With the recent subsidy removal and the existing N250bn intervention facility by the Central Bank of Nigeria (CBN) to stimulate investment in the gas value chain,stakeholders are now optimistic anticipating increased gas utilization and larger opportunities with CBN’s N250bn facility ; they believe the narrative around gas production and usage in the country should change just as they said banks and investors’ exposure to the gas sector in Nigeria at this period should be highly profitable.
Before now, subsidy on petrol and low level of investment in the oil and gas industry have resulted in minimal production and utilization of Compressed Natural Gas (CNG) and Liquefied Petroleum Gas (LPG) as clean alternative energy sources in Nigeria.
According to the CBN framework for the implementation of the N250bn facility, midstream and downstream activities in the gas value chain are the eligible sectors for the fund. The intervention fund is to be disbursed through Deposit Money Banks (DMBs) and NIRSAL Microfinance Bank (NMFB), which will also handle credit appraisals, assist customers in accessing the funding, and administer the loan disbursements under the CBN’s supervision. Furthermore, the monitoring of projects funded under the scheme will be a collaborative effort between the participating banks, the Ministry of Petroleum Resources, and the CBN.
The twin challenges of (i) petrol subsidy, which constituted a cheaper alternative and (ii) the lack of requisite infrastructure for gas extraction, processing, storage, and distribution have also hampered the implementation of the National Gas Expansion Programme (NGEP). The post-subsidy regime, the N250bn intervention facility, besides creating at least 750,000 jobs in the LNG sector and 250,000 jobs in the CNG sector, should provide the needed infrastructure to advance the NGEP, increase private financing access necessary to harness the country’s huge gas endowment and increase investments in gas-related industries. However, transitioning from a largely oil-based economy to a gas-based one may not be a smooth process as there could be significant disruption in some sectors, particularly those heavily reliant on oil. Analysts say the implementation of the facility should, thus, be rechanneled through industry associations, particularly oil marketers’ associations, conversion engineers’ unions, and transporters unions considering that the current funding channel might face the usual hurdles of lack of accessibility associated with banks’ lending process.
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