Why Nigeria Is Reducing Kerosene Importation

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Tony Attah, MD, NLNG

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Nigeria reduces kerosene importation to boost the use of cooking gas in the country

By Anayo Ezugwu  |  Dec 26, 2016 @ 01:00 GMT  |

NIGERIA has been systematically reducing the importation of kerosene to encourage domestic consumption of liquefied petroleum gas, LPG, across the country.  According to the latest statistics on petroleum products imports  released by the National Bureau of Statistics, the volume of kerosene imported into Nigeria between May and September this year dropped by 51.894 million litres. In the NBS report, the bureau stated that a total volume of 86.031 million litres of kerosene was imported in May but it dropped to the 34.137 million litres in September.

The reports also showed that the country recorded a reduction of N6.369 billion in the amount spent on kerosene importation during the review period. In May this year, a total of N10.61 billion was spent on kerosene importation, while the figure dropped to N4.25 billion in September.

Prior to this, Vice-President Yemi Osinbajo had said that Nigeria spent $1 billion as subsidy on kerosene in 2015. This is because of the massive dependence on kerosene and firewood by millions of households in the country. He, however, declared that the government had decided to unlock the domestic LPG value chain as this was one policy that the current administration was passionate about since Nigeria had one of the largest gas reserves in the world.

Also, to deepen the LPG usage, the government recently constituted an inter-ministerial committee chaired by Osinbajo to expand its use. This is probably the reason, the federal ministry of petroleum resources and the Nigerian National Petroleum Corporation had both canvassed the increased use of cooking gas as opposed to kerosene.

Both organisations recently stated that the gas sector had the potential to revolutionalise Nigeria’s fuel consumption, noting that a policy was being developed to address the country’s gas development issues.

This notwithstanding, operators, in the LPG point out the bottlenecks frustrating the full-fledged development of the market. They included dearth of investments in the LPG reception facilities and supply infrastructure; throughput challenges as well as fiscal regime and regulatory environment such as imposition of value added tax on the LPG produced in the country while the imported product was granted waiver.

According to them, prior to 2007, the LPG was simply too elitist and the chain of supply was unsustainable, until the intervention of the Nigeria Liquefied Natural Gas company when it dedicated 150,000 metric  tonnes of the LPG to the domestic market.

Nonetheless, Tony Attah, managing director, NLNG, recently said given the right conditions, the LPG market in Nigeria can grow its penetration and market share by 32 percent from 400,000 metric tonnes per annum, MTPA, to three million MTPA within five years. He stated that study by the company has projected that within the five-year period, the country could improve her per capita consumption of LPG from approximately two kilogramme (kg) to 12kg.

Nigeria’s LPG per capita consumption is the lowest in Africa but increased adoption of LPG could yield a lot of socio-economic benefits to the country. Attah said the NLNG had taken up the drive to improve LPG usage in Nigeria but that its efforts would need to be complemented by certain government actions to ensure the market peaks in line with the market estimate its study revealed.

“It is expected that an aggressive and well-coordinated market expansion strategy should lead to the growth of the Nigerian LPG market at annual rates of up to 32 percent from the current level of over 400,000 MTPA to over three million MTPA in five years with a potential increase in per capita consumption from approximately 2kg to over 12kg, well above the sub-Saharan average of 3.5kp per capita,” he said.

According to Attah, unlocking the potentials of the industry will require a public-private sector partnership. “The government needs to intervene by removing fiscal and regulatory bottlenecks necessary for creation of a conducive business environment for private sector investment in all segments of the value chain.

“The removal of VAT on LPG as well as taxes and duties concessions for LPG equipment and cylinders must be at the top of the priority list for the government. On the other hand, the private sector must deepen the market to create efficiency and provide quality services at lower costs whilst ensuring that highest safety standard are adhered to across the entire value chain especially in LPG plant operations, transportation and cylinder quality/recertification,”

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