Manufacturers Turn To Gas As High Cost Of Diesel, Petrol Persists

Manufacturers in Nigeria are increasingly turning to natural gas as a solution to soaring diesel and petrol costs, which have impacted production expenses.

Following the removal of fuel subsidies, petrol prices have surged over threefold, exacerbating the cost-of-living crisis in the country.

The federal government, recognising the potential of its vast natural gas reserves—over 200 trillion cubic feet—has initiated a compressed natural gas (CNG) programme aimed at reducing transportation costs by nearly 50 per cent. This initiative encourages the conversion of vehicles to CNG and aims to introduce CNG buses across major cities.

Additionally, the recent commencement of diesel sales by Dangote Refinery has led to a notable decrease in diesel prices, dropping from approximately N1,700 to N1,350 per litre. This reduction is expected to alleviate some financial pressure on manufacturers reliant on diesel for operations.

Industry leaders emphasise that transitioning to natural gas not only addresses immediate cost concerns but also aligns with global sustainability goals.

The Manufacturers Association of Nigeria has urged businesses to adopt sustainable energy practices, as energy costs constitute 30-40 per cent of production expenses.

Commenting on the development, managing director of Tiget Business International Limited, Zheng Wei, said that some Nigerian manufacturers are leveraging improved gas supply around Lagos to boost production despite recurring grid collapses.

Wei, who oversees one of the country’s largest footwear manufacturers, described this shift as vital to sustaining operations amid Nigeria’s power crisis.

Wei noted that, while manufacturers face challenges like inflation, currency instability, and regulatory hurdles, power remains the most critical issue.

According to the Manufacturers Association of Nigeria (MAN), energy costs make up nearly 40 per cent of manufacturers’ expenses, with limited and unstable grid supply disrupting production and reducing output.

To address this, Tiget partnered Clarke Energy to install a 6.6 megawatt Jenbacher gas power plant, sourcing gas from a supplier along the Lagos-Ibadan Expressway.

The project included assessments, engineering designs, and maintenance services, enabling Tiget to transition to cleaner, more efficient, and cost-effective energy.

“The gas plant is producing cleaner electricity and saving us significant operational costs compared to diesel. It has addressed efficiency issues, making our operations more sustainable,” Wei said.

Managing director of Clarke Energy for sub-Saharan Africa, Yiannnis Tsantilas emphasised that adopting resilient and cost-effective energy solutions is key to sustainable productivity for manufacturers.

He commended Tiget’s leadership for enhancing Nigeria’s economy by improving local market access to quality footwear, reducing unemployment, and increasing investment. Tiget, incorporated in Nigeria in 2020 and based in Sagamu, imports polyvinyl chloride as a key raw material for its footwear products.

The company plans to expand its operations through backward integration and establish offices across Nigeria and Africa. Wei expressed confidence in Nigeria’s potential as a regional economic hub, citing its young, talented population and vibrant local market.

However, he acknowledged the challenges of high fuel costs on logistics and competitiveness.

Wei called for investments in refineries to provide feedstock for plastic industries and a stable gas supply to support manufacturers. He argued that these measures would drive industrial growth and enhance Nigeria’s economic stability.

With a population exceeding 220 million, Nigeria’s dynamic market presents significant opportunities. Tiget aims to contribute by producing high-quality footwear that aligns with Nigeria’s rich cultural identity and evolving fashion industry.