Liquified Petroleum Gas, LPG, is a sustainable and eco-friendly energy source. It is one of the products of natural gas, it serves as a better and healthier alternative to wood for heating and cooking purposes and Nigeria owns the largest gas reserves in Africa.
According to Nigeria LNG Limited’s report in 2013, Nigeria was a net exporter of LPG in Africa, producing over 2 MTPA but consuming barely 15% of the volumes while exporting the rest. Between 2013 and 2022, there has been a considerable increase in the consumption of gas in Nigeria, although a significant portion is being imported for local use. The report explains that the reason for the large export is the difference in the type of gas consumed domestically and the one exported. The butane variant of LPG is mainly consumed locally, while propane is mostly exported.
Despite the gradual increase in consumption, Nigeria has the lowest per capita usage of LPG in Sub-Saharan Africa, consuming only 1.8kg compared to Ghana’s 3.0kg, South Africa’s 5.5kg, and Morocco’s 44kg. With the West African regional average at 3.5kg, Nigeria’s consumption stands at a meagre 1.8kg per capita. Nevertheless, the future of LPG in Nigeria holds significant potential due to the country’s growing population, increasing consumption, and demand for LPG. Also, the socio-economic challenges and the need for sustainable energy to meet the growing needs of various sectors of the economy highlight the enormous market opportunity for LPG in Nigeria.
Hyde Energy, a reliable global energy trading company with a downstream network is promoting the adoption of clean energy sources among Nigerians. The company’s Chief Executive, Oladimeji Edwards, is committed to making LPG accessible to many homes in Nigeria.
He pointed out, “The Nigerian population is underserved with LPG. Morocco today has the biggest LPG business on the continent, and Morocco has a population of 60 million people, consuming about 5.5 million tons of LPG annually. In contrast, we are about 210 million people in Nigeria, and we consume about 1.4 million tons per annum today”.
Edwards also said that in the LPG business, there is a convergence of events: there is deforestation, which means firewood is expensive and scarce and there is also no subsidy for kerosene. With these things converging, there’s no better time for the LPG business than now. These statements were made during a recent media roundtable held at the company’s office in Lagos.
The Head of LPG, Hyde Energy, Olumuyiwa Akande, who also participated in the media briefing, emphasized that LPG is the future of the energy business in Nigeria. He highlighted that Nigeria is a gas-rich country, with more than 200 trillion cubic ft of gas reserves in six of the country’s seven sedimentary basins, which are commercially rich in gas. Mr. Akande stated, “I believe that it is the way to go as a country. For us at Hyde Energy, we have experienced exponential growth with our LPG business. By 2021, with the government declaring Nigeria’s ‘Decade of Gas,’ we had expanded our footprint in Lagos and Abuja. This increase in supply and demand has convinced us that the future is LPG.”
Two years ago, the Central Bank of Nigeria, CBN, stated, while announcing its plans for the N250bn Gas Expansion Fund, that “failure to harness its gas resources has had negative consequences for the country—economic, environmental, fiscal, and social—particularly as the industry has the potential to engender rapid growth in Nigeria’s non-oil economy.”
In 2021, the Nigerian government launched Nigeria’s ‘Decade of Gas,’ an initiative aimed at leveraging the country’s vast gas reserves to drive economic growth and development. The $20 billion initiative focuses on four key pillars: expanding gas infrastructure, increasing domestic gas utilization, growing gas exports, and attracting foreign direct investment into the gas sector.
The answer to how Nigeria will harness the potential of LPG lies in the four key pillars of Nigeria’s Decade of Gas initiative. If the plans outlined within these pillars are executed, the projected growth of the LPG industry will become a reality.
Speaking on the investment, Edwards explained that “one of the ways will be to find gas within the ground, attract investments to extract that gas, develop the distribution network, and become like NLNG to the degree that supports the business.”
According to Nigeria LNG Limited’s report on Barriers to Market Development: Demand Pull vs. Supply Push, three things can be done to overcome the barriers to LPG adoption for market development: Accessibility, Affordability, and Acceptability. To make LPG accessible, suppliers should ensure its widespread distribution to customers, eliminate long supply chains and infrastructure deficiencies, establish several local agents, make significant investments, and consider risk and Mega Tonnes of Coal Equivalent (Mtce) cost. On the demand side, efforts should focus on increasing local LPG supply to households, creating smaller cylinders, ensuring full local sales and service, and facilitating fast and convenient refills with an abundant supply of cylinders.
Affordability is also crucial for customers. Suppliers should strive to lower LPG prices, reduce overhead costs, and develop small profit margins. Economic viability, subsidies for entry appliances, and third-party financial support should be considered as well.
Ensuring public acceptance of LPG usage is equally important. While there has been a significant increase in recent years, Nigeria can do more to promote the acceptability of LPG.
Educating the masses on affordability, safety, and proper usage, as well as implementing a friendly household energy policy, are effective strategies. Additionally, favourable government policies that harness the potential of LPG in Nigeria are essential.