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CNG Conversion to Save Nigeria $4.4bn in Annual Petrol Import Costs

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The Nigerian Federal Government announced on Tuesday that it will reduce the importation of Premium Motor Spirit (PMS), commonly known as petrol, by approximately $4.4 billion annually through the adoption of Compressed Natural Gas (CNG).

This announcement was made under the Presidential Compressed Natural Gas Initiative (PCNGI).

The initiative aims to convert one million diesel and petrol-powered vehicles to run on CNG, providing a substantial financial reprieve for the country.

According to Zayyan Tambari, Coordinator for Regulations, Compliance, and Facilitation at PCNGI, this move is expected to save Nigeria around $4.4 billion annually in petrol import costs.

Speaking at the Co-Creation Session on Nigeria Gas Vehicle Monitoring System in Abuja, Tambari highlighted the Federal Government’s target to replace 20% of the 50 million liters of petrol consumed daily in Nigeria with CNG.

This shift is part of a broader strategy to enhance energy sustainability and economic resilience.

Tambari’s statements followed a report indicating that the Federal Government had already commenced the rollout of CNG-powered buses and tricycles.

The initiative was officially launched in Ilorin, Kwara State, with Governor Abdulrahman Abdulrazak inaugurating a refueling and conversion center.

The launch included the unveiling of CNG buses and tricycles, marking the beginning of a nationwide deployment.

The Special Adviser to the President on Information and Strategy, Bayo Onanuga, confirmed the launch, emphasizing the Federal Government’s commitment to expanding CNG infrastructure.

“Ilorin’s launch is just the beginning. We are setting up refueling and conversion centers across the country,” Onanuga said.

During the co-creation session in Abuja, the PCNGI noted that an investment of about $890 million would be required to develop the necessary infrastructure for the alternative fuel.

Ekperikpe Ekpo, the Minister of State for Petroleum Resources (Gas), represented by Abel Nsa, underscored the government’s dedication to maximizing the benefits of Nigeria’s abundant gas resources.

Ekpo emphasized the need for public education and adherence to safety standards in the use of CNG.

“We must educate ourselves and adopt new tools and materials to ensure the safe and efficient use of CNG,” he stated, drawing a parallel to the economic impact of mobile phone adoption during former President Olusegun Obasanjo’s tenure.

Ogbugo Ukoha, Executive Director for Distribution System, Storage, and Retailing Infrastructure at the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), announced that new filling stations would only be licensed if they provide CNG dispensing points.

“We are engaging stakeholders to mandate the conversion of fuel trucks and fleet owners to CNG, given the high cost of diesel,” Ukoha said.

Michael Oluwagbemi, Project Director and CEO of PCNGI, highlighted the economic and environmental advantages of CNG, stating that it is cheaper, cleaner, safer, and more sustainable than petrol.

He stressed the importance of a smooth transition, strong regulatory compliance, and cooperation across the ecosystem to ensure the success of the CNG initiative.

The PCNGI has already commenced a nationwide CNG conversion program for mass transit buses, starting in Lagos, Kwara, the Federal Capital Territory, and Rivers states.

The program is being executed in partnership with major transport unions, including the National Union of Road Transport Workers (NURTW), Road Transport Employers’ Association of Nigeria (RTEAN), and Nigerian Association of Road Transport Owners (NARTO).

The initial phase involves eight of over 120 designated conversion workshop sites, with plans to scale up operations across 15 states in the next 45 days.

“This ambitious initiative aims to convert mass transit vehicles to cleaner energy sources, significantly reducing emissions and promoting environmental sustainability,” Oluwagbemi stated.

This landmark initiative marks a significant step towards reducing Nigeria’s dependence on imported petrol, promoting the use of domestic gas resources, and advancing the country’s environmental sustainability goals.

As the nation embarks on this journey, the anticipated $4.4 billion annual savings will be a critical boost to Nigeria’s economy.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Nigeria to Suspend Import Levies on Food Crops to Ease Inflation Pressure

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The Nigerian government has announced a series of measures aimed at curbing the surging cost of food.

Among the most significant steps is the suspension of import levies on key food crops, including wheat and corn, for a period of 180 days.

Agriculture and Food Security Minister Abubakar Kyari outlined the new measures in a statement released on Wednesday.

“The government is committed to stabilizing food prices and ensuring that essential commodities are accessible to all Nigerians,” Kyari said. “This temporary suspension of import duties will help increase the supply of crucial food items and alleviate some of the pressure on consumers.”

The government will also introduce a recommended retail price for imported foods to prevent price gouging and ensure that the benefits of the duty-free window reach the general populace.

Specific guidelines to enforce compliance with these measures are being finalized and will be issued in the coming days.

This move comes amid a wave of economic reforms initiated by President Bola Tinubu, who took office in May 2023. These reforms, including the devaluation of the naira and increased electricity tariffs, have contributed to the inflationary spiral, with food prices jumping 41% in May—the highest rate in 28 years.

The steep increase in prices, compounded by a weakening naira—the world’s worst-performing currency this year after the Lebanese pound—prompted the Central Bank of Nigeria to raise interest rates to a record high.

Last month, the government signaled its intention to introduce measures to curb inflation through a so-called Inflation Reduction and Price Stability Order.

Despite earlier interventions, such as the release of 42,000 tons of assorted food commodities and the purchase of 88,500 tons of milled rice, food prices have continued to rise.

“In some cases, these days, food items are becoming unavailable,” Kyari noted.

To further boost supply, the government plans to import 250,000 tons of semi-processed wheat and a similar amount of semi-processed corn. These imports will be distributed to small-scale processors and millers across the country to enhance local production capabilities.

The Nigerian government has attributed the rising food supply challenges to inadequate infrastructure, multiple taxes and levies, and profiteering by marketers and traders.

The International Monetary Fund estimates that at least 19 million Nigerians are food insecure, with the nation having the world’s largest population of citizens living in poverty after India.

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Cocoa Processing Slows Amid Soaring Bean Prices

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Cocoa processing slowed last quarter and industry experts warn a steeper decline is looming as the ripple effects of skyrocketing cocoa prices hit chocolatiers globally.

Despite an historic shortage that sent cocoa prices to record highs this year, the impact on chocolate makers has been somewhat delayed.

However, as stockpiles of pre-crisis beans dwindle, manufacturers will soon face the full brunt of the price surge.

Cocoa prices soared to an all-time high of over $11,000 per ton in April due to poor harvests in West Africa, a key production region. Though prices have slightly eased, they remain more than double what they were a year ago.

This surge has not yet fully translated into higher costs for chocolate makers, who had previously secured beans at lower prices.

However, with inventories running low, the need to replenish supplies at higher costs is expected to significantly impact cocoa grindings in the latter half of the year.

Jonathan Parkman, head of agricultural sales at Marex Group, explained, “The cheap stuff is beginning to drop off, and the expensive stuff is coming in. The worst of input inflation will affect the second half of this year.”

A recent Bloomberg survey of six analysts and traders revealed that second-quarter cocoa grindings likely fell from a year earlier.

Processing in Europe, the largest consumer of cocoa, is estimated to have declined by 2%, potentially marking a four-year low.

All six analysts anticipate a larger global decline in the second half of the year.

Nestlé SA has already signaled the challenges ahead. An executive from the company warned last month that as manufacturers face higher cocoa costs, they will have to pass these expenses onto consumers, leading to a potential decrease in chocolate consumption.

Darren Stetzel, vice president of soft commodities for Asia at broker StoneX, echoed this sentiment, noting, “We are more likely to see a significant change in the grind number in the second half of the year.”

The rising costs have forced some cocoa processors to shutter factories, particularly in West Africa. This, combined with the tight supply of beans, has made it difficult to gauge true demand.

Traders and analysts are closely watching upcoming cocoa grinding data and earnings reports from major chocolate companies, such as Barry Callebaut AG, for further insights into the market.

To adapt to the high costs and scarce supply, some chocolate manufacturers have started using substitutes like palm oil to maintain production levels.

However, this is seen as a temporary fix rather than a long-term solution.

The cocoa crunch underscores the vulnerability of global supply chains to regional disruptions. As the second half of the year unfolds, the chocolate industry will be forced to navigate these challenges, balancing the need to secure sufficient cocoa supplies with the pressures of maintaining affordability for consumers.

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Refiners Predict Petrol Prices to Fall to N300/Litre with Adequate Local Crude Supply

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The pump price of Premium Motor Spirit (PMS), commonly known as petrol, could drop to N300 per litre once local production ramps up significantly, according to operators of modular refineries.

This projection hinges on the provision of sufficient crude oil to domestic refiners, which they say would undercut the exorbitant costs currently imposed by foreign refineries.

Speaking under the aegis of the Crude Oil Refinery Owners Association of Nigeria (CORAN), the refiners stressed the urgency for the government to ensure a steady supply of crude oil to local processing plants.

They argue that the reliance on imported petroleum products has been economically disadvantageous for Nigeria.

Eche Idoko, Publicity Secretary of CORAN, emphasized that the current high costs could be mitigated by boosting local production.

“If we begin to produce PMS in large volumes and ensure adequate crude oil supply, the pump price could be reduced to N300 per litre. This would prevent Nigerians from paying nearly N700 per litre and stop foreign refiners from profiting excessively at our expense,” Idoko stated.

The potential price drop follows the model seen with diesel, which experienced a significant price reduction once the Dangote Petroleum Refinery began its production.

“Diesel prices dropped from N1,700-N1,800 per litre to N1,200 per litre after Dangote started producing. This is a clear indication that local production can drastically reduce costs,” Idoko explained.

In a previous statement, Africa’s richest man, Aliko Dangote, affirmed that Nigeria would cease importing petrol by June 2024 due to the Dangote Refinery’s capacity to meet local demand.

Dangote also expressed confidence in the refinery’s ability to cater to West Africa’s diesel and aviation fuel needs.

Challenges and Governmental Role

However, achieving this price reduction is contingent on several factors, including the provision of crude oil at the naira equivalent of its dollar rate.

CORAN has advocated for this approach, citing that it would bolster the naira and reduce the financial burden on refiners who currently buy crude in dollars.

The Nigerian government has shown some commitment towards this goal. Gbenga Komolafe, Chief Executive of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), confirmed that a framework has been developed to ensure consistent supply of crude oil to domestic refineries.

“We have created a template for the Domestic Crude Oil Supply Obligation to foster seamless supply to local refineries,” Komolafe stated.

Industry Reactions

Oil marketers have welcomed the potential for reduced petrol prices. Abubakar Maigandi, President of the Independent Petroleum Marketers Association of Nigeria (IPMAN), expressed optimism about the Dangote Refinery’s impact on petrol prices.

“We expect the price of locally produced PMS to be below the current NNPC rate of N565.50 per litre. Ideally, we are looking at a price around N500 per litre,” Maigandi noted.

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