A 27 Million Dollar Opportunity in Nigeria— April 12, 2018 0 2324
The NLPGA has estimated that more than 10 billion naira (USD 27 Million) will be generated through the switch of just 50% of kerosene and firewood users to LPG. This would come along with more than a million jobs that would be created as the entire value chain develops over the next couple of years. The association sees national consumption reaching 5 million metric tonnes in the next 5 years from its current use of about half a million metric tonnes. The per capita use of LPG in the country is about 2.5kg which is considerably low especially when compared to other African nations like Morocco (66.27kg), Ghana (9.45kg) and South Africa (7.28kg).
The amount of Nigerian families currently using LPG for cooking is at a paltry 5% of the total population. Comparing this to the 56% that use firewood and 27% using kerosene, there is enormous room for growth of LPG use. This represents more than 100 million Nigerians who are using firewood for their cooking. 50% of this would mean 50 million Nigerians shifting onto LPG. Developing the required infrastructure for 50 million people will be no easy task and there is more than just a small opportunity here for anyone involved in the LPG space. There will be need for producer, suppliers, logistics and plenty of after-market services such as cylinder maintenance and exchange.
A Need for Cylinders
Nigeria is also facing an epidemic of expired LPG cylinders. The NLPGA has recently disclosed that about 90% of all LPG in the country is currently being contained in gas cylinders that are more than 30 years old and need replacement. This presents another huge opportunity to cylinder manufacturers and LPG suppliers to jump on. Nigeria needs new cylinders and needs the old ones to be taken out from the market. The safety risk that the old cylinders’ present should not be overlooked and will only get worse as more time passes. It’s been estimated that the country will need around 3 million cooking gas cylinders each year. There is currently only one operating LPG cylinder manufacturing company in the country that produces around 400,000 cooking gas cylinder each year.
The market desperately needs more cylinder bottling and recertification facilities to ensure the continued safety of all LPG users. This is especially necessary in ensuring that the current population that is using firewood and kerosene can feel safe using LPG instead. It will not help the situation at all if new users who are already fearful of using LPG find out that the LPG they are using, is in fact posing a danger to them. To ensure the continued growth and proliferation of use of LPG, Nigerians using LPG and kerosene need to have full confidence that using LPG is not dangerous. This is one of the major concerns of those using firewood and kerosene for cooking.
The largest supplier of LPG, NLNG, has already expressed that they are committed to keeping a steady supply of LPG that will be able to support the type of growth that the NLPGA has targeted. NLNG also facilitated the revamping of three LPG jetties in Lagos in July 2017 to boost its supply to the local market. The Nigerian National Petroleum Corporation (NNPC) has even commenced operations of two new LPG vessels in February 2017 to increase supply of local LPG. Another company, Matrix Energy has also promised a steady supply of LPG as its 5000 MT storage facility just opened in December 2017.
Whereas many African nations face constant supply issues, Nigeria is slowly becoming free of this nagging problem. The big players in the industry are on-board to see that supply is not something that will prevent the LPG market from flourishing as it should. Having an adequate supply puts them in a great position for growth. Seeing the support of the local gas suppliers in making the right steps to ensure a consistent supply of gas, should provide investors with a sense of security knowing that supply issues will not be something they need to worry about.
Besides cylinders, LPG equipment in the country is in short supply and this causes the price of items such as cylinders, stoves and generators to be very high. These high prices make it all that more difficult to get the industry moving. If, however, manufacturing could be done in Nigeria itself, it would reduce the cost of import significantly. Even if only assembly was completed in the country, it would drive the cost of supplying these items down to a price point that would be much more favorable to the rural population to make the switch. Setting up factories would not only make this equipment affordable to the public but would also provide thousands of jobs. Working with LPG products will also increase the awareness of using LPG as to its benefits over traditional fuels such as firewood and kerosene.
Opportunities can often be hampered by a lack of support from the government and in many cases governments do quash entire industries from ever taking off by being too rigid and closed minded to private investors entering their local market. Fortunately, this is not the case for Nigeria. The government is aware of the problems at hand and has already conceived several initiatives to boost the industry. One such initiative is ‘The Local Manufacture of Liquefied Gas Cylinders’ initiative which is operating in tandem with the Federal Governments’ ‘Domestic Gas Utilisation’ Programme. Through these initiatives, the government aims to make cylinders affordable while creating a new industry in the LPG value chain with respect to local manufacturing. There are plans to develop a funding model to support investors who were interested in developing the LPG market in this area. The Nigerian Content Development and Monitoring Board (NCDMB) is behind the initiative and has recently partnered with the Nigerian Bank of Industry on this.
Leaders in Africa
The Nigerian LPG industry is at an inflection point as timing meets opportunity for exponential growth. All the right factors seem to be falling in place to set the perfect stage for the industry to liftoff and take its place beside other African nations widespread LPG use. The combination of a need for cylinders, a stable supply of LPG and newfound Government support is paving the way for an era of proliferation and expansion of the LPG industry in Nigeria. The door has opened, so be sure to grab the bull by the horns and not let this window of opportunity pass you by – be part of the change that is going to take place in this great African nation.
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