Overcoming the Rising Cost of LPG in Nigeria

Contrary to some expectations as many believe that renewable energy would have an immediate effect on gas demand across the globe, Liquid Natural Gas, LPG referred to cooking gas price has continued to soar high in the international market.  This is because some seem to be oblivious that this cannot be automatic and natural gas serves as a veritable transition between liquid hydrocarbon and renewable energy. Natural gas remains a cleaner, readily available and cheaper source of energy.

To curb the trend of soaring prices in Nigeria, an emerging investor in the oil and gas sector, Gboyega Olokunbola of the Habitat Construction Company Limited has called on the federal government of to co-finance the sector in order to make the product available to the public as this would forestall the exposure to pollutants resulting from the use of other fossil energy sources as well as damage to the thinning forest in the country.

Gboyega Olokunbola believes that apart from the high cost propane which is one of the main sources of LPG in colder regions of the world, other factors such as transportation of the product has impacted on the cost. In Nigeria LPG is usually a blend of propane and butane in the range of 20 – 30% and 80 – 70%. He said that a sustainable solution is boosting local capacity to produce LPG, reducing importation as that would increase growth and development. He argues that adopting LPG in Nigeria for cooking is slow and pointed out that the low purchasing power of the masses is the cause. In Nigeria despite rising inflation with its currency depreciating daily, the minimum wage is 30, 000 naira, a figure which the state governments have almost generally refused to pay saying they could not afford it. He said continuous use of what he termed as dirty energy has continued to shorten lifespan of the Nigerian people.

His major complaint is finance to boost investment in that sector which he says sourcing for it is difficult to access. He called for public funds to be deployed in this sector saying this would make Nigeria the largest gas utilizing country in Africa.

“Public funding is critical in this decade of gas to boost our local processing capacity, storage and other auxiliary systems, so we can make our gas count for our own sustainable development,” Olokunbola said.

However, I believe this dream may be unrealistic as Nigeria just enacted the petroleum industry act this year. The country’s debt profile continues to soar as it has been borrowing money to finance budget since the current regime in 2015 after its economy was plunged into deep recession. It is recommendable that investors should leverage on the abundant gas and cheap labour, study the new gas policy of the country and assess the market. This should be used to draw up an investment plan by a willing investor who should then approach the government for long term tax relieves and then recourse to willing partners for collaboration.

Nigeria is currently tending towards true federalism with the issue of who should be the direct beneficiary of the value added tax, VAT. What this would mean is that states with resources and guarantee security can easily attract investment and indeed governors may be willing to invest in sectors that can improve their income since the feeding bottle system is being phased out.  Hence, investors should approach state governments for collaboration. This will not only earn them money when they are transparent but the state government may be able to make laws and partner with them to make access to licenses and land for the project to be made easy. 

Engr. Samuel Onungwe samuelonungwe@gmail.com

Samuel O. Onungwe is an oil and gas engineer with years of experience in Ammonia and Urea Production and currently works with a Natural Gas Processing Company dealing with LNG, LPG and allied products.