LPG tax waiver leads to additional N7.2trn sector’s investments

The Presidency has disclosed that the nation’s gas market is set to attract about $20 billion (N7.2trillion) in investments following the removal of Value Added Tax on Liquefied Petroleum Gas (LPG) produced in-country.

Speaking on the expectations in the sector following government’s decision, Programme Manager, National LPG Expansion Initiative in the office of the vice president, Dayo Adesina, said that aside the VAT removal, government was introducing more incentives that would help grow and harness potentials in the industry.

 

Adesina projected that Nigeria would experience massive investments in the sector that would net about $20billion (N7.2trillion). However, he said the entire value chain would be reorganised to accommodate the volume of projected growth that the ongoing reforms would engender.

 

According to him, in 2017, domestic consumption of LPG was 580,000 tons, but going by the federal government’s five-year strategic plan, demand would soon reach five million tons and may reach 1.5 million tons by 2020. He also noted that deregulation of the sector has encouraged intervention of the Nigerian Liquefied Natural Gas (NLNG) in the supply market towards realising full market potentials.

 

The new government policy unveiled by the vice-president this year, is planning for four million households to convert to LPG over the next two years, 10 million households within five years, and 21 million households over the next 20 years, from approximately 2.5 million now.

 

Since around 2007 till now, LPG demand/supply market in Nigeria has grown from a mere 70,000 tons per annum market to over 600,000 tons per annum, pulling along with it, massive investments in LPG infrastructure along the value chain.

 

Adesina reiterated the federal government’s commitment to optimize the use of LPG in Nigeria. “This is a special area of interest and the whole idea is to create an LPG economy and eliminate bottlenecks that have to do with discharge at terminals, regulatory and enforcement issues, demand and supply issues and generally deepen the market in the shortest possible time,” he said.

 

Highlighting the need for massive infrastructure development to support the LPG Expansion Initiative, Adesina informed M&P of a new terminal that would come on stream very soon. “If you recall in 2007, the total storage capacity for LPG was about 19,000 to 21,000 tons; but with the expansion of existing terminals and new ones coming on stream, the figure for total coastline storage has now risen to about 42,000 tons and there are still about four or five terminals that are expected to come on stream very soon.”

Adesina also assured stakeholders that the government would collaborate with the private sector to encourage and stimulate the growth of the sector by having more people invest in cylinder manufacturing. He cited Techno Oil’s successful completion of its cylinder manufacturing plant with annual capacity for 5 million cylinders.

 

LPG, also known as cooking gas is a cleaner, healthier and more efficient fuel which is cheaper than kerosene and was until recently erroneously perceived as an elite product that only affluent households could afford.

 

In a chat with M&P, Chief Executive Officer, Second Coming Gas Limited, Basil Ogbuanu said  that as at 2007, there were less than 100 LPG plants in the whole country. “As of today, there are about 555 operational gas plants and 95% of them are owned by independents while more independent owned plants are being built because the consumption is high,” he noted.

 

He also mentioned that if the Presidency was keen on converting Nigerians to the use of LPG, it should copy successful models implemented in India and Indonesia, which converges on exchanging kerosene stoves for gas burners, free distribution of gas cylinders and the implementation of a 10-year duty waiver for LPG accessories including importation of steel plates for cylinder manufacturing.

 

The performance indices for the market have improved yet, Ngeria still has a lot to do to close the gap between itself and other LPG consuming nations.

 

On the issue of LPG penetration, former Managing Directo, Navgas Company Limited, Ian Brown, presented a comparative analysis which reflected the need for more Nigerians to embrace the cleaner and more efficient fuel for domestic purposes. 

 

He said: “We are approaching about 2kg per capita which has been a growth from 0.5kg per capita. If you put that in perspective, you have the likes of Senegal which consume 10kg per capita, Algeria does 30kg per capita, South Africa consumes 18kg per capita, so there is plenty scope for growth. It is a clean product and Nigeria has large quantities of it.”

 

M&P gathered that beyond encouraging its use as a cooking fuel, the concept of the LPG Expansion Initiative is to develop other areas where LPG can displace dirty fuels like diesel for industries, power generation, as a substitute for PMS in vehicles (auto gas) and other areas where the product will be intervening.

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