The Federal Government may consider assisting independent fuel marketers with funding to install Compressed Natural Gas sales pumps at filling stations across the country, Saturday PUNCH has learnt.
This followed the lamentation of the Independent Petroleum Marketers Association of Nigeria that its members were unable to finance the installation of CNG sales pumps at their filling stations in line with the presidential directive promoting the CNG initiative.
The marketers said the cost of installing CNG pumps was prohibitive for its members, adding that the high-interest rate charged by banks also made borrowing money for the project an unattractive option.
President Tinubu had announced an end to the fuel subsidy era during his inauguration on May 29, 2023, a move that triggered a hike in the cost of the product.
The President, however, promised to roll out measures, including CNG-powered mass transit buses and tricycles, to cushion the impacts of the subsidy removal. After almost one year in office, that initiative is set to come to life.
According to presidential aide, Bayo Onanuga, the Federal Government planned to launch its compressed natural gas initiative in May ahead of President Bola Tinubu’s first anniversary.
“In all, over 600 buses are targeted for production in the first phase that will be accomplished this year,” he said in a statement.
“A new plant on the Lagos-Ibadan Expressway will assemble thousands of tricycles. The SKD parts manufactured by the Chinese company, LUOJIA, in partnership with its local partner to support the consortium of local suppliers of CNG tricycles are set for shipment to Nigeria and are expected to arrive early in May. About 2,500 of the tricycles will be ready before May 29, 2024,” he added.
Onanuga said the Federal Government was targeting the purchase of 5,500 CNG vehicles (buses and tricycles), 100 electric buses and over 20,000 CNG conversion kits, in addition to spurring the development of CNG refilling stations and electric charging stations.
“With necessary tax and duty waivers approved by President Tinubu in December 2023, the Presidential CNG Initiative committee is partnering with the private sector to deliver the promise of the initiative. The private sector has responded with over $50m in actual investments in refuelling stations, conversion centres, and mother stations,” he said.
Also, the FG, through the Chief Executive Officer of the Nigerian Midstream and Downstream Petroleum Regulatory Authority, Farouk Ahmed, had issued a directive mandating oil marketing companies to instal CNG pumps in filling stations across the country.
Ahmed, who described the push by the Federal Government to encourage the use of CNG as an alternative to petrol as a revolution, said the government was determined to reduce the burden of petrol on the economy. As such, the government said intending retail licensees would now be required to establish CNG points in their filling stations before getting final government approval.
He said, “We want to reduce the burden of the importation and consumption of PMS. We explored the possibility of converting the energy requirement of retail outlets and depots by the stakeholders here going into solar, but there is a high entry cost. We have discussed that, and it is going to be in phases. By doing so, we will reduce the demand for diesel in terms of powering our generators by utilising solar options. Once we are done with consultations, we will require that CNG add-ons be put in petrol stations and for new applications, one of the requirements will be that you must have a CNG add-on in the petrol station.”
Marketers seek funding
Speaking with Saturday PUNCH in an exclusive interview, the Public Relations Officer of IPMAN, Chinedu Ukadike, said its members lacked the funds to install CNG pumps in filling stations across the country.
He also called for the establishment of an ‘energy bank’ to provide accessible loans to marketers.
Ukadike, however, said the deployment of CNG was welcomed by the association, noting that it had the potential to reduce the importation of petroleum products, while also helping to strengthen the naira by international procedures.
He said, “Compressed Natural Gas is a welcome development. In the last meeting held with the Nigerian Midstream and Downstream Petroleum Regulatory Authority, we were advised to install pumps and tanks as an add-on to our stations. We raised concerns about the licensing of the add-on and the conversion centre. The government had agreed that some of our filling stations will be used as conversion points for CNG vehicles. Unfortunately, we are still not aware of the next plan to commence this process to integrate independent marketers into the CNG programme.
“On the financing part, some banks had approached us and have mapped out some money for this kind of venture, but I also believe that there should be a microfinance bank set up by the government to help marketers engage in this venture. We have also advocated for an energy or petroleum bank, just like we have the Bank of Industry and Bank of Agriculture, where marketers can seamlessly obtain loans without any extra charges or high interest rates.
“The interest rates in commercial banks are burning our business. We cannot source fresh capital to fund this venture from them, and that is why we need the government’s assistance. We are already spending a lot on distributing petroleum products.”
Asked if the marketers needed assistance from the government to install CNG pumps, he said, “Yes, we definitely will appreciate that if the government can assist us.
“We would, however, also appreciate having an energy bank to enable us obtain loans at a better rate than the current one. I will also state clearly that marketers can distribute CNG. We control over 80 per cent of the distribution outlets scattered across the nooks and crannies of the nation.”
FG can assist marketers
Speaking with Saturday PUNCH, the Programme Director/Chief Executive Officer, Presidential Compressed Natural Gas Initiative, Michael Oluwagbemi, said the government would look at the possibility of assisting the marketers if they needed funding for the installation of CNG pumps at their filling stations. He said, “The reality of it is that anyone who is an operator within the downstream sector already has access to a number of government interventions. This spans all the way from the Nigerian downstream and midstream gas infrastructure fund to the Nigerian content fund.
“They can already assess those if they need support with respect to enhancing or streamlining their infrastructure fund. Of course, the requirements of these agencies apply. But be it as it may, we will consider their request. The directive to them by the NMDPRA is new and naturally, their requests will be marshalled through the necessary channels.
“If they need a kind of coordinated response in terms of creating a special sub-fund within these existing funds, of course, we’ll look at the possibility of doing that.
But be it as it may, it can be financed. We have looked at the return on investment for gas. It is much higher than that of petrol, gasoline and diesel. So even if they install it with a financial or commercial loan, they have a breakeven of anything from 18 to 24 months with a good business proposition.”
Speaking further, Oluwagbemi expressed confidence in the financing strategies for the CNG initiative, noting that the marketers had nothing to fear.
He said, “We are confident that they can finance it if they approach their existing financing (structure); as well as the establishment and expansion of the dispensing capacity.
“They have been marketing kerosene, gasoline and diesel, which are fuels of the past to now dispensing gas, which is the fuel of the future.
“We are confident that it can be financed. Even if the government tries to give support, it might be stimulative or catalytic, but it doesn’t necessarily have to be permanent, because the business can pay for itself.”
FCT taxi unions meet on CNG integration
Meanwhile, the association of taxi unions operating in the Federal Capital Territory has announced that it will be holding a meeting on Saturday (today) with all members of different unions to discuss integrating CNG vehicles into the transport system.
The unions represented by the President of Painted Abuja Taxis, Shehu Shugaba, disclosed this to our correspondent in a telephone interview.
Shugaba noted that while the government had not officially communicated the plan to the unions, awareness was growing.
“We want to have a meeting with all the unions tomorrow and meet with the government. We do not know whether they are going to give us (CNG vehicles), or we are going to purchase it. But, we will hold a meeting tomorrow and get back to you on the matter,” Shugaba said.
Fund vehicle conversion to CNG, RTEAN, NURTW urge FG
In a similar vein, the Road Transport Employers’ Association of Nigeria, and the National Union of Road Transport Workers have called on the Federal Government to provide financial support for the conversion of vehicles to Compressed Natural Gas.
Both unions are optimistic that with adequate support from the Federal Government, the transition to CNG will be smoother and more widespread, benefiting the environment and reducing operational costs for transport operators across the country.
Speaking in an interview with Saturday PUNCH,the Assistant Secretary-General of RTEAN, Tiwalade Akingbade, expressed enthusiasm about the initiative, highlighting the benefits of CNG as an environmentally friendly and cost-effective alternative to traditional fuel.
“CNG is better than using fuel, because it is environmentally friendly and much cheaper. We appreciate the Federal Government for this initiative,” Akingbade stated.
He, however, stated that the conversion process and access to CNG for vehicles would be the two major challenges that might affect the initiative. He said, “We are ready to partner with the Federal and state governments to ease the payments for the conversion of vehicles. They should support us to convert the vehicles.”
He also noted that the RTEAN had already embraced CNG vehicles, with the national headquarters launching over 2000 CNG buses in January 2022, allocating three buses per local government across the country.
Supporting Akingbade’s view on the matter, the Chairman of the Ogun State Chapter of NURTW, Mustapha Adewale, said the initiative was a welcome development. According to him, CNG was a viable alternative to Premium Motor Spirit, which often faced supply issues. He said, “This is an alternative to PMS. It will reduce dependence on PMS and the associated problems with its scarcity.”
He also disclosed that the association had started consulting commercial banks for support.
“We are happy with the development. This is an alternative to PMS. It is good this is coming now, because it will reduce the dependence on PMS. We believe that the government will assist us if we have difficulties in converting our vehicles. We are also consulting our banks to see what we can do on our part. We can purchase 500 buses to kick start the process. We will want the government to intervene, and we are ready to partner with them for the success of this initiative.” (Punch)
