Nigeria is at the top of a list that no country would even want to appear on.
A 2021 report by the International Energy Agency (IEA), the International Renewable Energy Agency (IRENA), the United Nations and the World Health Organization identified 20 countries experiencing extreme energy poverty. Their combined populations “accounted for 75% of the world’s people lacking electricity access,” the report states.
And number one among them — the country with the most people lacking electricity — is Nigeria.
Approximately 86 million people, about half of all Nigerians, lack access to an electrical grid. That percentage is closer to three-quarters of the population in rural areas. The lack of access impacts Nigerians’ lighting, their cooking, their safety and health care — basically all elements of daily living. And that doesn’t even get into energy poverty’s detrimental impact on the Nigerian economy and overall stability.
However, recently, Nigerian President Bola Ahmed Tinubu appointed Senator Heineken Lokpobiri and Hon. Ekperikpe Ekpo, Ministers of State for Oil and Gas, respectively, and his administration is attempting to rectify this situation once and for all.
Earlier this summer, the Energy & Natural Resources subcommittees published a report entitled, “Enabling Growth in Nigeria’s Energy & Natural Resources Sectors: Sector Challenges and Proposed Sustainably.” The report looks at the oil and gas sector’s current realities and describes a path for strengthening it, harnessing oil and gas to grow and diversify Nigeria’s economy, transitioning to renewable energy, and yes, addressing energy poverty.
We at the African Energy Chamber (AEC) wholeheartedly back Nigeria in this endeavor. As a sovereign nation, Nigeria deserves the opportunity to determine the measures it believes will lift its own people out of poverty and must be encouraged to take those steps along its own path toward prosperity.
Challenges to Success
The subcommittees’ report opens with some harsh realities: Nigeria has significant challenges to overcome before the country can fully reap the benefits of its oil and gas sector. But the report goes on to provide strategies for overcoming those challenges. I respect this kind of transparency and the Tinubu administration’s determination to pursue solutions instead of leaning on excuses.
What kind of challenges does Nigeria face? To begin with, security continues to be a major challenge. In addition to asset integrity and reliability issues, theft and vandalization have caused substantial production losses and skyrocketing operational costs. In fact, the report estimates that from 2009 to 2020, crude oil theft cost Nigeria USD46.16 billion. The administration cites a complicated, misaligned regulatory framework and poor enforcement of the laws for macroeconomic instability, which perpetuates the cycles of energy poverty and socioeconomic poverty while the people suffer high unemployment and high inflation.
Meanwhile, governance and regulatory concerns — including excessive oil and gas industry fees, taxes, and levies — have caused investor confidence to plummet.
The results have been far-reaching: drastic declines in energy investments are hampering exploration and production. Decreased exports are threatening government revenues, and the private capital needed for the development of critical oil and gas infrastructure has sharply declined. In addition to its already-inadequate power transmission and distribution infrastructure, Nigeria is now facing significant oil and gas infrastructure decay. At the current rate of capital spending, the subcommittees predict that it will take 300 years to close the infrastructure gap. Clearly, this is not a pace that benefits anyone!
Each of these challenges is hefty on its own — bundled together, they are proving to be serious obstacles to the economic growth Nigeria’s energy sector could and should be driving. What’s worse, the Nigerian people are the ones who suffer because the infrastructure is unable to meet even the most basic requirements to improve their standard of living.
The Primary Objectives
To unlock Nigeria’s energy potential and bring it in line with the administration’s vision, the subcommittees have established ambitious targets. The first involves gaining a stronger foothold in the global marketplace. While Nigeria currently ranks as Africa’s largest oil producer (trading the title regularly with Angola), the Tinubu Administration vows to see the nation become a top-10 destination for energy investments worldwide.
Growing its base of domestic and international investors alike will not only enhance Nigeria’s energy industry but also expand all the supporting industries, promoting job growth and overall economic development. This is doable, particularly if the government creates an enabling regulatory environment. At the Chamber, we have seen the power of government policies that encourage investment and foster world-class talent for energy innovation.
The second target is to grow the economy through greater diversification. By fostering the development of other sectors, rather than simply continuing to rely almost exclusively on oil and gas, the administration hopes that by 2050, Nigeria’s GDP will expand eightfold, and unemployment will be capped at 8%.
At the same time, however, the administration will harness the ability of the energy sector to grow revenue by expanding the role that natural gas plays in the mix.
The Chamber wholeheartedly agrees that natural gas will be a vital element in the energy industry as Nigeria — and Africa — seeks to both expand its energy security and grow its green energy initiatives. We have been promoting the expansion of natural gas as a clean alternative, and we are eager to see how Nigeria’s efforts in this cause will bear fruit.
A third target is the achievement of net-zero emissions by 2060. As with its goal for increased economic diversification, the administration acknowledges that sustainability at such levels will require more reliance on natural gas while the country incorporates more renewables into the overall electricity mix.
This measure echoes what we at the chamber continue to accentuate: We encourage robust green initiatives, at a pace that serves Africa and her people. Nations must not be prevented from using their own abundant natural gas reserves to supplement green energy while they are developing their sustainable infrastructure because this won’t happen overnight.
A final, and vitally important, target revolves around energy insecurity. The administration is striving to eradicate energy poverty once and for all by driving access to clean, affordable, and abundant energy for all its people. The goal is to increase electricity consumption ninefold — to 1,000 kWh per capita — by 2050. Again, this goal will rely on increased production of natural gas, which will be monetized to generate capital for infrastructure and can be used for much-needed gas-powered plants.
We’re also seeing signs that the country has begun efforts to meet these goals. State oil firm the NNPC Limited, in partnership with China Mechanical Engineering Corp. and GE Vernova, started constructing a 1,350 MW gas-fired power plant near Abuja in early August.
The Gwagwalada Independent Power Plant will provide about 11% of Nigeria’s energy needs and will be built in three phases, with the first phase expected to be completed in 2024.
The goal of eradicating energy poverty resonates strongly for us at the Chamber. One of our greatest priorities is fostering initiatives that drive African economies toward greater prosperity and human dignity. And greater energy security is a main component of this campaign.
Intervention Succeeding Already
The administration has already begun to roll out other measures outlined in its report. In early June, for example, President Tinubu eliminated Nigeria’s popular but costly subsidy on fuel. While the subsidy had kept the price of gasoline (petrol) down since the 1970s, the government has been paying dearly for it — to the tune of, for example, USD10 billion in 2022. The administration deemed the subsidy — a factor leading to wider deficits and higher government debt — no longer economically viable. According to World Bank estimates, the elimination of the fuel subsidy could save the country upwards of USD5.10 billion this year alone.
The subcommittees wrote that this move “will help stabilize the economy by preventing the deficit from escalating and conserving limited foreign reserves to stabilize exchange rates.”
Incidentally, ending the subsidy has already led to the collapse of a black market in neighboring countries that relied on petrol smuggled from Nigeria.
We applaud President Tinubu’s efforts to drive Nigeria’s energy sector. We are encouraged by the successes so far in the infancy of his administration, and we look forward to seeing the further economic growth that his other measures will produce.