Dangote Group Chairman Aliko Dangote has said his company will run its delivery trucks on compressed natural gas (CNG) by 2025. He said this at the company’s 15th Annual General Meeting (AGM) in Lagos.
He said: “We are now going to start using CNG vehicles, especially with the new policy of the Federal Government, launched by the Renewed Hope Agenda by President Bola Tinubu. By the end of next year, all our trucks that are operating in the company will be running on CNG, which is a lot of money that we will invest. But we are equal to the task, and we will continue to push and make sure to make our shareholders happy.”
Dangote first took this decision in 2023
The company’s decision to adopt CNG for its delivery trucks is a response to government policy and a strategic move to manage operational costs and improve its energy mix. Dangote Cement highlighted plans to incorporate CNG into its logistics operations in its first-quarter results statement for 2023 (Q1/2023). This transition is expected to significantly cut fuel costs, a critical factor given the country’s inflationary pressures.
Transitioning to CNG offers several advantages for Nigeria, particularly in the transportation sector. First, CNG is a cleaner alternative to diesel, producing fewer pollutants and greenhouse gases. This switch can contribute to reducing transportation’s environmental footprint, an important consideration for companies aiming to enhance sustainability.
Secondly, CNG is typically less expensive than diesel. Fuel costs represent a substantial portion of overall expenses for a large logistics operation like Dangote Cement. By switching to CNG, Dangote can lower fuel expenses, improving its cost structure and profitability. This is particularly important in an economic environment with rising costs and inflation.
Dangote Cement’s financial performance in Q1 2023, when it first expressed interest in converting to CNG, provides context for its strategic decisions. The company’s manufacturing costs increased by 6.2%, rising to ₦163.7 billion from ₦154.1 billion in Q1 2022. Fuel and power consumption amounted to ₦56.7 billion in Q1 2023.
Nigeria’s heavy reliance on imported fossil fuels risks energy security and economic stability. By adopting CNG, Dangote Cement contributes to the nation’s efforts to diversify its energy sources. Natural gas is abundant in Nigeria, and its increased utilization can help reduce its dependence on imported fuels, bolstering energy security.
Moreover, this transition supports the broader national agenda of leveraging local resources to drive economic growth. Using domestically produced natural gas, Nigeria can enhance its energy self-sufficiency, stimulate local industries, and create jobs within the natural gas supply chain.
As Nigeria grapples with inflation and economic pressures, adopting CNG presents a viable solution for cost reduction and energy diversification. Dangote Cement’s initiative sets a precedent for other companies, showcasing the practical benefits of transitioning to cleaner, more sustainable fuel options.