Apart from the continuous subsidising of domestic kerosene due to some political reasons which has remained a huge hindrance to the growth of Liquefied Petroleum Gas (LPG) also known as cooking gas in the country, Federal Government policies seem to have created a bottle neck situation for operators and stake holders in the sector alike. Kunle Kalejaye writes on some of these polices.
Unquestionably, Nigeria is said to be more of a gas producing country than a crude oil one, with estimated reserves of about 182 trillion cubic feet (tcf), ranking her as the largest producer of the product in West Africa but its utilisation in the country is said to be the lowest in the region.
Reasons given for the poor utilisation of this abundant product in the country have been attributed to harsh Federal Government policies on tariff and taxation on the product and its associated equipment.
This development is believed to be a strong indication that government is not interested in assisting the private sector to deepen the growth of LPG in the country.
Despite government’s debilitating attitude towards the sector’s development, private investors have aggressively pursued the growth in the sector by investing over $400 million which covers the construction of terminals, depots and bottling plants.
In addition to government’s indifferent attitude toward the development of the LPG sub sector, government agencies responsible for evaluating LPG standards and its accessories have followed the footsteps of their master.
While government’s numerous policies of taxation and tariff on the importation of LPG accessories are hindering the deepening of the domestic market of the product, government agencies have put in place stringent measures on the certification to import LPG equipment.
Before meeting up with the expected requirements for import certification, this writer reliably gathered that importers of LPG equipment are coerced to pay the flight and accommodation fees for government agency workers to inspect and verify the standard of the equipment. The equipment in question which are not produced in the country include cylinders, burners, hose, pipes, storage tank among others.
When finally certified, it was also learnt that government agencies collect a certain percentage on the total import charge of the equipment/accessories. With this development in addition to government unfriendly policies, importers of LPG accessories have no choice but to pass the burden to the final consumers in order to make profit and stay in business.
The high price of these accessories unquestionably makes it difficult for the end user to purchase the LPG product, thereby limiting the growth of LPG usage in the country. This has been described by stakeholders in the industry as a major set-back to LPG development in the domestic market.
Stakeholders believe that these charges will only encourage substandard LPG accessories to infiltrate the country’s domestic market.
Earlier, the Standard Organisation of Nigeria (SON) responsible for the mandatory industrial standards in respect of products or processes recommended by the Nigerian Standards Council had reviewed the standard of LPG in the country.
The review was aimed at making LPG safe for Nigerians sequel to news that elements of contaminated LPG were smuggled into the country from Niger Republic. The review was first held by the SON Technical Committee on LPG in Lekki Lagos on February, 2013 and the final meeting was held in Nicon Luxury Hotel on the 10th of June, 2013.
The final meeting according to reports was for the Technical Committee on LPG to set a new and safe standard of the product in the country. The new standard is expected to take effect whenever it is made public by SON. On a sad note however, five months after the review, the new standard is yet to be made public by SON.
However, a source close to SON told this writer in confidence that the review is currently with the council and will be made public very soon. How soon is yet to be decided.
President, Liqefied Petroleum Gas Retailers Association of Nigeria, Michael Umudu said the current LPG standard by SON states that the propane content should be a maximum of 50 percent adding that whatever comes from Niger Republic must meet the standard.
He however explained that stakeholders have expressed concerns over the safety of LPG with a high amount of propane such as the ones that come from Niger Republic owing to the fact that there are a lot of substandard and outdated equipment and accessories such as cylinders, storage tanks, hose, pipes, cookers in the country that cannot stand the high content of propane.
“This led to the review of existing standards by the SON Technical Committee on LPG. The committee met in Lekki Lagos in February this year and held its finally meeting in Nicon Luxury Hotel, Abuja on the 10th of June this year where new standards were set. The new standards will take effect whenever SON publishes it,” he said.
Another factor hindering LPG growth in the country according to Umudu is that a number of organisations operating in the country’s LPG sector do not have strategic inland storage terminals and standard truck facilities amongst others to conveniently take advantage of the huge potentials ever-present in the domestic LPG market.
He said access to long-term funds for LPG projects had remained cumbersome in the country while rampant and unchecked unprofessional conducts in the LPG value chain like LPG decanting, use of old and substandard cylinders and equipment pose as threats to the sector.
In terms of moving the sector forward, Umudu called for prompt government intervention and the creation of a viable environment for LPG development, stressing the fact that private investors cannot do much as they are in the business to make money.
“Federal government has not really done anything to promote the growth of the LPG domestic market apart from what Lagos State and other private companies have done,” he said.
*Kunle Kalejaye is a journalist and writer who writes on various oil, gas and energy related matters.