Connect with us

Business

CNG, EV transition plans face hurdles over technical support

Published

on

FG promises to convert 250,000 vehicles to CNG annually

Nigeria’s ambition to transition towards cleaner and cheaper transportation options like Compressed Natural Gas (CNG) and electric vehicles is grappling with gas and electricity supply shortfalls, with a gloomy outlook that requires drastic measures to reverse.

According to stakeholders in the petroleum and transport sector, the initiative is also facing major challenges of inadequate CNG stations in the country as well as non-availability of required infrastructure to recharge electric vehicles. The situation is compounded by investor apathy occasioned by the capital intensive nature of tapping into the initiative.

In October 2023, about five months after the removal of the petrol subsidy, President Bola Tinubu launched the Presidential CNG Initiative (PCNGI) to deliver cheaper, safer and more climate-friendly energy. The CNG Initiative was designed to deliver compressed natural gas, especially for mass transit.

The Federal Government earmarked N100bn (part of the N500bn palliative budget) to purchase 5,500 CNG vehicles (buses and tricycles), 100 Electric buses and over 20,000 CNG conversion kits, with plans to develop CNG refilling stations and electric charging stations nationwide. The initiative was expected to ease the burden of the increased pump price on the masses.

FG provides incentives

In a bid to incentivise investors, the government approved 100 percent Value Added Tax and import duty waivers for everything that has to do with CNG, LPG, electric vehicles, gas air conditioners, and others.

In a circular titled ‘Fiscal Incentives for the Presidential Gas for Growth Initiative’, the Ministry of Finance had directed that: “In line with His Excellency, Mr. President’s commitment to improve the investment climate in Nigeria, and to increase the utilisation and supply of gas in the domestic market:

“Pursuant to Part 1, Section 5 of the Customs and Excise Tariff Act, which grants an Import Duty Waiver on machinery, equipment and spare parts imported into Nigeria for the utilisation of Nigerian gas (‘Gas Utilisation Waiver’), the importation of all equipment related to Compressed Natural Gas and Liquefied Petroleum Gas into the Nigerian market shall attract zero per cent (0%) import duty rate.

“Consequently, the Federal Inland Revenue Service and the Nigeria Customs Service are hereby directed to apply a zero per cent (0%) Value Added Tax rate on the following items: Feed Gas for all processed gas; Compressed Natural Gas; Imported liquefied petroleum gas; Compressed Natural Gas equipment components, conversion and installation services i.e. Liquefied Petroleum Gas equipment components, conversion and installation services;

“All equipment and infrastructure related to the expansion of Compressed Natural Gas, Liquefied Petroleum Gas and the Presidential CNG Initiative, including conversion kits.”

It was learnt that the Nigeria Customs Service had commenced implementation of the duty waiver on the said items on December 15.

However, despite the incentives, investors in the energy sector are yet to show interest in investing in CNG. This has led to a very insignificant number of CNG stations in Nigeria as of today, a situation discouraging the call for the conversion of vehicles from petrol or diesel to CNG.

Rising hopes

However, the Presidency had said that the Federal Government kick-started its CNG initiative in Ilorin, the Kwara State capital on Wednesday, May 29, as part of plans to commemorate the first anniversary of President Bola Tinubu.

The Special Adviser to the President on Information and Strategy, Mr. Bayo Onanuga, who disclosed this, said the state governor, Abdulrahman Abdulrazak, launched the refueling and conversion centre for the programme and unveiled the Federal Government CNG buses and tricycles in Ilorin.

He said, “There was a launch in Ilorin Kwara State today (Wednesday) by Governor Abdulrahman Abdulrazak. The Ilorin launch was a refueling and conversion centre. CNG buses and tricycles were also unveiled. The CNG vehicle assemblers have begun the rollout, beginning from Ilorin.

Advertisement

“The inauguration began today in Ilorin. It started with a conversion centre before they unveiled some CNG buses and tricycles. They have not given a date for Abuja. But the process started today,” Onanuga stated.

Recall that the presidential aide had in a statement issued on April 21, 2024, said the Federal Government was ready to launch about 2,700 CNG-powered buses and tricycles before May 29, 2024, when President Tinubu turned one year in office.

In the statement titled, ‘Presidential CNG initiative set for rollout’, Onanuga said the Federal Government would deliver 100 conversion workshops and 60 refueling sites spread across 18 states before the end of 2024.

He 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, alongside spurring the development of CNG refilling stations and electric charging stations”.

With necessary tax and duty waivers approved by President Tinubu in December 2023, Onanuga said, “The PCNGI Committee is partnering with the private sector to deliver the promise on the initiative.

“The private sector has responded with over $50m in actual investments in refueling stations, conversion centres, and mother stations. In all, over 600 buses are targeted for production in the first phase which will be accomplished this year.

“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,” Onanuga said in the statement.

Crossing the hurdles

Delivering a keynote address on “Powering Up Nigeria: Embracing Clean Technologies for Sustainable Growth,” at the American Business Council (ABC) Economic Update, in Lagos recently, Chairman and Chief Executive Officer of Geometric Power Group, Prof. Barth Nnaji, cautioned that the current promotion of the use of electric and gas-powered vehicles in Nigeria would be thwarted by insufficient supply of gas and electricity as well as non-availability of required infrastructure to recharge electric vehicles.

According to Nnaji, the feasibility of the government’s green initiative is doubtful without addressing these underlying issues.

“In terms of vehicular transportation, Nigeria seems to be embracing CNG vehicles and electric vehicles. But there are challenges to these two solutions. In the CNG solution, the gas must be available to be compressed into CNG. Unfortunately, the non-availability of adequate gas for power and industrial processes will also afflict the CNG initiative,” he said.

The former Minister of Power insisted that the Federal Government should resist any pressure to label natural gas as a typical fossil fuel destined for elimination under the shift to cleaner energy sources.

He cautioned the government against hastily pursuing nuclear energy development without thoroughly addressing the challenges of managing its wastewater.

Meanwhile, Nnaji has urged the government to boost power generation to 100,000 MW and modernize the national power transmission system to a super grid, ensuring efficient electricity delivery across the country.

He praised the authorities for tapping into international markets for Nigeria’s natural gas but reminded them to prioritize domestic needs first, emphasizing that “charity starts at home.”

He added: “A well-articulated and sustainable programme needs to be put in place to incentivise investors to aggressively increase natural gas production in Nigeria. It is for this reason that I have called for emergency treatment of the gas sector in Nigeria.”

Advertisement

“Without including this potentially new demand sector for power, I estimate that Nigeria needs more than 100,000 MW to meet its energy needs.

“Unfortunately, we currently have just 13,000MW of installed capacity from which we are only able to put less than 5,000 MW on-grid due to reasons primarily of gas and transmission constraints.

News continues after this Advertisement
News continues after this Advertisement