High Conversion Costs Stall Nigeria’s CNG Dream: Can The Promise Be Revived?

High Conversion Costs Stall Nigeria’s CNG Dream: Can The Promise Be Revived?

Nigeria stands at a critical crossroads in its journey toward energy diversification and sustainability. With over 208 trillion cubic feet (TCF) of proven natural gas reserves and more than ₦122 billion invested in infrastructure development, one would expect Compressed Natural Gas (CNG) to be a thriving alternative fuel in the country. Yet, adoption remains disappointingly low.

As of the first quarter of 2025, less than 100,000 vehicles have been converted to CNG out of an estimated 12 million registered vehicles nationwide. This accounts for less than 1% market penetration. One of the major reasons behind this slow uptake is the prohibitively high cost of conversion, a burden that many Nigerians simply cannot afford.

Economic Logic vs Financial Reality

From an economic perspective, the appeal of CNG is evident. A standard cubic metre (SCM) of CNG costs about ₦230, which can power a car for roughly 10 kilometres. The same distance would cost nearly ₦891 using petrol. For commercial transport operators, such as taxi drivers, bus owners, and keke (tricycle) drivers, this offers a compelling case, with potential savings of over 74% in daily fuel expenditure.

However, the financial barrier lies in the upfront cost of conversion, which ranges from ₦900,000 to ₦1.6 million depending on the engine type and vehicle specifications. This cost is significantly higher than in peer markets such as India, Pakistan, and Egypt, where conversions typically range from $300 to $800. Nigeria’s conversion cost falls between $580 to $1,035, making it one of the highest globally.

Infrastructure and Regional Disparities

Nigeria’s CNG infrastructure is also unevenly distributed. As of April 2025, there are 27 mother stations, 63 daughter stations, and 242 certified conversion centres. However, most of these facilities are concentrated in the South-West and South-South, where pipelines and compression hubs are more established. The North and South-East regions remain underserved, often relying on expensive virtual pipeline solutions that increase logistics costs and limit accessibility. This infrastructural imbalance not only restricts access but also compounds the cost challenges for potential users in remote or underserved areas.

Skill Gaps and Maintenance Concerns

The successful adoption of CNG also depends on a reliable maintenance and servicing ecosystem. Currently, Nigeria has only 320 certified CNG technicians, a stark contrast to countries like Argentina, where over 5,000 technicians are certified to support conversions, diagnostics, and repairs. Without sufficient technical capacity, even those who have converted their vehicles may struggle with maintenance, creating an additional deterrent for potential adopters.

Government Interventions and Industry Response

Recognizing the potential of CNG and the barriers to its adoption, the Presidential Compressed Natural Gas Initiative (PCNGI) was launched in 2023. It set an ambitious target: 1 million vehicle conversions by 2027 and the establishment of 150 new refuelling stations nationwide.

To encourage private sector participation, the Midstream and Downstream Gas Infrastructure Fund (MDGIF) approved ₦122 billion in October 2024 to co-finance gas infrastructure projects. In response, major operators like NIPCO Gas, Powergas, and BOVAS Group have adopted vertically integrated models, handling everything from gas compression to distribution and conversion. Others, like Tetracore Energy and Green Fuels, are deploying mobile refuelling units and forming regional partnerships to expand access.

Despite these efforts, the conversion cost remains a significant bottleneck. Most private motorists and small commercial operators cannot afford the initial investment, especially in the absence of scalable financing mechanisms. Although financing initiatives such as the Credit Access for Light and Mobility (CALM) Fund have been introduced, their reach and impact remain limited.

The Exchange Rate Dilemma

Another challenge is exchange rate volatility, which affects the pricing of imported conversion kits and infrastructure. Although feedgas is priced concessionally at $1.57/MMBtu, transactions are settled in naira. This exposes downstream players to the risk of naira depreciation, making conversion and maintenance even more expensive.

What Must Be Done?

To achieve meaningful adoption of CNG, several urgent interventions are needed:

1.Subsidize conversion costs, especially for public transport vehicles, which can drive early mass adoption.

2.Promote local manufacturing of conversion kits to reduce import dependency and lower costs.

3.Expand access to affordable financing through banks and microfinance institutions.

4.Train more technicians, particularly in underserved regions, to create a robust support ecosystem.

5.Accelerate the construction of refuelling infrastructure across all geopolitical zones to eliminate regional disparities.

6.Create a national conversion roadmap and coordinate efforts under a single, transparent regulatory body.

The Role of Data in Monitoring Progress

At LPG in Nigeria, we believe in the power of data to drive informed decisions. We continuously track market data, pricing trends, and conversion metrics to help shape both policy and industry responses. Monitoring this data ensures transparency and helps identify gaps in implementation.

Conclusion

Nigeria’s CNG future remains promising, but its success depends on overcoming the structural and financial barriers that currently hinder adoption. With coordinated effort from government, private sector players, and civil society, the country can unlock the full potential of its natural gas reserves, delivering cleaner, cheaper, and more sustainable energy for all.

LPG in Nigeria is committed to tracking market data, price trends, and adoption metrics to help stakeholders, government, investors, and citizens, make informed decisions. We believe Nigeria’s CNG future is still bright, but only if we confront these structural and financial barriers head-on.

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Source: This Day 

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