Small silver lining in Nigeria’s fuel subsidy removal?

President Bola Tinubu’s pronouncement in his inaugural speech that the government was not going to keep paying subsidies on petrol sent the country into a frenzy. The pump price of Premium Motor Spirit or PMS, used in most vehicles, immediately tripled.

As the prices of petrol increased, so did the running cost of businesses that depend on the product. Small businesses like beauty salons, hotels, and those in transportation were hit, and in a country that still struggles to supply steady power to its 200 million citizens, some of these businesses decided to opt for alternatives like connecting their gas cylinders to generators.

For local barber Ikechukwu Moses, he said the struggle to get what he called “little shingbai” to make ends meet became tougher with the increase in the price of petrol. 

Things became tougher for him as he struggled to  take care of his family.“It wasn’t funny at all,” the 30-year-old muttered

When he first saw friends connecting their generators to gas cylinders, he was first curious, then scared, “I was not sure about using gas”                

But the resistance of his customers to increasing of price of his services made him rethink the idea. “Customers do not want to accept that we suffer buying fuel, and they think we are just stealing for them,” he said.

So Moses reached out to his friends who had done theirs, and days later, he had his generator connected to a gas Cylinder. 

“The gas I started using was the small 6kg gas that was at home. My wife would use a stove or firewood to cook while I use the gas in the shop. But after some weeks, I took it back home and got another one on rent.”

While Moses is tries to payoff the debt, he insist the return on investment has been huge. 

“The 4-litre fuel I buy at about 2400 doesn’t reach 4 days, and the amount I get from barbing is not up to that. But when I fill my 6kg gas with 3500, it lasts for a week and sometimes with some days.”

Moses has heard so much about its dangers but chooses to take chances since he saves more. He believes God is with him and sees his situation, so he wouldn’t let anything harm him.

“People have said so much about the dangers of using gas, but I know that God knows my situation as he will not let anything harm me.”

Paulina Titus, a hairdresser located not far from Moses, has been observing from a distance and gradually warming up to the concept of using gas as an alternative to alleviate the burden of daily fuel expenses.

“I do have some reservations, but when I consider the money I spend on electricity and fuel, I might soon opt for the gas alternative,” Paulina stated.

Initially, Titus criticized her neighbour’s decision and cautioned him not to let his choice negatively impact their surroundings. However, after witnessing his persistence in using the gas cylinder and observing its benefits, she has grown more at ease with the idea, believing that its advantages outweigh any potential drawbacks.

“I’m seriously contemplating this change because my customers are even reluctant to have their hair washed using the generator due to the high cost. Instead of paying 800 Naira, they’d rather wait for NEPA to provide power so I can wash their hair for 400 Naira,” she recounted to Prime Progress.

Though these anecdotes may appear unconventional, Nigerians are gradually embracing the idea and are willing to explore it despite the potential challenges associated with it.

Fuel Subsidy

Fuel subsidies originated in the 1970s and became entrenched in 1977 after the enactment of the Price Control Act, which prohibited the sale of certain products, including petrol, above regulated prices.

Fuel subsidy represents a government-led transfer of economic resources to consumers or producers of a particular good or service. This transfer is intended to incentivise increased production or consumption of the subsidised item beyond what would occur naturally. However, critics of energy subsidies hold a different viewpoint.

Opponents argue that subsidies create market distortions and discourage investments. Some contend that subsidies emerge when governments fail to implement strategies that internalise the uncontrolled costs associated with energy markets. Others assert that government intervention leads to a subsidy situation when fuel prices are not aligned with the marginal cost of production.

Despite the multifaceted nature of fuel subsidies, Nigerians, driven by a quest for improved quality of life, are actively seeking alternative methods to shield themselves from the impact of subsidy removal. These individuals are exploring alternative avenues to mitigate the burden that the elimination of subsidies brings forth.

Procedure and Safety

Asiko Energy Holdings Limited, a Nigerian company specialising in natural gas solutions, has provided insights into the functioning of gas generators.

According to the company, they have demonstrated the viability of powering a 7.5kVA generator using a 12.5kg gas cylinder. This innovative approach offers an alternative to traditional fuel sources.

Furthermore, Asiko Energy highlights that even users of petrol-based generators can opt for a conversion kit that enables them to run their generators on Liquefied Petroleum Gas (LPG). This conversion kit comprises two essential components: the reducer and the carburettor.

The company underscores the substantial cost and consumption differences between using a 12.5kg gas cylinder and petrol to power a 7.5kVA generator. By using a 12.5kg gas cylinder, users can expect approximately 15 hours of electricity at a cost of N500 per hour. In contrast, powering the same generator with petrol for 14 hours would require 30 litres of petrol, amounting to a cost of N1,050 per hour. This illustrates the economic advantage of using gas, with its cost per hour being half that of petrol.

Felix Ekundayo, the President of the Nigeria Liquefied Petroleum Gas Association (NLPGA), emphasised in discussion with Nairametrics that Liquefied Petroleum Gas (LPG), commonly known as cooking gas, shares similarities with other commonly used fuels. He highlighted that LPG is a cleaner alternative to fossil fuels and could offer greater reliability for powering generators.

Responding to inquiries about the implications of employing gas for generators, the President expressed that switching to gas-powered generators is both secure and practical for Nigerians to consider. He emphasised that this alternative presents a more efficient and environmentally cleaner approach to power generation.

Impacts on Climate

Nigeria is one of the top six countries for the use of generators, India, Iraq, Pakistan, Venezuela and Bangladesh. Over 40% of Nigerian households own generators and bear the associatedcosts. 

The cost of purchasing generators is estimated at about $500 million between 2015 and 2019, higher than the proposed capital expenditure in Nigeria’s 2022 budget.

Also, the installed capacityof generators is between 15-20 GW compared with a grid capacity of 5-15 GW.

Fumes from petrol and diesel-powered generators have health implications- the generators emit sulfur dioxide, nitrous oxide, carbon dioxide and other pollutants that contribute to climate change.

So, while fuel subsidy has a negative impact on the country, many assert that the adoption of gas to power generators is good for the environment. 

Etulan Adu, an oil and gas production engineer at Italian major Eni, said LPG is better than fuel, and it has the potential to increase energy access in the country. 

But he also calls for care and balance in its usage, as LPG needs extreme care when handling.

According to a report on LPG Chater Benefits of Climate, it states that LPG is one of the cleanest conventional fuels available. It is mainly from natural gas production and is also non-toxic, with minimal impact on soil, water and underground aquifers. 

The charter states that “LPG is a clean burning fuel that is low carbon, emits virtually no black carbon and does not spill. Its use improves air quality, reduces the emissions of GHGs and protects the environment.”