The CBN’s N250 Billion Gas Intervention Aims To Increase LPG Penetration

As Nigeria strives to double domestic Liquefied Petroleum Gas (LPG) consumption to five million metric tonnes (mmt) by 2021, stakeholders stressed Wednesday that financial incentives may help the country leapfrog clean energy and solve looming health and environmental risks.

The experts, who emphasized that the country must move quickly to meet the Sustainable Development Goals and the Paris Climate Accord, noted that unless urgent measures are made, the country may continue to rely heavily on fossil fuels.

The experts consequently advised industry participants to leverage the Central Bank of Nigeria’s (CBN) N250 billion intervention facility to alleviate bottlenecks in the domestic gas market, while also advocating for sustainable financing in the sector.

The African Refiners and Distribution Association (ARDA) and other specialists in the Liquefied Petroleum Gas (LPG) industry had previously warned of imminent danger if Africa does not rapidly adopt modern clean energy, as over 850 million Africans still cook with solid fuels (biomass).

Without concerted efforts toward energy transformation, particularly in the cooking sector, scientists predicted that solid fuels will continue to kill over 600,000 Africans each year owing to household air pollution.

The Federal Government said last year that the CBN will give a N250 billion intervention facility to support the country’s gas expansion initiative, which aims to make compressed natural gas (CNG) the preferred transportation fuel and liquefied petroleum gas (LPG) the preferred fuel for household cooking, captive power, and small industrial complexes.

Dayo Adeshina, Programme Manager, National LPG Expansion Implementation Strategy, observed that while the intervention was vital for the industry, the plan needed to be tweaked to guarantee that sector players could access the loan seamlessly.

He observed that the intervention’s objectives would be met if commercial banks ceased to recognize the loans as commercial loans.

“Your commercial banks will approach the CBN to obtain the loan, but unfortunately, the banks treated it as a commercial loan. Typically, they will want the same information as they do for conventional loans; equity investment, collateral, and so on.

“All of these factors reduced the number of people whose balance sheets qualify them for a loan. This is being investigated to determine how associated bottlenecks may be alleviated to make access easier for people,” Adeshina said.

He added that five million metric tonnes was feasible, noting that while Covid-19 had an influence on implementation, the Federal Government has been striving to overcome underlying impediments.

“We are not concerned about meeting the projection,” Adeshina stated. On our side, we are involved in a plethora of projects and endeavors. Thus, perhaps, there will be improvement when individuals resume full activities. There are various efforts, both on the financial and supply side, that would assist us in meeting the five million metric ton target.”

Habeeb Jaiyeola, Associate Director, Energy, Utilities, and Resources at PricewaterhouseCoopers, said the CBN involvement remained a positive step in facilitating investment in the domestic LPG market and achieving the targeted retail penetration.

“The fund’s objective is also quite broad, as it seeks to alleviate funding challenges for all players along the LPG value chain,” Jaiyeola explained.

According to him, while the fund is still a loan with a predetermined payback period, its utilization must be closely managed to ensure that the most crucial segments of the LPG value chain receive the greatest benefit.

Jaiyeola noted that payment must also be enforced in order to keep the fund available for future crucial operations.

Further discussing the LPG sector, Jaiyeola emphasized the importance of instituting an appropriate pricing structure that allows market forces such as demand and supply to decide the price and ensures adequate returns on investment.