Nigeria is oil rich and energy poor. It can’t wait around for cheaper batteries

At the same time, many poor countries that have so far contributed very little to global CO2 emissions are particularly vulnerable to rising temperatures and increased droughts, fires and floods linked to climate change, which threaten food security and exacerbate water scarcity.

Yet the average person in Nigeria emits less than 0.7 metric tons of carbon dioxide per year, according to the World Bank. That compares with the European Union’s 6.4 metric tons per capita and North America’s 15.3 metric tons.

“The biggest justice issue is that the countries that are the least developed are also the most vulnerable and have the least ability to adapt to climate impacts,” said Amal-Lee Amin, climate change director at CDC Group, Britain’s development finance institution.

If poor countries are asked to give up fossil fuel production, experts say their wealthy counterparts need to spend trillions of dollars to develop solutions that both spur economic development and protect the planet. If that doesn’t happen, the global poor may be left behind in the energy transition.

Nigerian President Muhammadu Buhari pledged to reach net zero emissions by 2060 on Tuesday, joining other large energy exporters including Saudi Arabia. But he also told COP26 attendees that Nigeria needs “adequate and sustained technical and financial support” to meet its goal.

Lagos on May 13 2020, shortly after the government eased coronavirus lockdown measures.

Untapped resources

Millions of Nigerians don’t have access to electricity. But the country’s government and economy depend on energy.

Nigeria is Africa’s biggest oil producer, with fossil fuels accounting for 60% of government revenue and 90% of foreign exchange earnings. The Petroleum Industry Act, which Buhari signed into law in August, envisions an even greater role for oil and gas in Nigeria’s economy.

“The intent [of the Act] is to really transform the industry for us to be able to attract the required investment into oil and gas,” explained Adewale Ajayi, a partner at KPMG in Lagos. That entails ramping up oil production to 4 million barrels per day, from 1.6 million barrels currently, and drawing on the country’s roughly 200 trillion cubic feet of gas reserves to provide much needed electricity.

“We have enormous reserves of gas in Nigeria and we need to be able to tap into those resources to develop the Nigerian economy,” Ajayi told CNN Business, adding that alongside power generation, gas will also be crucial to developing industries such as petrochemicals and fertilizers.

The law also lays the groundwork for developing oil refining capacity, which would allow Nigeria to stop importing virtually all of its fuel at an enormous cost.

Change can’t come quickly enough in a country where some 90 million people, or more than 40% of the population, don’t have access to electricity and more than 80 million live on less than $1 a day.

“Nigeria will soon, certainly before 2050, have a larger population than the United States, but it has less than 1% of America’s electricity generation capacity,” said Todd Moss, executive director of the Energy for Growth Hub, a nonprofit focused on energy for development based in Washington D.C.

Nigeria’s installed power generation capacity is about 13 gigawatts, but only about 4 or 5 gigawatts reaches end users due to breakdowns in transmission and distribution. By comparison, the United States has over 1,000 gigawatts of utliity-scale electricity generating capacity.

“Nigeria just needs a lot more energy,” added Moss.

Can’t afford to wait

Nigeria’s energy ambitions are coming up against a global drive by banks, pension funds and development finance institutions to limit or altogether halt investments into fossil fuels in line with net-zero emissions goals.

“They’re prioritizing global emissions over Africa’s development needs,” said Moss.

Across Sub-Saharan Africa, natural gas projects are “increasingly imperiled by a lack of development finance,” according to Nigeria’s Vice President Yemi Osinbajo.

“Efforts to restrict fossil fuel investments in Africa are even harder to stomach because many of the wealthy countries behind them — including Japan, the United Kingdom, and the United States — include natural gas in their own multidecade plans to transition to clean energy,” Osinbajo wrote recently in Foreign Affairs.
The world plans to produce far more fossil fuel than it should to stay under dangerous climate limits, UN says
The European Investment Bank will end financing for fossil fuel energy projects from the end of this year, with some exceptions for gas-fired power plants, while the World Bank, the biggest provider of climate finance to developing countries, is moving towards restricting its fossil fuel investments, according to Reuters.
CDC Group will no longer invest in most parts of the coal, oil and gas industries, according to its recent fossil fuel policy. CDC will consider investments into gas power where there are “large unmet energy needs” and if these are consistent with a pathway to net zero, according to Amin.

Moves by such institutions to restrict fossil fuel funding come despite the fact that the United Kingdom relies on gas for around two thirds of its electricity, while the European Union currently has €87 billion ($102 billion) worth of gas projects in the pipeline, according to a report by the Global Energy Monitor.

In the United States, natural gas makes up 40% of utility-scale electricity generation, with coal, nuclear and renewables contributing about 20% each, according to the US Energy Information Administration.
Solar panels on the rooftop of a street boutique in Lagos, Nigeria.

Like the United States, Europe and Britain, Nigeria sees a prominent role for renewable energy, notwithstanding its investments into gas power.

The government is targeting 32 gigawatts of on-grid power generation capacity by 2030, with renewables expected to contribute 43% and gas making up 41%. When off-grid capacity is included, gas and renewables will contribute roughly 30% each to planned power generation capacity of 45 gigawatts.

“In Nigeria, clean energy is central to our government’s plan to transition to net-zero emissions,” Osinbajo, the vice president, continued. “But our citizens cannot be forced to wait for battery prices to fall or new technologies to be created in order to have reliable energy and live modern, dignified lives.”

Sub-Saharan Africa is home to three quarters of the 760 million people globally without access to electricity, according to the World Bank, which expects that number to rise as a result of the pandemic. Less than half of the population has access to electricity in their homes.

In Nigeria, energy poverty is itself a major driver of emissions, according to Olu Verheijen, the founder of Lagos-based energy advisory business Latimer Energy. Given how scarce and unreliable existing supply is, many households and businesses rely on diesel generators for backup energy supply, while the lack of access to modern cooking technologies is a major driver of deforestation.

“If you’re siting on massive reserves of gas that have already been commercialized, it makes sense to extend that existing infrastructure to satisfy energy needs, diversify the economy and lift citizens out of poverty,” Verheijen said.

Young men work on generators at a workshop in Maiduguri in Nigeria's northeast.

Africa’s renewables potential

The Nigerian government’s Solar Power Naija initiative — which aims to deploy 5 million new solar-based connections by 2023 — highlights how difficult it is to scale renewable solutions quickly.

The program will expand energy access to 25 million individuals, delivering power to just 28% of Nigerians who don’t currently have access. And while a step in the right direction, solar panels on roofs are not necessarily adequate to power large industrial businesses, which require a great deal more electricity than what’s needed to switch on a light bulb or charge a cellphone.

Still, renewable technology is developing at lightning speed and this can only benefit Africa.

Mark Carrato, who coordinates the US Agency for International Development (USAID) Power Africa program, sees vast potential to deliver electricity to Africa in a climate smart way.

Since its launch in 2013, Power Africa has delivered electricity to over 118 million people on the continent, connecting 25 million homes and businesses to on and off-grid energy solutions. More than three quarters of the transactions it has closed are based on renewable technologies.

“In almost every case, project by project you see a renewables solution that is cheaper,” he told CNN Business.

Carrato argues that fossil fuels might provide short-term solutions to energy needs, but could end up taxing poorer countries in the long run through increased funding costs and the problem of “stranded assets,” in which infrastructure becomes obsolete as it is replaced by cleaner and cheaper renewable technologies.

“The cost of capital to do fossil fuels is only going to increase,” Carrato said.

Could this startup end Nigeria's reliance on generators?

On the other hand, the cost of renewable technologies is rapidly declining. According to the International Renewable Energy Agency, the cost of large, utility-scale solar projects decreased 82% between 2010 and 2019, while the cost of onshore wind fell by 40%.

The cost of…

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