August 23, 2021

Nigeria’s oil and the energy transition

For DSO, a new life in a season of expectations

By Caleb Adebayo

AT the start of our national life as a country, oil was not the fulcrum of the economy. In fact, Nigerian history is replete with nostalgic stories of agricultural produce like palm kernel and groundnut being exported and accounting for more than 70 percent of the country’s Gross National Product, GNP.

We are told stories by aging parents about how our country was food sufficient and how the value of the naira evoked a sense of pride; how the government catered for their needs as undergraduate students and how jobs waited for them upon graduation.

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

Various scholars would later refer to this occurrence in history as “the resource curse”. Ironically, things did not get better with the Nigerian economy. Instead, it was a downward spiral. Soon we began to lose refineries and other means of production and became a rent-seeking state, exporting raw crude and importing refined products.

Looting of the treasury was a constant companion to this economic decline and entire oil blocs were awarded to political allies for no reason other than that it could be done.

As with a volatile commodity like oil, there came the oil shocks of 1986, 1991, 2001, 2009, 2011, 2014 and of course 2020. With these shocks came significant impact on economies, not excluding Nigeria’s.

Yet, the country was none the wiser after each episode, believing blindly that all was well, and that oil was an infinite resource. It was only in 1999 that Nigeria became serious about including produce from its gas reserves in the foreign exchange bucket and floated first production from the NLNG plant in Bonny. Still, the progress with gas was staggered, with gas flaring continuing unabated, aided by flaccid laws and nonexistent implementation.

And so, beyond the economic damage oil brought us, it upset livelihoods, shortened lifespans, rendered many homeless and wreaked environmental damage in several communities.

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Till date, the Ogoni oil spill is yet to be cleaned up – one of many. While countries like Norway, Canada and even Trinidad and Tobago – all countries with smaller amounts of proven gas reserves than Nigeria – began serious gas operations in the early ‘90s, Nigeria played the mule, focusing on the oil and equally looting its proceeds. For us, gas exploration was too expensive.

Today, Nigerian oil is failing, as is oil from across  the world. With the impact of COVID-19, the OPEC cuts and the Saudi-Russia oil war, oil prices took a hit this year in a form we had not seen in the recent past – and it’s even not done yet.

About three decades late, in December 2019, the Minister of State for Petroleum Resources, Chief Timipre Sylva, announced 2020 as the year of gas. For a country that had set a zero-flare target for 2020 and made commitments under its Nationally Determined Contributions to significantly reduce its emissions, a first public move from government at energy transitioning happening five years after the Paris Agreement was inconceivable.

So while our peers today actively look to scale renewable energy, RE, technologies for entire cities and states, we struggle to power even our urban areas in Nigeria, with most rural areas completely estranged from electricity supply.

One cannot but wonder how we flared a resource that could help us solve our power problems all these years. Sadly, we equally fail to harness the sun’s energy, our wind capabilities and our waste. We also seem oblivious of the ample and free resources for fixing our energy problem.

We are at the edge of the precipice. And I reckon we realise that, which is why there are now frantic moves to boost the gas sector. They are impressive, no doubt – the Gas Flare Commercialisation Programme (which unfortunately has not progressed as quickly as it should), the Gas Network Code,

the NLNG Train seven kick-off, the flag-off of the 614km AKK pipeline, the Brass shipyard construction, the move to boost LPG production and use, the methanol policy, the agenda for CNG and Autogas vehicles, the VAT removal on downstream gas utilisation etc. These are all commendable, but mostly reactionary.

We must not make that mistake with the next stage of the transition- renewable energy. Indeed, there has been some increased commitment from government over the last few months in RE, but the unenergised population still looms large.

We cannot wait for gas to saturate the market before we heavily invest in and strengthen the framework for RE. We need to boost gas and RE all at once, side by side; encourage hybrids and make the painful separation from oil with an aim to boost clean energy access for all- rural, semi-urban, urban.

Strong institutions and laws are equally vital to the transition. The much anticipated PIB is yet to make an appearance with only four months left in the year. If any lasting development is to be made in Nigerian gas or RE, we must shorten the window for churning out legislations and strengthen our energy governance institutions.

Adebayo, a lawyer working on the energy and projects team at Templars, wrote from Lagos.