From firewood to LPG

 The highest non-food expenditure Nigerians make is on housing, water, electricity, gas and other fuel. However, energy poverty is prevalent, despite Nigeria’s wealth of oil and gas.

Millions of Nigerians don’t have access to electricity and efficient, safe, cheap, quality energy sources, e.g., liquefied petroleum gas (LPG). The cost of LPG is beyond most Nigerian households. LPG users in Nigeria are limited to 300,000 urban high and medium income households with an average per capita income above $50, according to Accenture, a consultancy.

Others, those that make up the 30 million urban low income professional households; rural and urban survivors; the rural and urban poor depend on kerosene, charcoal and firewood. Average per capita income in these households is between zero and less than $50.

Over half of Nigeria’s population lives below the poverty line and life expectancy is among the lowest in the world. Access to decent health services is compounded by how 70 percent cook their food: with firewood. One-quarter of Nigerians rely on kerosene (subsidised on paper but in reality expensive because of smuggling, black market and political corruption). Because 22 million households rely on solid fuel for cooking, indoor air pollution in Nigeria causes about 80,000 deaths a year; most are children less than five years old. 

Alas, conventional wisdom suggests that firewood is cheaper than modern fuels, e.g., LPG. Pay-as-you-go consumption of wood, charcoal and kerosene masks the true cost of cooking with these fuels. A 12.5kg LPG cylinder that can last for three weeks costs N3,500. Cooking a meal with 5 sticks of firewood costs N100; a N150 small bag of charcoal can cook meals for 1 day; cooking a meal with a litre of kerosene can cost N50 (recommended retail price) or N150 (black market price).

The cost of the gas cylinders and stoves has limited the adoption of LPG. Starting with the 7.3 million urban poor, a public private initiative involving Lagos State government, Oando, LAPO Microfinance, and Banner Energy is working to reduce switching costs by integrating a smaller LPG cylinder with a stove (burner); providing microfinance to help people pay in instalment, and ensuring the proximity of gas suppliers where cylinders can be bought or refilled.

Making LPG accessible and affordable is crucial to reducing energy poverty, putting an end to the vicious cycle of energy poverty of low productivity and low returns on investment. A cheaper and safer source of energy will aid healthier and productive lives. Especially because it gives consumers a choice of an efficient technology, the lives of thousands at risk of dying from indoor air pollution will be saved.

This initiative shows how public policy and business strategy can work to tackle social problems. We recommend that this initiative be adopted as a part of strategy to end fuel subsidies. For inspiration, we suggest a study of how Lula, the former president of Brazil, set up Bolsa Familia, “Family allowance”, as part of Fome Zero, “Zero Hunger”, in Brazil. One of the three government initiatives that formed Bolsa Familia was Auxílio Gas, a compensation scheme that was set up when the Brazilian government ended fuel subsidies.