The plan is part of the oil- and gas-rich nation's effort to lower transportation costs which skyrocketed as petrol pump prices rose last year following the removal of costly gasoline subsidies, angering the public.
On Thursday, state oil firm NNPC said it commissioned a CNG station in Lagos, with capacity to deliver 5.2 million standard cubic feet (mmscf) of gas per day to serve around 3,700 cars daily, supply gas to industries and other companies.
It also said it has reached a final investment decision with Axxela on new plants.
"Although the elimination of the premium motor spirit (petrol) subsidy has brought difficulties, it has also given us a once-in-a-lifetime chance to invent and adopt more economical, efficient, and sustainable energy alternatives," Nigeria's minister in charge of gas resources, Ekperikpe Ekpo, said.
Nigeria has turned to gas as an alternative fuel after it scrapped a popular but costly subsidy on petrol that has seen the petrol pump price rise sharply, angering motorists and businesses that use petrol to generate their own power.
The government hopes the switch to CNG will lower costs and boost clean energy use in Africa's top oil exporter.
The Lagos state government at Thursday's commissioning said it will deploy over 2,000 new CNG buses and 2,500 conversion kits before the end of the year.
The NNPC said in August it has partnered with local firm NIPCO Gas to speed up the adoption of CNG for buses, cars and tricycles and that it expected other oil marketing firms to join to boost availability.
Nigeria has the world's ninth-largest gas reserves. Vehicles that run on gas are generally cleaner and better for the environment. But gas must be cool or pressurised for distribution, and the infrastructure for transporting, processing and distributing it would cost billions of dollars.
