INTERVENTION: CBN targets 3m jobs with 250bn Gas Intervention Fund

BY EMEKA EJERE

The Central Bank of Nigeria (CBN) is hoping to reduce Nigeria’s unemployment figure by at least three million if the N250 billion Gas Intervention Fund is judiciously implemented.

It is even more feasible as unfolding events suggest that the Federal Government’s policy of converting vehicles to run on natural gas may be further driven by the recent removal of subsidy on the consumption of premium motor spirit (PMS) otherwise known as petrol.

The apex bank had in 2021 introduced a N250 billion intervention facility in collaboration with the Ministry of Petroleum Resources to stimulate finance and motivate investors in the gas value chain for sustainable business development in the country.

In other words, the intervention is intended to improve private financing access, boost investment and develop gas-based industries.

With 208 trillion standard cubic feet of gas reserves, Nigeria, which should ordinarily be a leader in the gas supply business worldwide, has been struggling to even meet domestic needs due to the paucity of the needed infrastructure for production and transportation.

Currently, Africa’s largest economy imports roughly 55 per cent of Liquefied Petroleum Gas (LPG) as the demand continues to increase in the country and could even worsen with the recent disruption in the operations of Nigeria Liquefied Natural Gas (NLNG) Ltd.

Nigeria’s inability to meet local and global demand has been linked to lack of investment which compelled the CBN to inject the financing facility to ramp up the domestic gas expansion programme.

Among others, the CBN said the facility would help fast-track the adoption of Compressed Natural Gas (CNG) as the fuel of choice for transportation and power generation, while LPG will serve as the fuel of choice for domestic cooking and transportation.

Eligibility

According to the framework for the implementation of the facility, eligible activities in the midstream and downstream gas sectors that will benefit from the intervention funding include the establishment and development of various modular/small scale gas plants ranging from gas cylinder manufacturing, Liquefied & CNG regasification modular systems, auto-gas conversion kits, compression stations, LPG retail skid tanks, auto-gas transportation systems, amongst others.

This fund is to be accessed via deposit money banks (DMBs) and NIRSAL Microfinance Bank (NMFB). These participating banks are responsible for credit appraisals and for assisting their customers to access the CBN intervention funding. The participating banks are also responsible for the day-to-day administration of the disbursed loans under the supervision of the CBN. Periodic monitoring of projects financed under the scheme is conducted jointly by the participating banks, the Ministry of Petroleum Resources and the CBN.

There are different administrative streams for providing the intervention funding to the aggregators, manufacturers, processors, wholesale distributors among others on the one hand, and for funding the smaller SMEs on the other hand.

Whereas the former will be funded through DMBs under the aegis of the existing Power and Airline Intervention Fund (PAIF), the SMEs and retail distributors will be funded by NMFB under the existing Agribusiness/ Small And Medium Enterprises Investment Scheme (AgSMEIS).

The aggregators, manufacturers, processors, wholesale distributors, etc to be funded under PAIF will have access to term loan facilities of up to N10 billion per obligor, and working capital facilities of up to N500 million per obligor.

The facility size for the SMEs (to be funded via AgSMEIS) will be up to N50 million per obligor for term loans and up to N5 million per obligor for working capital. The interest rates on these facilities are concessionary (ranging from 5% to 9% per annum) and the maximum term loan tenors range from 5 years to 10 years, depending on facility type. Facilities disbursed pursuant to the programme are to be repaid by December 31 2030.

Job creation

Addressing newsmen in Abuja, Ms Brenda Attaga, Technical Adviser to the immediate past Minister of State for Petroleum Resources, Chief Timipre Sylva, said with the volume of the fund and spread of businesses, it was expected that the scheme would contribute to job creation.

“In the Liquefied Natural Gas sector, our job creation plan is looking at a minimum of 750,000 jobs; in the Compressed Natural Gas (CNG) sector, we are targeting additional 250,000 jobs”, Attaga said.

“The CNG sector jobs including operations of kits centres where vehicles using petrol can be adapted to using CNG and some new fuelling stations would consequently come up.

“On manufacturing, jobs have become leaner because the world is technology- based today and manual labour is getting contracted. On industrialisation, we are looking at a spike because of the number of plants that can be set up with this money. So, overall, we should hit about a total of three million jobs from this funding, if we get it right.’’

Commendation

Various stakeholders in the oil and gas sector have urged operators to take advantage of the CBN N250 billion intervention facility to boost the much-needed infrastructure in the sector.

President of the Petroleum Products Retail Outlets Owners Association of Nigeria (PETROAN), Dr. Billy Gillis-Harry said while the N250 billion funding made available by the CBN remains key, the conditions for accessing the facility were overly stringent.

He urged the apex bank to take into cognisance the dynamics of the situation in which most of the small scale indigenous companies in the petroleum marketing sector operate and review the rules.

Gillis-Harry maintained that the CBN would need to work with associations in the sector to drive the agenda of domestic gas utilisation, stressing that the country has everything it takes to stop the importation of LPG.

He added: “Nigeria has huge gas resources and should not be importing gas. I think the intervention by the CBN is commendable but more is needed. The infrastructure needed to unlock gas is huge.”

Gillis-Harry believes that given growing gas demand in Nigeria, it did not make any sense if the current LNG production in the country is focused on the export market when Nigeria is attempting to increase domestic LPG consumption to 5 million metric tonnes (mmt).

Also in his intervention, PricewaterhouseCoopers’s Associate Director, Energy, Utilities, and Resources, Habeeb Jaiyeola, stated that it was high time the government stopped the importation of LPG, stressing that the CBN’s N250 billion intervention was critical to realising the government’s objectives.

He explained that if complemented with existing gas infrastructure investment like the AKK pipeline, the provisions in the Petroleum Industry Act (PIA) and other initiatives, the country stands a chance to meet its LPG demand.

Jaiyeola urged industry players to take advantage of the N250 billion CBN intervention facility to address the bottlenecks in the domestic gas market, while urging sustainable finance into the gas sector.

He noted: “The move by the CBN is laudable and the intent of the fund is also quite comprehensive and seeks to ease funding challenges for all players within the LPG value chain.”