Naira at that time to subsidize the dollar will now be freed up for development. I believe that this discussion around subsidy has been a vexed issue that has captured the imagination of this country for a long time now,” the minister said.

READ: Government can unlock N4 trillion by removing these subsidies – PWC

He pointed out that past administrations had lacked the political will to deregulate the downstream sector, and remove subsidy despite attempts to do so. At some periods, the time was not good for it.

The Minister said, “And why did I say that time was not good for it? Does that imply the time is good for it now? The problem around deregulation is that people must understand first that the product we are talking about is a derivative of crude oil.

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READ: Subsidy and PIB

“It is refined from crude oil. Therefore, it has a direct relationship with the price of crude oil. If the price of crude oil goes up, then you expect that it would reflect in the price of the derivative.

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“So, the best time to achieve this we looked at was the time when crude oil prices are low so that Nigerians will get the benefit of those low prices.’

READ: FG gives reason oil marketers are not yet importing petrol, stops monthly price fixing

The Minister, however, lamented that when the Federal Government announced the deregulation policy in March, and reduced the price of petrol which was beneficial to consumers, the price of services and goods in the market place did not reduce.

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“Whenever there is a kobo increase in the pump price of petrol, people will use it as an opportunity to triple the selling price of their commodities,” he said.

Chike Olisah is a graduate of accountancy with over 15 years working experience in the financial service sector. He has worked in research and marketing departments of three top commercial banks. Chike is a senior member of the Nairametrics Editorial Team. You may contact him via his email- [email protected]

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    Business News

    FG to distribute 10 million LPG gas cylinders in 1 year

    The FG is set to inject up to 10 million gas cylinders into the market to help improve safety and deepen cooking gas utilization.

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    The Federal Government has announced plans to inject 5 to 10 million Liquefied Petroleum Gas (LPG) cylinders into the market in the next one year.

    This is to help improve safety and deepen LPG (otherwise known as cooking gas) utilization across the country.

    This disclosure was made by the Programme Manager, National LPG Expansion Implementation Plan, Mr Dayo Adeshina, at a sensitisation workshop on LPG Adoption and Implementation for Industry Stakeholders, on Wednesday in Lagos.

    According to a report from the News Agency of Nigeria (NAN), Adeshina said the National LPG Expansion Implementation Plan, domiciled in the Office of the Vice President, was committed to achieving Nigeria’s target of 5 million Metric Tonnes of LPG consumption annually by 2027.

    What the Programme Manager for LPG Expansion Implementation Plan is saying

    Adeshina said, “The Federal Government is working towards injecting five to 10 million cooking gas cylinders into the market within the next one year. We are starting the cylinder injection under the first phase in 11 pilot states and FCT, with two states from each of the geopolitical zones.

    The states are Lagos, Ogun, Bauchi, Gombe, Katsina, Sokoto, Delta, Bayelsa, Ebonyi, Enugu, Niger and the Federal Capital Territory. The cylinders will be injected through the marketers. The marketers will be responsible for the cylinders and the exchange will take place in homes and not in filling stations.

    What this means is that going forward, cylinders will not be owned by individuals but by the marketers who will ensure that they are safe for usage.’

    Adeshina pointed out that apart from household consumption, the government was trying to increase LPG usage in agriculture, transportation and manufacturing adding that this will enable the country to reduce CO2 emission by about 20% and create millions of jobs for Nigerians.

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    He said that the government had also granted waivers on importation of LPG equipment and removed Value Added Tax (VAT) on LPG in addition to investment in infrastructure.

    The President of the Nigerian Liquefied Petroleum Gas Association, Mr Nuhu Yakubu, said efforts should be made to ensure the availability, accessibility and affordability of cooking gas in the country adding that this would encourage more Nigerians to embrace gas usage in their homes with the attendant benefits to the country.

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    Mr Olalere Odusote, Lagos State Commissioner for Energy and Mineral Resources, said the population of Lagos makes it imperative for residents to adopt cleaner energy sources for cooking, transportation and power generation adding that the government was targeting the conversion of 45% of about 4 million vehicles in the state to autogas over a four-year period in partnership with marketers.

    What you should know

    • It can be recalled that the Federal Government had in November 2020, announced plans for the conversion of cars to autogas in a bid to have cheaper and cleaner energy especially with the high cost of petrol.
    • The government at different levels are pursuing cleaner energy sources for cooking, transportation and power generation.

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    Energy

    Nigeria’s Untapped LPG Market: Where Policy and Investment Meet

    Investments in LPG are needed to drive the market and make it more available domestically.

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    Nigeria's Natural Gas Liquids

    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.

    READ: Sahara Gas Vessel boosts LPG availability with historic 7,000MT delivery to Nigeria

    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.

    READ: FG moves to appoint fund manager for $37 billion infrastructure company

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    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.

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    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.

    READ: Would the Nigeria-Morocco gas pipeline succeed where the Trans-Saharan failed?

    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.

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    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.

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