Press release by the Nigeria Liquefied Natural Gas (NLNG) on 13th January 2022, states that 100% of Nigeria’s Liquefied Petroleum Gas (LPG) produced will be supplied to the Nigerian markets for domestic consumption.
The NLNG explained that the reason for doing this is to increase the availability of LPG in Nigeria, diversify the uses of LPG, and also support the Federal Government’s decade of gas initiative.
LPG is the second-highest export of the country and an important source of revenue for the government, 100% domestic supply means no export and a possible loss in revenue for the government. This will create a dent in the country’s revenue and might affect the 2022 budget implementation.
Nigeria has about 2% of the world’s proven gas reserves and made over $1.8billion in 2019 on sales of gas and Nigeria liquefied natural gas (NLNG) both domestically and internationally. Nigeria also has a natural gas reserve of 5,750 billion cubic meters and natural gas exports of 35,586.1 million cubic meters as of 2020.
Gas production in Nigeria has been relatively stable in the years under review except for a dip in 2018.
The gross production and marketed production of natural gas in Nigeria has mostly been on the increase over the years according to the US Energy Information administration (US EIA).
Local consumption of natural gas has been progressive, moving from a total of 178 bcf consumed in 2010 to 663 bcf consumed in 2019.
The country exports most of its natural gas output annually. From 2010 to 2019, the country produced a total of 28.85 trillion cubic feet of natural gas. Of this quantity, 14.77 trillion cubic feet were exported while 5.76 trillion cubic feet were consumed locally. This shows that 51.21% was exported while 19.98% was consumed locally. The remaining 29% is unaccounted for and likely lost to gas flaring, which costs Nigeria about N82 billion annually in lost revenue.
NLNG is currently the highest supplier of LPG in the Nigerian domestic market with an estimated 400,000 metric tonnes supplied in 2021. An increase in the supply of gas resources and natural gas could help drive the economy by providing cooking gas for homes, supporting industrialization, powering mobile cell sites and complex transport systems, impacting food supply through the production of fertilizers, and increasing power supply to both homes and industries while reducing the country’s carbon footprint.
However, the NLNGs decision might mean a loss of potential revenue for the government. The country generates a substantial amount of revenue from the exportation of natural gas and has generated from 2018 till date a total of N1,883.2 billion, according to the Nigerian Bureau of Statistics. In 2019 gas exports brought in N1,782.6 billion in revenue, in 2020 revenue from gas exports was N1,407.2 billion and N1,374.7 billion was generated in Q1, Q2, Q3 of 2021.
Mele Kyari, Group Managing Director of NNPC, favored improved access to gas by locals rather than focusing on export, he opined that it would have a larger impact on the economy.
Nigeria would be losing an average of N429.9 billion quarterly in export revenue if the exportation of natural gas in Nigeria is halted.
The 2022 budget had a projected revenue from NLNG of N184.03 billion. Thus with 100% supply to the domestic market, this figure might not be actualized creating a wider deficit in the 2022 budget. The 2022 budget already has a deficit of about N6.27 trillion.
While the decision by NLNG to make the product available to the Nigerian market is commendable, it might create a bigger fiscal issue that will invariably affect the domestic economy. It is unclear from the press release how the revenue from gas exports will be augmented to avoid widening the budget deficit which is already impacted by the decision to continue fuel subsidies.