In my past articles, I did an analysis of value derived from converting your vehicle to LPG. A lot of people pointed out that the government incentive is based on CNG, not LPG. So, ....today, we will be taking a closer look at the CNG option as prescribed in recent government policies. There is still a lot of confusion about it - this analysis will attempt to establish clarity in grey areas and also demonstrate, using available information and data, the viability and feasibility of this new policy. So, without further ado, here we go:
Unlike LPG which is Propane/Butane, CNG means Compressed Natural Gas and is mainly comprised of a composition made of Methane. To make this analysis easy to understand, we will use Petrol as the yardstick and basis of comparison, since petrol is a well understood quantum. We are going to look at four areas of impact:
1) Comparative Cost
2) Availability / Access
3) Investment Required + ROI
4) Practicality
1) Comparative Cost
To eliminate the comparative differences in energy efficiency and varying units of measurement in fuel types, I have decided to approach this from the perspective of energy density. This approach allows an equitable and constant value returned regardless of what type of fuel is addressed. The standard unit of measuring energy density across board is the "Megajoule" (MJ).
Price of Petrol = N925 / Litre
Price of CNG = N230 / scm
Energy in 1 scm of CNG = 40MJ
Energy in 1 Litre of petrol = 34.2MJ
From the above data, we can deduce the following:
1 scm (cubic metre) of CNG = 1.169 litres of petrol
Therefore, using a typical example of a full tank (60 Litres):
- With Petrol; 60L of fuel will cost N55,500 (@ N925/L)
- With CNG; Equivalent energy amount will require 60/1.169 = 51.33 scm of CNG. Approximate it to 52 scm of CNG. Therefore 52 scm of CNG will cost N11,960 (@ N230/scm).
CNG presents excellent value. As far as cost goes, there is no comparison. CNG will save you over N43,000 every time you fill up your tank! This is a very significant amount that needs no further pontification.
2) Availability or Access to Fuel Type
NIPCO is the strategic partner of FGN in the retail of CNG. Presently, Benin city in Edo state can be considered the CNG capital of Nigeria. Benin city was used as NIPCO test pilot for the CNG program and as such, Edo has 15 CNG filling stations spread all over the cities. Attempts are being made to expand similar service to Lagos, however to the best of my knowledge, right now Lagos only has 6 filling stations with the biggest one being located in Ibafo (along Lagos-Ibadan expressway). Abuja also has 6 new filling stations. Ibadan in Oyo state has one filling station. The rest of the nation will have to wait until such a time as Tinubu remembers them! I discovered the one serving Lekki peninsula is in Awoyaya - 40 minutes drive for me! As far as accessibility, I will give it a "E" mark at this point. Nevertheless, there is hope things will keep improving. Truth is, except for those within close proximity to these filling stations and those living in Benin city, CNG is not yet a viable alternative.
3) Required Investment + ROI
I have called up to six different installers spanning across three states. The quoted cost of installation varies wildly. I have had quotes as high as N3.5 million, and other quotes as low as N1 million. It is also worth noting that if your car has some mechanical faults or anomalies, it will have to be fixed before installation commences. For the purpose of this analysis, I decided to use the most conservative quote along with contingency costs, bringing the estimated investment required to a ballpark figure of N1.25 million. The quoted amount will only allow a 75L CNG tank which has the capacity to hold 16 scm of CNG. As such, we have the following calculation:
Required Investment = N1.25 million
• Assuming a prior use of 60L of petrol every week was required.
• Weekly savings = N43,500
ROI is 1250000/43500 = 28.73 (Approx 29 weeks)
From the calculation above, it is evident that this investment represents very good returns. At the assumed rate of use, the investment would pay for itself in 7 months only! This is very good result in my opinion.
4) Practicality
This is a very crucial but straightforward consideration. In its current form, while I have to admit that the CNG program will bring great savings, nevertheless, it is not very practical or useful to the average Nigerian because the logistics is not feasible. The key issues which are hampering it from being very feasible are as follows:
1. CNG limited access and availability is a very serious limitation. Using my example, I will have to drive a total of an hour and a half plus just to put fuel in my car. For many, that distance will be even more insane simply because the distance will be infinitely more. This singular issue is enough to disqualify the fuel option as a useful or feasible alternative.
2. The cost of installation is a real barrier to entry. The entire point of having cheaper fuel is to help those struggling with the high cost of fuel. If the very same people have to spend over one million Naira to convert their cars, then you can be rest assured that very few will be able to afford the upfront cost. The hardship felt today all over the nation is real. Conversion cost alone will deter many and greatly reduce the number of participants in the program.
3) The final factor that threatens the entire program is the factor of practical limitations. For instance, the 75L tank quoted above is good for 16 scm of CNG. This gives a very short range. In other to get the same mileage as 60L of petrol, you will need 52 scm of CNG. This means that (using myself as an example), I will have to make that trip back to the nearest filling station three times within the week! Considering the fuel consumption to and fro, i will likely have to make the trip 4 times in a single week!! On top of that, my car engine would also lose about 20% of its power output! As an example, in USA, the 2016 Honda Civic with petrol engine produced 140hp. The CNG variant was only able to produce 110hp. I think that example suffices for those who understand mechanics. More importantly, the limitation in fuel range and lack of available filling locations means that CNG cannot be used for long distance travelling and commercial buses cannot take advantage of it.
My Conclusion
I believe the program has real potentials, however there is a lot more work to be done. When Tinubu administration suddenly and unceremoniously removed subsidy last year, I was one of those who screamed because I understood what it portends (as we have now seen). At that time, my alarm was not so much over the fact that subsidy was removed, much rather, it was over how it was done! They could have put much more thought into it and this would have gone a long way into mitigating the economic shock that was subsequently experienced. Nevertheless, today we are here - the damage notwithstanding, the nation has to move on. How wise it would have been for the incumbent government to spend two years horning policies, ramping up infrastructure, increasing nationwide availability and educating the public. At the very least, every LGA in the nation should have at least one or two filling station to make it viable. Another incentive? - imagine a 5% duty on CNG cars, rather than the current 65% on cars?? This would have given many people a head start. Considering the fact that Nigerian government has historically never demonstrated any capacity for effective and effectual implementation at any level, it is no surprise therefore that the cart was put before the Ox. As it is now, the nation's economy is almost completely comatose, and it is almost a case of too little too late! The main beneficiaries of the program right now are wealthy individuals who often own fleets of large gas guzzling vehicles. There is however one ray of light and hope in all these, the program is one that cold be immensely beneficial to corporations and companies. In its current form, corporate entities with fleets of vehicles definitely have the incentive to invest capital in the necessary conversions, which should bring them massive savings, thus improving their bottomline. It is my sincere hope that with time, any such savings on the part of companies, would at the very least trickle down to the hapless population of disillusioned citizens. With the passage of time, assuming the government does not renege in its effort, available filling stations should become more common nationwide, and hopefully, cost of conversion should reduce, thus making the program more viable and feasible for ordinary citizens.
My five cents.