Nigeria’s energy transition shows distinct gaps, lacks readiness framework – report

• Requires‭ $‬177bn funding to 2030
• $122bn for power generation

Nigeria’s energy transition plan (NETP) with a 2060 target could be really challenged by the need for a clear development policy approach. Early distinct gaps noticeable in the NETP programme include: lack of holistic legal framework; no incentives for transition to clean energy; absence of disincentives for use of dirty energy; and centralisation of energy provision in Nigeria, according to a report by the Nigerian Economic Summit Group (NESG).

The federal government, though, had only this year enacted the energy decentralisation law.

If properly administered, Nigeria stands to gain from energy transition, which will offer an excellent opportunity to address its energy poverty by leveraging abundant renewable energy sources. Though in the short to medium-term, the country will lose significant revenues because of its over-dependence on fossil fuels. However, the NETP projects 340,000 jobs to be created in 2030 and 840,000 by 2060.

Potential effects of energy transition

The required funding of the NETP is huge. According to the 2021 Nationally Determined Contribution (NDC) update, which is a commitment by national governments on meeting the net-zero emissions by 2050, the Nigerian government would need $177 billion covering the implementation period 2021-2030, enabling the country to deliver the conditional NDC target.

About $122 billion of the amount will be channelled towards investments in the electricity generation sector, which is considered a development priority for the government. According to the NESG 2023 report, it is essential that this investment is made within 10 years of the report — that is 2033. Furthermore, significant additional investments are needed in energy efficiency, in transport, agriculture and oil and gas, and Nigeria’s ability to meet its 27 percent NDC commitment.

The NETP projects that it would need $10 billion in new investments annually from 2023 to 2060, totalling about $1.9 trillion by Net Zero in 2060. The country is currently ill-placed economically and financially and in terms of proactive and responsive policy to this end.

“Certainly, Nigeria does not have much money, and will be unable to make these all-important investments without the support of domestic and international commercial investors, development partners, both bilateral and multilateral, and the support of the government of the advanced economies,” the NESG report made available to Business A.M. indicates.

Moreover, Nigeria’s infrastructure base is abysmally weak and inadequate. A World Bank report said more than 80 percent of Nigerian businesses identified electricity-related challenges as the most significant obstacle to doing business in the country. As a result, more than $25 billion is lost in the economy annually due to power challenges. In December 2022, the federal ministry of finance said the country would require some $150 billion annually for the next 10 years to solve the country’s infrastructure deficit and other challenges identified by World Bank reports of 2019, 2020 and 2021.

Regarding the state of the country’s readiness to transit, the report said that Nigeria appears extremely not yet placed on any of the frameworks for readiness.

For instance, transition readiness looks at a country’s social, economic, political, and regulatory environment to see the extent to which they promote or support energy transition; and the preparedness for renewable energy systems. It consists of six enabling dimensions that could assist a country in deciding or determining whether it is ready or capable of making the transition effective. These are: energy system structure; human capital and consumer participation; infrastructure and innovative business environment; capital and investment; institutions and governance; and regulation and political commitment.

The NESG report titled: “Regulating Energy Transition in Nigeria: Articulating a Development Policy Approach”, therefore, recommends that Nigeria “should harmonise relevant Plans and Strategies into a coherent policy document and framework that is a workable, comprehensive, inclusive, and top-down policy framework, containing strategies and milestones for the country’s energy transition agenda”.

In addition, the report said Nigeria’s energy transition policy “has to identify and outline strategies for implementing the transition readiness, enabling dimensions and the strategic performance indicators (SPI) as enunciated in the World Economic Forum (WEF) documents”.

“It should reduce dependency on foreign technologies; cultivate the private sector into the strategies adopted, as is done by developed economies; deliberate steps must be taken to ensure that changes in political leadership or administrators of public institutions do not lead to a shift in focus away from the objectives; a shift in lifestyle adjustment like construction, housing, transport system and consumption of tech goods.

“Also, energy transition policy, strategies, and plans must be rooted in the relevant data guiding policy formulation, policy direction, and implementation strategies and plans. For instance, there is a need to have accurate and current data on GHG emissions by sectors, businesses, and domestic uses,” the NESG report stated.

The NESG report warns that Nigeria and other resource-rich developing countries need to take firm policy and principled positions regarding how, when, and the pace at which each country can pursue energy transition, with regard to the national interest and national priorities, particularly in energy access, growth, and economic development.

Just energy transition – Africa and Nigeria

On the matter of just energy transition, which indicates a shift to a clean energy mix in an inclusive manner without impoverishing others, the report stated that the discussion on a just energy transition has been accepted as the primary and most important approach to addressing climate change. “For many African countries, the discussion on just energy transition is not a politico-economic one, but one of survival,” the NESG report said.

With an abundance of oil and gas in many African countries and the significant contribution of oil and gas to the economy of these countries, demanding a transition to clean energy may imply economic woes and instability, the report noted.

Representing Nigeria as the minister of state for the environment at COP26 in Glasgow in 2021, Sharon Ikeazor told a cable network journalist that Nigeria’s energy transition programme was on course, describing rather vaguely Nigeria’s energy transition pathway as one that would depend on natural gas. She was looking at 2060 to make the much needed transition just when the major global drivers of technologies are looking at 2030 to 2035 to overhaul the energy system.

On emission reduction and social adjustments, the report said Nigeria’s energy transition should target emissions reduction, particularly from sources where cuts can easily be made without significant impacts on national development objectives, noting that gas flare out is key in this case.

It noted that other requirements are: lifestyle adjustments, which include encouraging clean energy usage, discouraging use of dirty energy; social transformation geared towards protecting the environment; technological adoption which indicates committing considerable investment in low-carbon technologies like hydrogen, carbon capture, utilisation and storage (CCUS).

The NESG report, therefore, advised Nigeria to invest in research and development (R&D) of low-carbon or new technologies, adding that the country must also adopt national strategy to local solutions such as implementing the NDC by adopting local solutions.