Nigeria’s Finance Minister Declares: CNG Costs Slash Half of Petrol Expenses

During the launch of the Nigerian Banking Sector report by Afrinvest in Lagos on November 14, the country’s Finance Minister, Wale Edun, made a significant statement about the cost efficiency of Compressed Natural Gas (CNG) compared to petrol in Nigeria. Represented by Dr. Armstrong Takang, the Managing Director of the Ministry of Finance Incorporated (MoFI), Edun emphasized the potential economic benefits of increasing the adoption of CNG in the nation.

In his address, Dr. Takang highlighted that the substitution of premium motor spirit (PMS) for CNG could be a game-changer. Observing the ongoing campaign for this transition, he pointed out that the cost of CNG is notably lower than that of PMS, ranging from half to a quarter of the price. This cost disparity opens up opportunities for reducing production costs for both businesses and households in Nigeria.

The Finance Minister’s endorsement of CNG is rooted in its economic advantages. Dr. Takang underscored the importance of aggressive movement toward CNG adoption, emphasizing its potential impact on various sectors, including vehicle fueling, mass transit, and industries relying on fuel and diesel. The cleaner nature of gas compared to petrol adds an environmental dimension to the initiative, aligning with global efforts to transition to more sustainable energy sources.

However, Dr. Takang acknowledged the challenges associated with the widespread adoption of CNG. He pointed out the need for substantial investments in conversion kits, refueling stations, and infrastructure for transportation. This involves midstream and upstream aspects, necessitating a comprehensive approach to ensure the success of the CNG plan. Dr. Takang hinted at upcoming announcements detailing the steps being taken to stimulate demand in the CNG value chain, emphasizing the potential for private sector partnerships.

The context of this push toward CNG is set against the backdrop of changes in the country’s energy landscape. The administration led by Bola Tinubu is actively pursuing the adoption of compressed natural gas as a cost-effective alternative to petrol. This strategic move becomes especially relevant due to the removal of subsidies, impacting petrol prices that have surged to N640 per liter in Abuja and over N685 in Kano and Sokoto states.

In August 2023, the Nigerian National Petroleum Company Limited (NNPCL) entered into an agreement with Nipco Gas Limited to establish mother-daughter CNG stations across the country starting in 2024. The goal is to provide CNG at a more affordable rate than petrol, addressing the economic challenges posed by rising fuel prices.

However, the successful execution of this plan requires a mass conversion of vehicles and large equipment to run on CNG. The NNPCL, in collaboration with Nipco, plans to construct 35 state-of-the-art CNG stations nationwide, including three mother stations. Once operational, these stations have the capacity to service over 200,000 vehicles daily, leading to a substantial reduction in automobile fuel costs for Nigerians and transportation expenses.

The implementation of this ambitious project is designed to unfold in phases. The first phase, comprising 21 CNG stations, is focused on supporting intra-city transportation and is expected to be operational by the first quarter of 2024. The second phase, consisting of 35 CNG stations, will target inter-city transformation and is scheduled for completion by late 2024. This phased approach aims to ensure a systematic and efficient rollout of CNG infrastructure across the country.

Moreover, the NNPC Retail is set to contribute to this initiative by deploying an additional 56 CNG stations nationwide, further bolstering the accessibility of this alternative fuel source. These collective efforts, involving strategic partnerships and phased implementation, underscore the commitment of the Nigerian government and relevant stakeholders to mitigate the economic challenges posed by escalating petrol prices.

As the nation embarks on this transformative journey towards CNG adoption, it not only seeks to address immediate economic concerns but also aligns with broader global trends favoring cleaner and more sustainable energy solutions. The comprehensive strategy outlined by the Finance Minister and the collaborative efforts between government entities and private sector partners signal a concerted push toward a more cost-effective and environmentally friendly energy landscape for Nigeria. The successful realization of this vision will undoubtedly have far-reaching implications for the nation’s economic resilience and environmental sustainability.