Nigeria’s radical idea for car owners facing soaring petrol prices

Welcome again to Vitality Supply — coming to you as we speak from Houston and Lagos.

As Individuals return from the Thanksgiving break, all eyes stay skilled on Donald Trump’s preparations for his return to the White Home and what his coverage proposals will imply for the vitality area.

The president-elect’s plan to slap hefty tariffs on Canadian imports has disconcerted oil producers, who warn it risks driving up US gasoline prices.

However what of Joe Biden’s vitality legacy? My colleagues Amanda Chu, Alexandra White and Ollie Roeder take a deep dive into the way forward for the $400bn dedicated to the inexperienced industries and the semiconductor sector by means of Biden’s Inflation Discount Act. Will his manufacturing renaissance endure?

In the meantime, vitality bankers and attorneys right here in Texas are finalising plans for an IPO by Venture Global, the liquefied pure fuel developer set to be a big beneficiary of the brand new administration. The flotation is about to be one of many largest ever by a US vitality firm.

However the matter of as we speak’s e-newsletter is a dispatch from Nigeria, the place my colleague Aanu assesses the state of a novel coverage push to deal with that perennial political bugbear: excessive costs on the pump.

The federal government is hoping that an effort to persuade hard-pressed motorists to transform their autos to run off compressed pure fuel will catch on. However obstacles to the shift abound.

Ideas? Drop me an e-mail: myles.mccormick@ft.com.

Thanks, as ever, for studying. — Myles

Will Nigerian automotive homeowners convert to CNG-powered autos?

For many years, beneficiant authorities subsidies allowed Nigerians to pay a number of the most cost-effective petrol costs globally. However since their gradual withdrawal over the previous 18 months by President Bola Tinubu as a part of reforms he’s betting will remodel a moribund financial system, petrol costs have skyrocketed greater than fivefold and contributed to almost three-decade-high inflation.

Transport prices have inevitably risen, and in a rustic the place nearly all items, significantly farm produce, are ferried through street within the absence of an expansive rail community, meals inflation is at a staggering 39 per cent.

With Nigerians dealing with the worst price of dwelling disaster in a technology, Tinubu’s authorities is encouraging residents to embrace a radical new concept: changing their petrol-powered autos into absolutely or hybrid compressed pure gas-powered autos. CNG is a methane fuel that’s compressed and saved in a high-pressure storage tank contained in the car.

The Presidential CNG Initiative (Pi-CNG), launched in August 2023, hopes to reap the benefits of the nation’s enormous fuel reserves of about 200tn cubic toes, which is Africa’s largest. The federal government has set formidable targets for the conversion scheme. It hopes to transform 150,000 autos by the top of the 12 months — its director Michael Oluwagbemi stated 100,000 car homeowners have already made the bounce.

The Pi-CNG is eyeing the 1mn car mark by 2027. Changing automobiles might additionally assist decrease emissions. “The transformed autos will function at a big low cost, stay versatile, and run cleaner, cheaper, safer and extra reliably,” Oluwagbemi has stated.

Changing a car would ultimately decrease transport prices by 40 per cent for automotive homeowners, in response to authorities estimates. 2 hundred million {dollars} has already been invested within the initiative, with an extra $450mn proposed in infrastructure funding corresponding to conversion centres and filling stations.

CNG’s value attraction for purchasers is obvious. It sells for N230 per litre ($0.14), considerably decrease than the N1,080 ($0.64) per litre value for petrol.

The conversion course of entails putting in a high-pressure fuel tank into the boot of a car. The conversion equipment is then built-in into the car’s gasoline system.

The federal government is providing subsidies to corporations concerned within the conversion initiative, with beneficiant tax waivers on supply for CNG gear. A N10bn ($6mn) credit score facility has been arrange for these inquisitive about making the leap to CNG.

But the street to widespread adoption in a rustic of virtually 230mn individuals is plagued by obstacles. The obvious downside is the sheer scale of the duty. There are an estimated 12mn autos in Nigeria, nearly definitely an undercount of the true variety of automobiles within the nation. However there are lower than 150 accredited conversion centres throughout such an enormous nation. The centres are in lower than half of Nigeria’s 36 states and its capital, Abuja. And there appears to be little in the best way of publicity efforts to elucidate the initiative, significantly outdoors of Nigeria’s largest cities.

There are additionally security considerations with CNG conversion. Or quite extra precisely, there are widespread perceptions that CNG autos are strolling time bombs. In an episode that made nationwide headlines, a automotive exploded at a filling station within the southern metropolis of Benin in October, severely injuring three individuals. 

In a low-trust nation the place persons are typically cautious of what their authorities is telling them, it was a setback for the Pi-CNG’s efforts. The federal government has aggressively defended the scheme, saying the car that exploded had been labored on by an unlicensed conversion mechanic and that misinformation was behind a lot of the protection considerations being raised.

There’s little information on the variety of individuals keen to transform their autos, however anecdotal proof suggests many Nigerians are reticent and this, maybe above all else, stays the largest impediment to the initiative. (Aanu Adeoye)

Energy Factors

Vitality Supply is written and edited by Jamie Smyth, Myles McCormick, Amanda Chu, Tom Wilson and Malcolm Moore, with assist from the FT’s world group of reporters. Attain us at energy.source@ft.com and observe us on X at @FTEnergy. Make amends for previous editions of the e-newsletter here.