Page 7 - DMEA Week 39

DMEA COMMENTARY DMEA

By expanding the required infrastructure, conventional fuels.
such as pipelines and refuelling stations, Nigeria The Nigeria Labour Congress (NLC), the
wants to see thousands of buses and trucks on Trade Union Congress (TUC) and other labour
the roads using gas. Boosting the role of CNG unions called on their members to go on strike
could create 1mn jobs and help Nigeria reduce on September 28 over the high cost of gasoline
its fuel import bill, authorities say. and electricity. But the industrial action was later
Despite being Africa’s biggest oil producer, called off, after the government agreed to pro-
Nigeria relies on foreign supplies of gasoline, vide unspecified support to workers. There have
diesel and other key fuels, as its main refineries also been large-scale protests.
are in a state of disrepair and have been closed. High fuel costs have led to riots breaking out
The country is awaiting the launch of the 650,000 in the impoverished country in the past, and
barrel per day (bpd) newbuild Dangote refinery motorists are even more incensed by the price
within the next year, and is developing a num- increases given the deep recession Nigeria is fac-
ber of small-scale modular refineries. But by ing. Despite this pressure, however, the govern-
expanding CNG consumption, Nigeria would ment appears to be staying the course.
utilise more of its gas reserves and potentially Over the past month President Muhammadu
make more of Dangote’s output available for Buhari has repeatedly defended the removal of
export. subsidies, saying Nigeria needs to “stop the mis-
Fuel retailer Nipco, which has already con- management of taxpayer money” and “eliminate
verted more than 5,000 vehicles to run on gas in corruption associated with subsidies.”
and around the southern city of Benin, is among Minister of Information and Culture Alhaji
several companies that have already signed up to Lai Mohammed reiterated the government’s
the subsidy package. It believes that millions of position in a speech on September 27, calling on
cars in the country could potentially be fuelled trade unions to drop their strike plans.
using gas. “Revenues and foreign exchange earnings by
“CNG, unit for unit, costs less than even the the government have fallen by almost 60% due
subsidised gasoline,” a Nipco representative was to the downturn in the fortunes of the oil sec-
quoted as saying by Bloomberg on September tor. There is no provision for the subsidy in the
19. “We believe that when an alternative is given revised 2020 budget. So where will the subsidy
to Nigerians, they will get used to it.” money come from?” he said.
Another company to apply for support is The minister estimated that some NGN10.4
Sagas Energy, a gas distributor. trillion ($3.6bn) had been spent on fuel subsidies
CNG is already significantly cheaper than between 2006 and 2019, and the support meas-
gasoline and diesel. Speaking on September ure only led to fuels shortages.
24, Nigerian Vice President Yemi Osinbajo “Ordinary Nigerians endured incessant long
estimated the cost of CNG for cars and buses at queues and paid higher to get the products, thus
NGN78-80 ($0.20-0.21) per litre, or half the cur- making the subsidy ineffectual,” he said.
rent cost of gasoline. The challenge is developing Nigeria is currently negotiating financial aid
the necessary infrastructure and manufactur- from the IMF and the World Bank, and these
ing capability to make this fuel available at scale lenders will insist on austerity measures in
nationwide. return for their support, which could mean the
fuel subsidy is gone for good. However, there is
Risk of reversal still a risk that the government could U-turn if
Plans to ramp up CNG use will likely be upended unrest continues to mount. After all, CNG will
if the government caves into mounting pressure not become as readily available as gasoline over-
and reverses its decision to end subsidies for night. ™

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