Nigeria’s oil and the energy transition

Nigeria's oil

By Caleb Adebayo

At the beginning of our national life as a country, oil was not the linchpin of the economy. In fact, Nigerian history is full of nostalgic tales of agricultural products like palm kernels and peanuts that are exported and account for more than 70 percent of the country’s gross national product.

Elderly parents tell us stories about how our country had enough food and how the value of the naira evoked a sense of pride; how the government met their needs as students and how jobs awaited them after graduation.

Soon, however, there was the discovery of oil in commercial quantities in the early 1970s and the oil boom a few years later. These were the trigger for the country to give up agriculture completely and head for this “black gold”.

Various scholars would later refer to this event as a “resource curse” in history. Ironically, the Nigerian economy was not getting any better. Instead it was a downward spiral. Soon we began to lose refineries and other means of production and became a rent-driven state that exported crude oil and imported refined products.

The plunder of the treasury was a constant companion of this economic decline and entire oil blocs were given to political allies for no other reason than that this was possible.

As with a volatile commodity like oil, there were the oil shocks of 1986, 1991, 2001, 2009, 2011, 2014, and of course 2020. These shocks had a significant impact on economies, not excluding Nigeria.

Still, the country was no wiser after each episode, blindly believing that everything was fine and that oil was an infinite resource. It wasn’t until 1999 that Nigeria got serious about adding products from its gas reserves to the bucket of foreign exchange and launched the first production from the NLNG facility in Bonny. Still, the progress on gas has been shocking as gas flaring continued unabated, aided by limp laws and a lack of enforcement.

In addition to the economic damage, the oil has messed up our livelihoods, shortened life expectancy, made many homeless and caused environmental damage in several communities.

To this day, the Ogoni oil spill has yet to be cleaned up – one of many. While countries like Norway, Canada, and even Trinidad and Tobago – all countries with less proven gas reserves than Nigeria – began serious gas operations in the early 1990s, Nigeria played the mule, focused on the oil, and equally plundered its revenues. Gas exploration was too expensive for us.

Today Nigerian oil fails, as does oil from around the world. With the impact of COVID-19, the cuts in OPEC, and the oil war between Saudi Arabia and Russia, oil prices have plummeted this year in a way that we have not seen in the recent past – and it has not even happened .

About three decades too late, in December 2019, the Minister of State for Petroleum Resources, Chief Timipre Sylva, declared 2020 the year of gas. For a country that had set itself a zero flare target for 2020 and committed itself to significantly reducing its emissions as part of its nationally defined contributions, a first public step by the government towards the energy transition five years after the Paris Agreement was unthinkable.

So while our colleagues are now actively working on scaling renewable energies and RE technologies for entire cities and states, we are struggling to supply our urban areas in Nigeria with electricity, with most rural areas completely disconnected from the electricity supply.

One can only wonder how all these years we have ignited a resource that could help us solve our energy problems. Unfortunately, we fail to use the sun’s energy, our wind capacity and our waste. We also seem not to be aware of the abundant and free resources to solve our energy problem.

We are on the edge of the abyss. And I think we are aware of that and that is why there are now hectic steps to get the gas sector going. They are undoubtedly impressive – the gas flare commercialization program (which unfortunately has not progressed as fast as it should), the Gas Network Code,

the starting shot for NLNG train seven, the flag-off of the 614 km long AKK pipeline, the construction of the Brass shipyard, the step to increase LPG production and use, the methanol policy, the agenda for CNG and LPG -Vehicles, the abolition of VAT on downstream gas recovery, etc. These are all commendable, but mostly reactionary.

We cannot make this mistake in the next stage of the energy transition – renewable energies. Indeed, there has been some government engagement in RE in recent months, but the population without energy is still large.

We can hardly wait for the market to be saturated with gas before we invest heavily in RE and strengthen the framework conditions for this. We need to crank gas and RE at the same time, side by side; Promotion of hybrids and the painful separation from oil with the aim of improving access to clean energy for all rural, semi-urban and urban areas.

Strong institutions and laws are just as important to the transition. The eagerly awaited PIB is still four months of the year. If we are to achieve sustainable development in Nigerian gas or renewable energies, we need to shorten the window of opportunity for law implementation and strengthen our institutions for energy policy.

Adebayo, a lawyer who works on the Templars energy and project team, wrote from Lagos.


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