Nigeria faces a dire future as a fossil fuel economy

By Olu Fasan

TWO recent developments firmly establish Nigeria’s future as a fossil fuel economy. One is the newly-passed Petroleum Industry Bill, PIB, under which 30 per cent of profits accruing to the Nigerian National Petroleum Corporation, NNPC, would be used for further oil exploration.

The other is the Federal Government’s decision to acquire, through NNPC, 20 per cent equity, costing over $4billion, in Dangote Refinery, owned by Aliko Dangote, reputedly Africa’s richest man!   

The Federal Government trumpets both developments as being in the national interest, despite being deeply divisive and controversial. For instance, the Southern Governors, more or less, tore the PIB into pieces at their recent Lagos meeting. Yet, the Presidency exulted, saying: “Jinx broken”, referring to the bill’s over 20 years’ gestation at the National Assembly. As for the plan to invest huge public funds, largely borrowed, to acquire 20 per cent in Dangote Refinery, the NNPC said the aim was to guarantee energy security. 

My focus here is not on the political controversies around the decisions. Rather, it’s on the direction that the developments would set for Nigeria. Truth is, the passage of the PIB and the decision to invest public funds in Dangote Refinery position NNPC, which would be incorporated and wholly-owned by the Federal Government, as the main institutional driver of the Nigerian economy. Thus, Nigeria’s growth model is based on a hydrocarbon-led economy, while its energy generation is tied to fossil fuels – oil, gas and coal.

But while Nigeria is excited about deepening the role of hydrocarbons in its economy, virtually all the developed nations and a growing number of developing countries are moving in the opposite direction. They are accelerating progress towards renewable energy generation and net zero carbon. By contrast, Nigeria is doing absolutely nothing to prepare itself for a post-fossil fuel economy. Rather, it harbours the great delusion that it can prosper as a hydrocarbon-led economy in defiance of the global shift away from fossil fuels. 

This was the theme two weeks ago, on June 25, when I was a virtual guest of two bright Nigerians: Bankole Oloruntoba, Managing Director and Chief Executive Officer of the Nigeria Climate Innovation Centre, NCIC, and Emmanuel Etaderhi, Executive Secretary of the Financial Centre for Sustainability Lagos, FC4SLagos.

They invited me as guest speaker at their organisations’ webinar termed: “Fireside Chat with Prof. Olu Fasan”. I spoke on Nigeria’s energy and climate change policies, drawing on my experiences in the UK, where I taught at the London School of Economics, and advised the UK Government, on the policies. 

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Now, I have long argued that Nigeria pays lip service to tackling climate change and embracing renewable energy generation. Over five years ago, in an article titled “On the global climate deal and Nigeria’s pledged actions” (BusinessDay, December 21, 2015), I questioned why President Muhammadu Buhari attended the Paris Climate Conference with a large entourage when Nigeria’s Nationally Determined Contribution, NDC, which sets out how much a country would reduce their emissions, was so miniscule: a pledge to unconditionally cut emissions by 20 per cent by 2030!

So, when I was asked at the webinar whether Nigeria was serious about tackling climate change, about embracing renewable energy, my answer was an emphatic NO! What about Nigeria’s “interim updated” NDC, submitted to the United Nations on May 27 this year: Was it ambitious enough? Again, my answer was an emphatic NO! 

In its first NDC, Nigeria made several commitments, including ending gas flaring and ramping up the rollout of solar energy production; indeed, Nigeria said it would “work towards” installing 13,000 MW of solar power. So, what has happened to date?

Gas flaring continues almost unabated, and solar or any other renewable source is hardly in use. Put bluntly, Nigeria’s climate change and renewable energy commitments are worthless, which is why, according to the International Energy Agency, IEA, greenhouse house emissions from fossil fuel production and use in Nigeria increased by 16 per cent since 2015. 

But why? Well, the answer is simple: Nigeria is hooked on fossil fuels. With an estimated 5.3 trillion cubic metres of natural gas reserves, an estimated 37 billion barrels of untapped crude oil reserves and an estimated 379 million short tonnes of coal reserves, Nigeria refuses to wean itself off dependence on hydrocarbons. Thus, every effort is made to incentivise and subsidise fossil fuel production and use. But hardly any effort is made to encourage renewable energy generation.

Indeed, the tendency is to disincentivise the use of renewables. For instance, in a recent editorial, this newspaper pointed out that the Nigerian Customs Service arbitrarily imposed a five per cent duty and five per cent VAT on solar panels coming into Nigeria, and that batteries needed for storage of solar energy “are suffering a 20 per cent duty”.

Yet, Nigeria would spend 30 per cent of NNPC’s profits on further oil exploration and wants to invest over $4billion to buy shares in Dangote Refinery to “guarantee energy security”. 

But Nigeria cannot solve its twin problems of acute electricity shortage and vulnerability to climate change by burning fossil fuels. Rather, the country must align its energy and climate change policies, with the energy policy aimed at guaranteeing energy security but doing so through renewable and other low-carbon sources. Anything short of that is a dead end!

Yet, Nigeria faces even greater challenges. Recently, Vice President Yemi Osinbajo expressed concerns about the rich countries’ pledge to stop funding fossil fuel projects overseas. He wants the Forum of Gas Exporting Countries, GEC, to lobby against the defunding.

But that’s a lost battle because defunding hydrocarbon projects overseas is part of the developed world’s net zero agenda, so defunding will continue. Even worse, as the developed world shifts to electric cars and other clean-energy products, demands for fossil fuels will fall significantly, leaving Nigeria’s hydrocarbon-led economy deeply fragile. 

Put simply: It’s utterly short-sighted to be deepening Nigeria’s fossil-fuel dependency just as the world is turning to net zero carbon! 

Vanguard News Nigeria

Author: Pascal