Introduction

The energy industry is a global market, and domestic energy policies and implementations are predominantly shaped to align with international trends and standards. This pattern for domestic alignment with global trends is not unconnected from the need to demonstrate capacity, conformity, and unionistic behaviour to avoid being red-flagged or sanctioned in the international market, which would have varying damning effects on a country like Nigeria.

Discussions on energy transition date back over 4 decades ago after the 1973 oil crisis, when it was perceived that there would be a decline in global oil production in the future. This discussion was later globalised by the United Nations in 1981 after the 1979 second oil shock.

In recent years, the debates on energy transition have been underpinned by the immediate need for climate change mitigation, preservation, and sustainability of the earth’s habitation. This discussion culminated in the Paris Agreement, in which the parties committed to limiting global warming to 1.5°C and ensuring that greenhouse gas emissions must peak before 2025 at the latest and decline 43% by 2030. This requires a rapid energy transition with a downshift of fossil fuel production to stay within the carbon emissions budget. At the COP26, H.E. President Muhammadu Buhari announced Nigeria’s commitment to carbon neutrality by 2060. This commitment was followed by the passing of the Climate Change Act 2021, and Nigeria’s Energy Transition Plan (ETP) was also unveiled.

The Energy Transition Plan acknowledged the role Natural Gas must play as a transition fuel on Nigeria’s path to net zero, considering Nigeria’s abundant gas reserves and energy security considerations.

Recent developments in the Nigerian energy industry have indicated a motivation for energy diversification, promotion, and investment in Natural Gas as an alternative to diesel fuel is not limited to environmental preservation but is also geared towards economic emancipation, revitalisation, and improvement of the standard of living due to natural gas’s cost-effectiveness.

This insight focuses on developments in the concerted effort to adopt and commercialise CNG as an alternative to fossil fuels. It also highlights the opportunities for investment in CNG in Nigeria and risks or barriers that deserve investors’ consideration to properly articulate an effective risk management strategy for the investment.

Nature of Compressed Natural Gas

As Nigeria strives towards promoting cleaner energy and reducing the emission of greenhouse gases (GHG), the adoption of CNG as an alternative to fossil fuel is a significant step towards achieving cleaner energy and limiting environmental degradation. This is because road transportation has been the dominant mode of transportation in Nigeria, and over the years, most automobiles in Nigeria rely heavily on fossil fuels. When considering the environmental footprint of GHG in Nigeria, the transport sector alone accounted for 24 per cent of Nigeria’s GHG emissions in 2020. Without concerted efforts, there are indications that this may increase by up to 50 per cent before 2035.

In the face of escalating global concerns about climate change and environmental degradation, Nigeria stands at a critical juncture where, even if fossil fuels play a crucial role in the short and medium terms, concerted efforts are required to transition to cleaner energy. Given the current high cost of fossil fuel in Nigeria, the adoption of CNG presents a promising opportunity for Nigeria to align with this global shift and ensure climate sanity. Compressed Natural Gas is a gaseous fossil fuel consisting primarily of methane (CH4), the shortest and lightest hydrocarbon molecule, and is preferred as an alternative to diesel fuel because it is lighter than air and so tends to dissipate. It is a natural gas under pressure that remains clear, odourless, non-poisonous, and non-corrosive. The storage of CNG inside a cylinder is achieved through compression at a higher-pressure range of 200–300 bar, and since CNG is lighter than natural air, it typically disperses after leakage, thereby providing a considerable benefit over liquefied petroleum gas and conventional fuels.

The Federal Government has initiated several policies and programs to promote the utilisation of natural gas in Nigeria. One of them is the National Gas Flare Commercialisation Programme (NGFCP), which was launched in 2016 with the aim of reducing gas flaring by capturing and commercialising flared gas. The NGFCP is expected to create 300,000 jobs, produce 600,000 metric tons of LPG per year, and generate 2.5 gigawatts of power from new and existing plants. One of the potential uses of flared gas is to produce CNG for vehicles and industries. Another policy is the National Gas Expansion Programme (NGEP), which was launched in 2020 to stimulate the growth of the domestic gas market and create a natural gas-based economy. The NGEP focuses on four key areas: Autogas (CNG and LPG), industrial clusters, virtual pipelines, and power generation. The NGEP aims to convert one million vehicles to run on CNG by 2021 and create 12.5 million direct and indirect jobs by 2025

In Nigeria, further to the Presidential CNG Initiative (Pi-CNG), 12 CNG stations were commissioned by the Nigerian National Petroleum Company Limited (NNPCL) in partnership with the Nigerian Independent Petroleum Company (NIPCO) to drive CNG adoption and access in the FCT and Lagos. The above initiative was followed by the Federal Government releasing the list of FG-accredited Autogas conversion centres in Nigeria. In like manner, President Bola Ahmed Tinubu, on August 12, 2024, commissioned 30 hybrid Compressed Natural Gas (CNG) buses and declared Compressed Natural Gas (CNG) transportation as an economic necessity for Nigeria, signalling a significant shift in the country’s approach to public transportation and energy use. The President emphasised the urgent need for Nigeria to utilise its vast natural gas resources in the transportation sector, noting that countries like India have mandated the use of CNG for all commercial vehicles since 2004 and reiterated the Government’s commitment to leverage Nigeria’s abundant gas deposits to enhance the nation’s energy competitiveness and bring about transformative changes.

These recent developments underscore Nigeria’s commitment to energy transition and diversification. With proper policy reforms that incentivise investments in this sector, Nigeria’s path to energy sustainability, economic prosperity, environmental preservation, and climate change goals will be assured.