Dayo Adeshina is President of the NLPGA and MD of Strategic Energy Ltd. He has been a huge advocate of LPG for more than 10 years now and has been fighting the good fight to ensure that LPG plays a major part in Nigeria’s progress. Just like in many parts of Africa, households are still making use of traditional ‘dirty’ fuels such as firewood and kerosene for cooking. Dayo knows that LPG has the potential to change the lives of every single person in Nigeria. It was our privilege to be able to speak with him and ask him some important questions about the Nigerian LPG Market.
We decided it would be best to start from the beginning and find out exactly where Dayo gets his drive from. He told us, “My career in LPG began in 2003 where I started working in the oil industry doing procurements for oil companies in the UK and US. I was also involved in procurement of gas equipment for Nigeria. I then spent a brief period working in the power industry with Schneider and VA Tech and eventually attended a course at the Oxford College of Petroleum to study supply chain economics.”
If judged by anything, a man is judged by his actions and with such an impressive repertoire, it is no wonder that Dayo had always seen himself being involved in the energy industry. He told us that he has always wanted to be either an oil or gas trader. He said, ‘I’ve always wanted to do things differently and I had a strong desire to be involved in gas as Nigeria was a proud gas nation. It was such that, the more I researched and the more I found out, the more I became interested in the gas industry.”
Dayo has also set up his own company; Strategic Energy Ltd. The company is one of the world’s fastest growing independent commodities trading companies in the world and is also a registered member of the WLPGA. We asked Dayo to tell us more about his company and its current involvement. He said that, Strategic Energy’s original focus was on trading of LPG in Nigeria but has since added to its portfolio of activities. Dayo said that he saw that there was huge gap in supply for development of gas infrastructure in the country. The shortage meant that there was a golden opportunity to be taken advantage of and thus, the company transited into a company that was specific to developing LPG infrastructure in the country. The company develops working relationships with experienced companies already involved in infrastructure development in Nigeria. Currently, the company represents more than 30 OEM and turnkey infrastructure providers.
Splitting his time between his company and his work at Strategic Energy and the NLPGA, Dayo said that his duties at the NLPGA have become more of a passion than actual work. The benefits that LPG can bring to the Nigerian people have provided the fuel for this fiery passion within him. Much of his work involves interacting with the government, the media and the public, to educate more people on the uses and benefits of LPG. He went on to say that, “Currently only a dismal percentage of about 5% of the 185 million people in Nigeria make use of LPG. This presents a huge opportunity and also a huge challenge to create awareness and to facilitate the use of this clean fuel that has the potential to change their lives drastically. It is difficult to instil a new mindset in people that will lead to a whole new way of thinking.”
LPG in Nigeria
This whole new way of thinking is exactly what the market needs and judging by how fast LPG is spreading it is only a matter of time before the majority catch on. We asked Dayo to give us a brief rundown on the LPG market in terms of its current applications, spread of use and affordability. He answered us stressing that the biggest issue at the moment is the lack of supply infrastructure and not supply of gas. He said that the current market size is only around 350,000 tonnes per annum but has the potential to grow up to 5 million tonnes per annum. Investment from market players is needed to facilitate further growth.
Dayo said that, “There is tremendous room for growth in Nigeria, I am extremely excited at the potential and where it could be going. Our advocacy is finally beginning to pay off and we are gaining significant traction with our initiatives. There is potential for LPG use not only in cooking but also in power generation and autogas in the near future. Once subsidies are removed for other automobile fuels, LPG could even potentially fuel the entire Nigerian 3-wheeler market.”
We proceeded to find out more about the distribution chain in the country, asking Dayo to explain to us where exactly Nigeria’s LPG comes from and how it ends up at the end user. He told us that everything begins at the NLNG Terminal at Port Harcott on Bonny Island. The facility has a capacity of some 3 million tonnes per annum of which 250,000 tonnes is allocated for the local market. This produced gas is then shipped to three separate terminals in Lagos. The terminals are operated by Navgas, Nipco and PPMC respectively. From here the gas is supplied to consumers via these three terminals. Dayo also said that there are 5 more terminals that have been proposed with some already in the construction phase. On top of the terminal operators, there are some 22 distribution companies who are main off-takers of the gas. Multi-national companies such as Total and Oando are also active in the country however they mainly sell LPG in bulk to the industrial sector.
The Unbranded Market
An interesting thing about Nigeria is that even though LPG has been in use for almost a decade the market is still an ‘unbranded’ one. Cylinders in Nigeria are not actually owned by any company and this can be a red flag for some investors. Dayo says that for the market to shift from an ‘unbranded’ one to a ‘branded’ one, the level of infrastructure has to change. He says that, “Fractional players in the retail part of the chain require much needed enforcement to ensure safe use of LPG. There are branded players who do try to comply but with the current infrastructure deficit and a lack of cylinder recertification and rehabilitation plants, it makes it a cumbersome task. The industry also requires further manufacturing plants on top of these.”
Branding will give transparency and accountability to suppliers and empower the consumer to make their own decisions. Dayo strongly believes that in time, branding will play a significant role especially with health and safety issues as people will begin to conform and operate within the newly set standards.
Besides sectoral support from users and suppliers a key component of industry success resides within the hands of the ruling party. Following the recent change of government, it looks like there could be a lot more support under the new regime. The new government has been in power for just 9 months and there seems to be a lot of promise for their support of LPG. The previous government only gave a lot of ‘lip service’, promising the world, with little to no action whatsoever. The previous government had also put in place tariffs on LPG equipment that are relatively high that make the task that much more difficult.
Dayo went on to say, “The new governments support can be measured vis-à-vis the kerosene subsidy. The current government has recently said that they will not continue to support the kerosene subsidy meaning that they are keen to hop on the LPG bandwagon. This seems promising and we are currently waiting on government for policy documents and implementation of widespread substitution of kerosene for LPG. It presents a huge opportunity for LPG to finally fill the spot that kerosene has been occupying all this while. It is paving the way for us to initiate a full switch from kerosene and wood to LPG.”
Even though there are no current policies or initiatives supporting the use of LPG in Nigeria, Dayo feels that the government shows great potential for this to change.
What Does the Future Hold?
Dayo reiterated his feelings on the outlook of LPG in the country saying that the future looks extremely bright. He says, “Just by looking at the progress that the industry has made so far in an unbranded market, with almost no support from the government and despite competition from all the other ‘dirty’ fuels, is very encouraging. From the fall in 2006/2007, when market volume was only 50,000 tonnes, there has been consistent growth each year and total volume reached 350,000 tonnes in 2014.”
Bringing the interview to a close Dayo tells us, “At this point we can imagine the consequences of a market that is fully supported by the government. I believe we are at the turning point and it represents true change in fortune for the future of LPG in Nigeria. The time for investment to flow into the sector is now, and there has not been such a promising opening in the LPG market in Nigeria ever. Every household could use LPG. In my work I have travelled and seen LPG industries in 34 countries and to see that it has taken off so well in places such as India, Mexico, Brazil and China to name a few – makes me feel that Nigeria should be no different. The demand for gas is there and with the potential to become a 5-10 million tonne market, the possibilities seem to be without end.”
(LPG Business Review)