FROM POLICY TO PRACTICE: A COMMENTARY ON NIGERIA’S PRESIDENTIAL COMPRESSED NATURAL GAS INITIATIVE

INTRODUCTION

Following the announcement of the removal of subsidies for Premium Motor Spirit (“PMS”) by the Federal Government of Nigeria (the “FGN”) on May 29, 2023, the FGN introduced the Presidential Compressed Natural Gas (“CNG”) Initiative[1] (the “Initiative”)  as part of its palliative measures to mitigate the impact of the removal of government subsidy for PMS. The Initiative aims to, among other objectives, reduce Nigeria’s reliance on PMS, facilitate a transition to cleaner energy sources, lower transportation costs, and position Nigeria as a forward-thinking player in sustainable energy development. This commentary aims to critically assess the Initiative, while identifying key opportunities that could support its effective implementation and long-term success.

AN OVERVIEW OF THE PRESIDENTIAL COMPRESSED NATURAL GAS INITIATIVE

As stated earlier, the Initiative was born out of the need to mitigate the harsh realities occasioned by the removal of government  subsidy for PMS. The Initiative was conceived as a flagship energy reform that sought to channel Nigeria’s abundant gas reserves into the transportation sector, offering motorists a cleaner and more cost-effective alternative to PMS. At the same time, it offered a convenient avenue for Nigeria to attain its Net Zero carbon emission goal.[2]

The Initiative seeks to address five (5) interlocking objectives[3].  First, it aims to slash Nigeria’s reliance on imported PMS, trimming annual fuel import bills by an estimated ₦2 Trillion.  Second, it aims for a substantial reduction in urban transportation costs. Third, the Initiative is designed to cut vehicular emissions by up to thirty percent (30%), in line with Nigeria’s broader climate commitments.  Fourth, it seeks to spur domestic manufacturing and create roughly fifty thousand (50,000) new jobs across assembly, conversion, and maintenance hubs. Finally, it seeks to enhance energy security by monetizing underutilized gas fields and developing local infrastructure to process and distribute CNG nationwide.

To translate these ambitions into tangible outcomes, the FGN, under the auspices of the Initiative, has rolled out a suite of complementary programs. Among these programs is the Conversion Incentive Program (“CIP”)[4], which provides heavily subsidized retrofits for commercial vehicles, prioritizing intra-city buses and tricycles. Parallel to this, the FGN has green-lit the construction of over one hundred and seventy-five (175) new CNG refueling stations[5]. Out of these stations, fifty-three (53) are already operational and in pilot corridors to close the fueling-point gap[6]. In the manufacturing sphere, partnerships with Original Equipment Manufacturers (“OEMs”) have been forged to assemble CNG-ready vehicles locally. Finally, a nationwide training drive has been set in motion to certify ten thousand (10,000) technicians by 2027, ensuring that there are skilled workmen to service conversion centers and fueling stations.

OUR THOUGHTS: GAPS AND FUTURE OUTLOOK

Nigeria’s CNG rollout has been hampered by a persistent supply shortfall, with only fifty-eight (58) retail stations operational nationwide despite over one hundred thousand (100,000) vehicles converted under the Initiative.[7] Additionally, Nigeria’s Midstream and Downstream Gas Infrastructure Fund (MDGIF), an initiative of the Nigeria Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), currently supports infrastructure projects that address only about 10% of the country’s domestic gas demand.[8] This percentage reflects the limited coverage of Nigeria’s gas pipeline network and associated infrastructure, including facilities for Compressed Natural Gas (CNG) conversion, distribution, and storage. This restates the need for an improved pipeline and distribution network that will impact the growth and full utilization of the MDGIF.

Further to the above, there remains public skepticism which compounds  Nigeria’s transition to CNG as an alternative fuel source. A large section of motorists remains unconvinced of CNG’s safety and reliability. This mistrust is amplified by isolated incidents at filling stations[9] and a steep conversion cost of between Six hundred thousand Naira (₦600,000) to One million, two hundred thousand Naira (₦1,200,000) per vehicle. On the regulatory front, industry stakeholders are actively contesting the scope of the MDGIF levy remittance obligations, due to ongoing uncertainty over whether gas suppliers or wholesale customers are legally responsible for making the payments. This ambiguity has triggered disputes that could lead to prolonged litigation and delay the disbursement of funds earmarked for critical gas infrastructure projects.[10] Another gap is the issue of escalated pricing of CNG, which may hamper adoption. Recent hikes have seen prices surge from ₦230 to as high as ₦450 per standard cubic meter, raising concerns about affordability and undermining the perception of CNG as a cost-effective alternative to petrol.[11]

We respectfully submit that the full operationalization of the MDGIF, established pursuant to Section 52 of the Petroleum Industry Act, 2021, constitutes a strategic pathway to remedy Nigeria’s longstanding gas supply deficits. As of October 2024, the FGN approved equity investments totalling ₦122 billion[12] in six indigenous gas infrastructure firms[13] marking a decisive move toward scaling midstream and downstream capacity. In a subsequent funding round concluded in mid-2025, the MDGIF further committed ₦165 billion in equity investments to ten additional firms to facilitate the construction of six gas processing plants,[14] three CNG stations, and one large-scale liquefied petroleum gas (LPG) depot. These disbursements are structured around vetted OEM to ensure quality assurance and technical reliability.[15]

Importantly, recent fiscal policy reforms have boosted the economic viability of the gas transition. Through the Value Added Tax (Modification) Order, 2024, the FGN exempted sixty-three (63) energy-related items[16]. Additionally, the recently enacted Nigeria Tax Act 2025,[17] provides for the exemption of Compressed Natural Gas (CNG) and related items from the 5% fuel surcharge. This exemption supports Nigeria’s energy transition goals and includes other clean energy sources like LPG and household kerosene. The surcharge itself will only take effect once the Minister of Finance issues a formal commencement order.This exemption significantly reduces cost barriers for investors and consumers, thereby accelerating uptake. We also recommend that the private sector be further incentivized through structured public–private partnerships (PPPs), drawing inspiration from India’s highly successful CNG expansion framework. Between 2016 and 2025, India scaled its CNG refuelling infrastructure from 1,081 stations to over 7,400, enabled by policy harmonization, OEM collaboration, and direct government subsidies.[18]

It is instructive to note that Nigeria’s journey toward adopting India’s successful CNG-adoption model is steadily progressing, led by the efforts of the National Automotive Design and Development Council (“NADDC”). NADCC has partnered with international OEMs to train local technicians and establish clear standards for CNG conversion.[19] As part of this rollout, NADDC is setting up twenty-one (21) automotive training centers across all six geopolitical zones in Nigeria, each equipped with advanced diagnostic and retrofitting tools to support calibration, conversion, and maintenance services.[20] NADDC has also introduced national occupational standards for CNG conversion, approved by the National Board for Technical Education, to guide training and certification. To ensure smooth operations and regulatory oversight, a digital CNG conversion portal was launched for licensing and monitoring of workshops nationwide. These efforts form part of the broader Initiative on CNG, reflecting Nigeria’s commitment to developing a skilled workforce and building public confidence in cleaner energy alternatives. Alongside NADDC’s efforts , the Nigerian Institute of Transport Technology is running nationally accredited safety certification programs for CNG technicians and conversion centers, reinforcing best practices across the growing sector.[21]

To sustain the momentum going and encourage wider adoption of cleaner energy solutions, it is important to maintain supportive fiscal policies, especially the VAT exemption, and expand access to low-interest loans for franchised fuel stations and certified CNG conversion centers. These actions, guided by the governance standards set out in the MDGIF regulations, will help reduce investment risks and attract both private domestic investment and international funding.

CONCLUSION

The Initiative offers a powerful opportunity to reduce fuel import costs, lower emissions, and create jobs by harnessing Nigeria’s rich gas reserves. Be that as it may; in order to fully harness the potential of CNG and encourage its wide-spread adoption in Nigeria, it would be necessary for the FGN to take  swift action is taken to address supply shortfalls, build public confidence, and clarify regulatory uncertainties. Additionally, fully operationalizing the MDGIF, its disbursements and fostering strong public-private partnerships drawing inspiration from India’s rapid CNG station rollout can expand refueling infrastructure and vehicle conversion centers. Accessible financing, particularly low-interest loans, will make the switch more affordable for everyday drivers.

Please do not treat the foregoing as legal advice as it only represents the public commentary views of the authors. All enquiries on this should please be directed at the key contacts