Economic Issues
Understanding The Nigerian Decade Of Gas And Its Implications For National Economic Growth -By Oyetola Muyiwa Atoyebi & Love Ebekhile
Nigeria is blessed with abundant renewable energy such as hydroelectric, biomass, solar wind and many others, depending on fossil fuels is not enough to meet the energy needs of the country. The benefit of this transition provides a solution not only for climate change but for the benefit of the economy and society at large.
INTRODUCTION
The world is currently undergoing an energy transition in a bid to combat climate change, and its main driver is focused on a switch from fuel domination to renewable energy sources. Natural Gas appears to be the most suitable energy type for the move towards cleaner energy in Nigeria.[1] As a country, we are at the forefront of achieving this goal, as Nigeria has one of the largest natural gas reserves in the world. According to The Nigerian Midstream and Downstream Petroleum Regulatory Authority(NMPRA), as ofJanuary,1st 2022, the country’s natural gas reserves stood at 209.5 trillion cubic feet (TCF), with this statistic provided by NMPRA.[2]
Natural gas is a versatile clean burning hydrocarbon, which meets the demand for renewable energy sources. It has been projected to be the fastest growing fossil fuel in the world, and is projected to take over coal by 2030, as the second largest source of energy.[3] It fuels many industrial processes that produce materials and goods ranging from glass to clothing.
This article would be primarily focused on the decade of gas initiative and its impact on the Nigerian Economy.
THE NIGERIAN DECADE OF GAS
Currently as a nation, we aim at following a transition pathway that combines technology, business strategies and government policy that will enable Nigeria to transition from its current energy system to a low-carbon energy system with natural gas. On the 29th of March 2021, President Muhammadu Buhari launched the Decade of Gas initiative to leverage the nation’s gas reserves to become an exporter of gas and a major consuming nation[4]. This initiative provides a certain level of hope to the citizens, that Nigeria’s largely untapped natural gas resources could provide a means for the country to fund its way through the global energy transition.
The Nigerian government is embarking on different initiatives, projects and policies to enhance the performance of oil and Gas. From the foregoing, it is clear that the fuel sector through the promotion of natural gas usage, would be dominated thereby creating alternatives for Nigerians[5].
The enactment of The Petroleum Industry Act was designed to enable Nigeria derive more value from natural gas. At the 6th Gas Exporting Countries Forum Summit while addressing the public President Muhammadu Buhari said “the recent enactment of PIA was an Indication of the government’s commitment to derive more value from natural gas by providing the required governance, regulatory and fiscal framework to support the industry’s growth”[6].
The Petroleum Industry Act 2021, would be the primary legislation guiding the energy sector in Nigeria, and the enactment of this act would be a guide in ensuring compliance towards the decade of gas initiative to be achieved by 2023. This act provides for The Midstream and Downstream Gas Infrastructure fund, a fund designed to promote private sector investment in gas projects[7].
ENERGY TRANSITION IN NIGERIA
Countries around the world are undergoing an energy shift in a bid to combat climate change and achieve a zero-carbon emission target. The Nigerian energy transition is primarily focused on the use of Gas.
Energy transition refers to an ongoing shift from energy relying on fossil fuels with low-carbon energy sources. Energy transition historically speaking, is not new as we saw a shift from the use of wood to coal in the 19th century, and in the 20th century, there was a transition from coal to oil[8]. Nigeria has low levels of carbon emissions and it aims to reduce greenhouse gas emissions by 20% in the year 2030,by working closely with Oil and Gas companies[9]
Nigeria is blessed with abundant renewable energy such as hydroelectric, biomass, solar wind and many others, depending on fossil fuels is not enough to meet the energy needs of the country. The benefit of this transition provides a solution not only for climate change but for the benefit of the economy and society at large.
The Decade of gas energy transition would undoubtedly impact the Nigerian Gross Domestic Product(GDP), although this requires enormous investment to achieve energy efficiency, and accessibility. This investment leads to high demand exportation and demand within the country thereby having a positive effect on the country and global GDP at large. The transition towards clean energy will have a positive impact through the improvement of human health and access to energy[10]. This development would also aid industries in the production of goods with major reference to the Agricultural sector. This transition would lead to a cheaper means of accessing energy and food products since this is what powers most agricultural machines.
According to the ministry of Petroleum, Nigeria flares an excess of 700 million standard cubic feet(SCF) of gas per day from 178 flare sites, which results in the loss of approximately $10 billion of revenue, due to its inability to capture and commercialize gas flaring in the country. If this issue could be properly harnessed, it would be a step toward achieving the Decade of Gas initiative.
CONCLUSION
The current energy transition in Nigeria is aimed at encouraging the use of domestically produced natural gas for power production, which would lead to an increase in power supply to meet the country’s domestic needs for power.
The growth of our gas reserves is a critical lever to achieving the federal government’s decade of gas initiative, which is aimed at transforming Nigeria into a Gas- powered economy by 2030, and as such, the decade of gas initiative can be achieved if the government puts reasonable efforts to increase in the domestic utilisation of liquid purified Gas(LPG), Commercialising gas flares and developing industrial gas markets.[11]
AUTHOR: Oyetola Muyiwa Atoyebi, SAN, FCIArb. (UK).
Mr. Oyetola Muyiwa Atoyebi, SAN is the Managing Partner of O. M. Atoyebi, S.A.N & Partners (OMAPLEX Law Firm) where he also doubles as the Team Lead of the Firm’s Emerging Areas of Law Practice.
Mr. Atoyebi has expertise in and a vast knowledge of Energy and Environmental Law and this has seen him advise and represent his vast clientele in a myriad of high level transactions. He holds the honour of being the youngest lawyer in Nigeria’s history to be conferred with the rank of a Senior Advocate of Nigeria.
He can be reached at atoyebi@omaplex.com.ng
CONTRIBUTOR: Love Ebekhile.
Love is a member of the Corporate and Commercial Team at OMAPLEX Law Firm. She also holds commendable legal expertise in Energy Law and Transactions.
She can be reached at love.ebekhile@omaplex.com.ng.
[1]LanfreAfuye, “Implications of the VAT(Modification) order 2021 for LPG Producers in Nigeria
<https://www.mondaq.com/nigeria/sales-taxes-vat-gst/1139178/implications-of-the-vat-modification-order-2021-for-lpg-producers-in-nigeria > accessed 20th July 2022
[2] Nigeria’s Gas reserve hits 209.5 TCF-NMDPRA <https://businessday.ng/energy/oilandgas/article/nigerias-gas-reserve-hits-209-5-tcf-nmdpra/ > accessed 20th July 2022
[3] IEA “Natural Gas Information- Analysis” https://www.iea.org/reports/natural-gas-information-overview accessed 21st July 2022.
[4]Buhari announces “Decade of Gas” African Business <https://african.business/2021/04/energy-resources/buhari-announces-nigerias-decade-of-gas/> accessed 21st July 2022
[5] Doha, Qatar “GECF member Nigeria heralds ‘Decade of Gas’ to transform its future <https://editor.guardian.ng/news/fg-to-focus-more-on-natural-gas-exploitation-says-buhari/> accessed 21st July 2022
[6] NAN “FG to Focus more on Natural Gas exploitation, says Buhari” <https://editor.guardian.ng/news/fg-to-focus-more-on-natural-gas-exploitation-says-buhari/> accessed on 20th July 2022
[7] “Nigeria’s Energy Transition “ <https://www.ashurst.com/en/news-and-insights/legal-updates/nigerias-energy-transition/> accessed 20th July
[8] “The Energy transition” <https://www.enelgreenpower.com/learning-hub/energy-transition> accessed on 20th July 2022
[9] “Nigeria’s Energy Transition’ <https://www.ashurst.com/en/news-and-insights/legal-updates/nigerias-energy-transition/> accessed 21st July 2022
[10] LIISA OUNMAA “What are the socio-economic impacts of an energy transition?” <https://www.undp.org/eurasia/blog/what-are-socio-economic-impacts-energy-transition> accessed 21st July 2022
[11] SIMON ECHEWOFUN “ As Nigerians pay N171bn in 6 Months for Gas Imports, ‘’Decade of Gas “ Policy May suffer <https://www.dataphyte.com/latest-reports/energy/as-nigerians-pay-n171bn-in-6-months-for-gas-imports-decade-of-gas-policy-may-suffer/> accessed 21stjuly 2022.
