Minister of Petroleum Resources, Chief Timipre Sylva is garnering the support of marketers with a two per cent interest rate loan. He is also pushing for assistance for original equipment manufacturers for the installation of Compressed Natural Gas (CNG) plants.
As the doomsday scenario stands out in the future removal of petrol subsidy, the worried Federal Government buys time for an alternative fuel. Thus, there are already plans to assuage the pains and pangs of the exit from the payment on the people. One of the measures to ameliorate the harsh impact on the downtrodden is the alternative the government has found in autogas. The Compressed Natural Gas (CNG) is the government choice gas for fuelling, especially mass transport vehicles.
It was last December that President Muhammadu Buhari launched the autogas policy in Abuja. Expectedly, it would have been replicated in other cities in Nigeria almost two years of take off. But this has not been the case. The gas is not available even in the very retail station that Buhari unveiled it virtually on Airport Road, Abuja.
Besides, the Nipco Gas Plc which prototype the Federal Government is attempting to replicate in other places has not really yielded its desired results. The Minister of State for Petroleum Resources, Chief Timipre Sylva, received this update and reason for the slow development of CNG plants across the country, from the Major Oil Marketers Association of Nigeria (MOMAN) Chairman, Adetunji Oyebanji on Tuesday. The minister met the MOMAN and Depot and Petroleum Products Marketers Association of Nigeria (DAPPMAN) executives in Abuja, where he presented: “A framework for the deployment of CNG in Nigeria,” to them.
Sylva had in his opening remarks recalled that a year ago, the government and its stakeholders in the gas business- the marketers -struck a deal to provide CNG as an alternative fuel prior the full deregulation of the petrol subsidy
Reminding them of the terms of the pact, the minister said: “We agreed that before we deregulate or side by side with deregulation, we must provide an alternative fuel to our people. And the alternative we agreed upon was the autogas for our people.” Since this agreement within us, a lot of work has been going on.” According to him, the agreement was that there must a certain reasonable number of converted vehicles and a proportional amount of gas dispensing stations before the full implementation of the autogas policy. His words: “The agreement around autogas is clear that you must have a certain amount of vehicles converted and a corresponding amount of dispensing stations for the system to kickstart.” The idea was to avoid creating idle autogas stations or converted vehicles.
To meet up with the demand and supply of the autogas in the first instance, according to him, is to attain the conversion of one million vehicles. He added that the process of emplacing the conversion has been ongoing.
The update Sylva tabled before the marketers was that the government has planned with some Original Equipment Manufacturers (OEMs) of different countries to support it with 50 per cent in the form of equipment required for the implmentation. The government, he said, will make up for the 50 per cent balance.
On the other hand, the government needs the marketers’ retail outlets and premises for the installation of the plants. It was on this note he extended a hand of partnership to them. According to the plan, the OEMs will support the plan with the installation of the equipment and conversion kits. On its own, the government will provide the marketers with some very soft loans with as low as two per cent interest rate. The facility that the marketers are at liberty to repay in five year, will not come in cash but in form of equipment and installations. The government has previously granted a N250 billion gas loan for the marketers to access through the Central Bank of Nigeria (CBN).
Sylva, however, told the marketers: “We have been talking to some countries OEMs. And we have come to some arrangements with them, where we have got commitments from some countries’ OEM that they will give us half of what we want. And of course we on the government side here will match it with half. We haven’t come to this conclusion. I felt that we needed to call you also because the OEMs are coming in and they are not Nigerians and they need partnerships with local marketers to put their systems in place in Nigeria. You are the only credible people in the sector to participate with these OEMs in the installations of the dispensing stations and also the conversation kits to convert the stations.”
The minister was emphatic that the government will fully put this system, which will commence in March, in place before it exits the subsidy regime. Already, the government is planning to stall the implementation of the Petroleum Industry Act (PIA) that stipulates the full deregulation of the PMS.
Sylva thus informed the marketers: “This structure has to be put in place so that the impact it will have when we have to do it when ultimately subsidy is removed at some future time, we need to make sure that everything is in place for the suffering masses in Nigeria not to have a full weight of what is going to come with full deregulation.”
On why and how the development of CNG has been slow in the country, Oyebanji told the minister that return on investment for the business has been at a snail speed. Some of the investors, according to him, are regretting venturing into it. Frankly, he said the investment in the infrastructure – compressors and pipeline- is very huge. He stressed that only God knows when and how to recoup it.
The MOMAN chairman said: “You are aware that our sister company Nipco already has an ongoing CNG operation in Benin City. The intention when that operation was put in place was by now it would have been replicated across the length and breadth of Nigeria. But the bottom line of it, we are being very frank with ourselves, is that as of now it hasn’t proved to be a profitable venture.”
On this note, he urged the government to put the right structure in place to fascinate the investors into the autogas business.
MOMAN Executive Secretary, Mr. Clement Isong assured the minister of commitment on the part of his association. He blamed the low pace of investment on the international shortage of gas and the subsequent price hike since last year. This, he said, has dampened the interest of the banks in anything credit facility for gas business.
From DAPPMAN, Mainland Oil and Gas Limited, Managing Director, Mr. Chris Igwe told the minister that his association has been committed to the project, but interest rate has been a major constraint to its implementation. He pleaded with the government to subsidise the equipment for the investors to leverage on.
His words: “I want to plead with you if there is any way the government can look at interest rate because a lot of our members have invested so much in the downstream so to move to gas requires a lot of capital. The CNG requires huge capital. You should see how you can subsidise these equipment that are very expensive.”
Responding, Sylva allayed the marketers fears. He told them that the Nipco CNG in Benin was having itches because it was purely a private arrangement. In the case of the government CNG implementation, according to him, the administration is ready to intervene in a very big way. All that the government requires of them is to arrange with the OEMs to access the exceedingly cheap funding.
Continuing, he said “Already the funding is in place. We are looking at our own side by providing 50% of the funding is provided the other 50%…So I think it’s it’s a different scenario when nipco started in by name, they were on their own. They had to set up everything. They had to get the funding themselves.”
Stressing government seriousness about the partnership with them and take off time of the implementation, he urged them to
“See how you can link up with some of these OEMs so that you will be part of this. This program is supposed to kickstart in March. We don’t have too much time but we don’t want to go further without carrying you along.”
With this, Oyebanji expressed satisfaction with the plan. The funding arrangement enthused him. Describing the meeting as a realistic one, he said
“Compare to the way we felt about a year ago, I am 10 times much more comfortable because I think this is definitely very well thought out. The funding arrangement is much more realistic and definitely it is something we can collaborate with the government and make sure we achieve in the shortest possible time. So, definitely you have our full support for that.”
Despite this optimism, he wondered whether the scheme will not go the same way of several well thought-out ones. He warned against bureaucratic hurdles that some agencies may use to wage the marketers from accessing the loan.
Oyebanji said “One of the main challenges we have always had is the approval process when we now get ready other government agencies will now be raising all sorts of questions and the turn around time and approval takes forever.”
Allaying Oyebanji’s fears about delays, Sylva, who, disclosed that he had already done the groundwork to remove such encumbrances, drew attentions to the presence of representatives of the Federal Ministry of Finance in the meeting. He revealed to the marketers that despite the so much paperwork that the two ministries have done, there is still room for continuous engagement.
Interestingly, the marketers were informed that the Ministry of Finance was already in the process of finalizing the issues about the CNG pricing, especially the Value Added Tax (VAT). Obviously, the government has already concluded that the price will be domestic based instead of the application of the international market rate that could be higer.
The takeaway from the meeting is that the government has decided to bear the burden of petrol subsidy until the country can substantially fuel mass transit vehicles with gas.
