Gbenga Adeosun
The day was 29th May 2023, the venue was at Eagle’s Square centre in Abuja, a place that was brimming under the bright skies of the Nigerian capital’s ambience.
The high-and-mighty in Nigeria had all gathered to witness the hand-over of power from Muhammadu Buhari (who had just finished his eight-year tenure) to Bola Ahmed Tinubu, the elected winner of the 2023 presidential election.
After the ceremonial swearing-in and presidential inspection of the colorful parade by members of the Guards Brigade, the newly-minted President of the largest black nation in the World mounted the grandest stage in the Capital to deliver his inaugural speech as Commander-in-Chief. As many members of the press were scampering for space to best capture what comes next, the audience sat with rapt attention, eyes focused on the President styled in white agbada and trademark cap colored green; an attire donned to reflect the unique colors of the Nigerian state.
Millions were also connected, watching the event on live TV or streaming on Youtube and other social media apps to witness directly what the new President had to say.The speech followed a usual pattern of presidential inaugural language, flowery with messaging of hope, resilience and aspiration; until a spectacular bombshell sentence dropped that sent shockwaves across the nation. In a moment that gripped millions, the President declared “Subsidy is gone” and with it came an unprecedented chain of actions and reactions that disrupted economic order in the country.
“Subsidy” became a national buzzword in 2012 when then-President Goodluck Jonathan announced its removal. Fuel prices increased from N65 to N140 per litre and triggered almost two weeks of protests known as Occupy Nigeria, causing Jonathan to reverse the decision. In the build-up to the 2023 elections, the three major candidates, Atiku Abubakar of PDP, Peter Obi of Labour Party and Bola Tinubu of the APC had all promised to discontinue the payment of petroleum subsidies citing its unsustainability viz-a-viz the heavy toll it takes on on government finances and the cesspool of corruption associated with the system.What many did not envisage was that Tinubu will declare “Subsidy is Gone” just a few hours into his Presidency without gradual implementation or removal in phases.
The sudden nature of the total removal triggered panic, hysteria and market disruption in the petrol-dependent economy.
The Tinubu government defended the move, declaring that the passage of the Petroleum Industry Act in 2022 eliminated the payment of petroleum subsidies and that the outgone Buhari administration did not budget for it in the remaining half of 2023. It further stressed that the petroleum subsidy that was introduced in the 1970s had kept fuel prices cheap for decades but had become increasingly expensive, costing the government $10 billion in 2022.
Galloping Pump Price and a Distressed Economy
The first price hike occurred shortly after the President announced total subsidy removal in May 2023. Following the announcement, the Nigerian National Petroleum Company Limited (NNPCL) raised the price of premium motor spirit (PMS) from N195 to between N448 and N557 per litre, marking a 185.64% increase. The federal government defended the hike, explaining that the subsidy which cost over N400 billion monthly was unsustainable.
Barely a month later in June 2023, the price of petrol rose again from N557 to N617 per litre, an increase of 10.77% and the regulators attributed the hike to market dynamics. Chinedu Okoronkwo, President of the Independent Petroleum Marketers Association of Nigeria (IPMAN), also confirmed that global economic factors beyond local control were responsible for the increase.
The third adjustment came in September 2024 with prices jumping by 45.38% to between N855 and N897 per litre. NNPCL revealed that the latest increase resulted from financial difficulties, including high debts to petrol suppliers. In a statement, NNPCL’s Chief Corporate Communications Officer, Olufemi Soneye, disclosed that the company was under severe financial pressure, which posed a threat to the sustainability of fuel supply.
Another increase followed NNPCL’s decision to step back from its role as a middleman between marketers and the Dangote Refinery This opened the market to direct dealings between the refinery and marketers.
Consequently, NNPCL and other fuel stations adjusted their pump prices to align with refinery costs, leading to a 15% Increase to N1,030 per litre. The meteoric rise in the pump price of petrol brought untold hardship on Nigerians who in the face of stagnant wages were made to grapple with soaring transportation costs and the attendant impact on production costs, factory/industry expenses, skyrocketing price of food items, medicine, house rent and other basic necessities.
This plunged the economy into significant adversity with tensions high among the citizenry furious with the impact of the subsidy removal.In recent times however, there has been a gradual if unremarkable decline in pump price of petrol.
As of February 1, 2025, the ex-depot price of petrol in Nigeria was N890 per litre which was a reduction from the previous price of N950 per litre; transport costs has however refused to come down as commercial transporters allude to the volatility in the pricing of petrol and slim profit margins amid the challenging operating environment; therefore this gradual fall in price of petrol has had no material impact in ameliorating the plight of the citizens or reduction in price of food and other commodities affected by the initial surge in fuel costs.
The CNG Initiative as a potential replacement for PMSThe Federal Government’s adoption of Compressed Natural Gas (CNG) marked a crucial step towards the nationwide rollout of CNG initiatives as an alternative fuel to power vehicular transportation and other petrol-dependent energy needs.
Launched in October 2023 under the Presidential CNG Initiative, the program aims to provide Nigerians with affordable and environmentally friendly energy sources. CNG is a fossil fuel which serves as a cleaner substitute for traditional gasoline or diesel. The production of CNG involves extracting natural gas from underground wells or pipelines, purifying it by removing impurities and liquids, and compressing it to the required pressure.
Many countries such as India, Pakistan, China, Argentina, Brazil, Italy, and Germany, have adopted CNG as a cleaner fuel. However, Nigeria’s infrastructure lags behind with only 131 CNG conversion stations across states like Lagos, Kaduna, Ogun, Oyo, and Abuja. This is insufficient to cover the entire country especially for areas not represented in all geopolitical zones.
The Presidential CNG Initiative is a component of the palliative intervention of the President Bola Ahmed Tinubu administration directed at providing succor to the distress caused by the transitive hardships of the fuel subsidy removal policy of the Federal Government of Nigeria. Sequel to the removal of the PMS subsidy and the full deregulation of the petroleum products market, the price of PMS has increased significantly and as such, there was a need to consider alternative sources of fuel. The initiative was not a pilot, rather it is an initial roll-out to stimulate the adoption of CNG for transport in line with the national policy on transportation already adopted. It is an end to end approach to CNG utilization to reduce costs and carbon emissions.
The key objective is to drive down and manage transportation costs for Nigerians by utilizing the cheaper gas alternative that is abundant but currently underutilized in Nigeria.The aggressive promotion of the initiative in the last one year by the Federal Government recorded a slow-down because of lukewarmness in some states. Another reason for the below-expectation performance is the unavailability of gas as a result of which the Southeast and the Northeast geo-political zones failed to key into the plan.
Despite the hiccups, Presidential Initiative on Compressed Natural Gas Initiative (Pi-CNG) has been able to distribute 150,000 kits and achieved the conversion of 50,000 vehicles from petrol usage to CNG in 2024. This is up from the availability of only 2,000 kits and conversion of 4,000 vehicles in 2023. These numbers are however still low when compared with the number of vehicles running on PMS.
Pi-CNG Programme Director, Michael Oluwagbemi recently disclosed that the initiative has recorded the following feats: Production of 807 CNG buses; Procurement of 3,500 CNG tricycles; and Training of 1,000 auto-technicians nationwide.
According to projections of the Presidential Initiative, 100,000 cars are to be converted before 2026, with the figure rising to 1,000,000 in 2027. He further revealed that the Initiative, which has attracted about $450 million, may lead to an investment drive of about $3 billion in 2027.
As Nigeria seeks to transition to CNG as an alternative to PMS, critical stakeholders have highlighted significant challenges that could impede this shift. In a recent move, the federal government directed petroleum marketers to install CNG dispensing pumps to foster the growth of the CNG adoption program. This initiative has been welcomed by indigenous gas stakeholders who view it as a promising step towards reshaping transportation, stimulating economic growth, and enhancing environmental sustainability. However, some have raised concerns about potential obstacles that need to be addressed.
Despite the government’s belief in the cost-effectiveness of CNG as a key component of Nigeria’s energy strategy, marketers promoting CNG have identified significant challenges. The primary concern is the high conversion cost for vehicles from petrol to CNG, which could hinder the government’s efforts to mitigate the rising cost of petrol. Data indicates that converting petrol vehicles with 1.6-litre engines costs between N300,000 and N400,000. Tricycles with 4-stroke engines cost between N100,000 and N200,000 to convert. Converting lorries and vans can cost up to N1.8 million, while 4-stroke petrol generator engines cost around N90,000.
Despite these high initial costs, the long-term economic benefits are substantial. A converted petrol vehicle consumes N40 per kilometre, saving the owner 40% on fuel costs. Tricycles consume N10 per kilometre, with savings of 50-75% compared to petrol, and converted trucks consume N360 per kilometre, resulting in significant savings. While the government’s directive and the support from gas stakeholders signify a strong push towards CNG adoption, addressing the high conversion costs and other potential hurdles is crucial to the success of this transition and realizing its economic and environmental benefits.
To reduce the cost burden of CNG infrastructure development, the Nigerian government has implemented tax incentives aimed at making CNG more attractive to investors and stakeholders. These incentives are designed to expedite the expansion of CNG infrastructure by providing financial benefits that lower the average cost of building CNG stations.
However, it is essential to ensure these incentives are balanced and do not negatively impact other sectors or revenue sources.
Other challenges with the adoption of CNG in Nigeria is the lack of regulation for some conversion centers. Unauthorized stations pose safety risks, as seen in the recent explosion of a CNG-converted vehicle at a filling station in Benin City which injured many people.There are also the issues of limited infrastructure and refueling stations, inadequate gas pipeline distribution networks and exchange rate volatility. Another major impediment is the significant sensitization gap and wide distrust in the effectiveness, safety, operability and compatibility of this model in Nigeria among road transport users who have been accustomed to petrol as fuel for vehicles.
There is public discontent due to the harsh effects of the subsidy removal and a deep resistance to accept this transition to CNG by members of the public as a measure to lower fueling costs and cushion the economic impact of the subsidy removal. Despite these obstacles, adoption of CNG offers significant benefits to Nigeria’s transportation system. It provides a cost-effective option for vehicle refueling, allowing motorists to pay less for a full tank compared to conventional fuels.
To make CNG adoption more accessible and safer, the government must establish more CNG refueling stations nationwide. The government should also offer incentives, such as tax breaks, for CNG vehicle owners.
Additionally, providing subsidies for conversion kits is essential. Policymakers must focus on public awareness by launching campaigns to educate citizens on the benefits and safety of CNG. They must also reform taxes and tariffs by reducing import duties on CNG-related equipment. Workforce development is essential, as technicians need training in CNG vehicle maintenance. Conducting regular safety audits is also necessary to ensure the reliability of conversion processes.
For individuals who cannot afford the cost of converting their vehicles, the government could explore partnerships with private companies to provide financing options. This would allow owners to spread conversion costs over time.
Public transport drivers could seek financial support from transport unions, agreeing to repay loans either gradually or based on other flexible terms. By addressing these challenges and creating a supportive infrastructure, the government can ensure that the adoption of CNG becomes a safe and effective alternative fuel option in Nigeria and deliver fueling relief to Nigerians.
