Nigeria’s CNG Market Set for $10 Billion Growth: Opportunities and Challenges for Investors

Nigeria’s compressed natural gas (CNG) market is expanding, perhaps boosting the local economy, lowering pollution, and creating jobs: The business sector and its networks is expected to grow rapidly over the next ten years, with industry experts projecting its value to reach $10 billion.

The country’s vast natural gas reserves of 208.83  trillion cubic feet (TCF) as of 2023, combined with rising energy costs for power, industrial application, and transportation, position Nigeria as a leader in Sub-Saharan Africa’s CNG sector.

However, navigating this expanding market comes with unique challenges and opportunities. To gain insight into this dynamic industry, Tanzania Petroleum spoke with Tosini Ashimi, the country manager of Bison Compression Limited-Nigeria, a global CNG solutions company.

What is Driving CNG Growth in Nigeria?

According to Tosin Ashimi, three main factors are fueling the adoption and utilization of CNG in Nigeria: economic benefits,environmental considerations and government policies including the removal of the petrol subsidy

 Economic Benefits

“Energy costs are a major concern for industries,” Tosin Ahsimi explained. “For decades, power generation and industrial operations in Nigeria have relied on traditional fuels like diesel. But as diesel prices continue to rise, production costs are becoming unsustainable for many businesses.”

CNG offers a cheaper alternative, helping industries cut costs while maintaining operations. Similarly, vehicle owners are turning to CNG as a more affordable fuel option amid skyrocketing petrol prices.

“Switching to CNG can save businesses and individuals up to 40% compared to diesel. It’s not just about savings—it’s about survival for many companies,” he added.

 Supportive Government Policies.

Recent policy changes have also boosted the sector. “The government’s removal of subsidies on traditional fuels has significantly improved the CNG industry and increased growth, as many companies and car owners have adopted and converted their vehicles to run on compressed natural gas.

Through the Presidential CNG Initiative, the government vehicle conversion incentive program is also offering free or significantly reduced conversions to commercial and public transportation in Nigeria.

Further, waiver of import duties and taxes for all CNG processing equipment as well as conversion kits have made the CNG business a more attractive option for investors,” Ashimi noted.

These incentives have encouraged businesses and individuals to transition to CNG, further driving market growth.

 Environmental Benefits. 

“The world is shifting towards sustainability, and Nigeria is no exception,” Ashimi said. “CNG is a cleaner energy source with significantly lower carbon emissions compared to diesel and petrol.”

This environmental edge is particularly appealing as industries strive to meet global sustainability standards.

 Key Challenges Facing the CNG Sector.

Despite its potential, the CNG industry in Nigeria faces several hurdles, including currency issues, reliance on imports, and limited financing options.

Currency and Import Dependency.

“One of the biggest challenges we face is Nigeria’s currency situation,” Ashimi explained. “Most CNG processing equipment, like Compressors, CNG Tube skids  and conversion kits, are imported from overseas suppliers who only accept payment in foreign currency. But businesses earn in naira, accessing foreign currency has been difficult due to shortage and a volatile exchange rate,”

This reliance on imports not only increases costs but also delays project timelines.

Ashimi believes the solution lies in local manufacturing. “If we can convince CNG equipment manufacturers to set up production in Nigeria, we can reduce our dependency on imports. Local production would cut costs, create jobs, and boost government revenue.”

 Financing Issues.

Another major challenge is the lack of affordable financing options. “CNG projects require significant capital investment, but banks in Nigeria charge extremely high interest rates,” Ashimi said.

This financial barrier forces companies to seek international investors or partnerships, which can complicate project execution.

“To move forward, we need better access to funding. Government and private sector collaboration could help address this gap,” he suggested.

Future Opportunities in Nigeria’s CNG Market.

Despite these challenges, Ahsimi is optimistic about the future of CNG in Nigeria and across Africa.

“Gas is the future of energy in Africa. With abundant reserves, Nigeria is well-positioned to lead the way,” he said.

 Industrial Growth and Job Creation.

CNG’s role in powering industries and vehicles could drive significant economic growth. “As of now, there are over 100,000 vehicles converted from petrol to run on CNG in Nigeria, and this number is growing every months as more conversion centers are being established across the country,” Ashimi noted.

He also highlighted the potential for job creation. “Expanding the CNG sector will create opportunities for small businesses and provide jobs for Nigeria’s youth.”

Competitive Edge Over Electric Vehicles.

While electric vehicles are gaining traction globally, Ashimi believes CNG has greater potential in Africa. “In a continent with abundant natural gas and limited electricity infrastructure, CNG is a more practical and affordable solution,” he said.

Advice for New Investors.

For those looking to enter Nigeria’s CNG market, Ashimi offered practical advice:

Choose Reliable Original equipment manufacture:  Carefully select your OEM, “Work only with reputable manufacturers. There are many substandard products in the market, and using them can lead to costly mistakes and production downtime.”

Focus on Location: “The success of a CNG project often depends on its location. Investors should carefully select sites that offer high demand and easy access to infrastructure.”

Build the Right Team: “A skilled team is essential. Without the right expertise, even the best equipment won’t guarantee success.”

Conclusion

Nigeria’s CNG market is poised for significant growth, offering opportunities for investors willing to navigate its challenges. With supportive government policies, economic and environmental benefits, and abundant natural gas reserves, the sector is set to transform the country’s energy landscape.

However, success will require careful planning, strategic investments, and a commitment to overcoming obstacles. As Ashimi put it, “The future of energy in Nigeria is gas, and those who invest wisely now will reap the rewards.”