Nigeria coal revival: Against global tides of cleaner energy

Nigeria has begun to retrace its steps to revive the fallow laying coal segment of its solid mineral reserves, yet, she appears to be working against the tides with the drive towards cleaner renewable energy sweeping across the globe.

Different from its N1.3 billion budgetary provision for the solid mineral sector in 2017, the President Muhammadu Buhari’s administration in a renewed commitment said it had prepared N30 billion to fund activities, including exploration, retooling and capacity building, among others, in its 2018 budget of consolidation.

Its mostly sub-bituminous coal, remarkable for power generation, is pegged at about three billion tonnes of indicative reserves in 17 identified fields and over 600 million tonnes of proven reserves, according to the Ministry of Mines and Steel Development.

Among the plethora of applications, such as steel production, cement manufacturing or liquid fuel, the country still primarily pursues electricity generation. It is believed that Nigeria has the capacity for up to four coal-fired power plants in Kogi, Benue, Enugu and Gombe states, producing about 20,000 megawatts.

“We need to pursue the cheapest source of electricity which is coal. We must do what industrialized nations do in order to industrialize, which is uninterrupted power supply. Nigerians are industrious by nature, what has been holding us down is lack of electricity,” said Rabi Sodangi, acting director general and chief executive of the National Steel Raw Materials Exploration Agency (NSRMEA), in a monitored report.

She said exploration must be intensified to quantify and determine the quality of all the mining fields to feed the power plants, stressing that investors should be supported and compelled to complete the exploration in order to attract major miners to produce the coal.

However, such optimism faces a grim future with the country’s energy mix already dominated by hydro and gas and global consumption in dire strait of long-term structural decline as consuming regions are increasingly leaning towards renewable energy initiatives.

The World Bank report on commodity markets outlook tied the development to both economic and policy reasons, saying examples of countries like the United States have experienced huge divestment in coal supply because low-priced natural gas has reduced coal usage in power generation.

Acclaimed top consumer, China, is also investing in cleaner energy sources, reforming its electricity sector to reduce inefficient production, and reducing the energy intensity of its economy at the expense of coal.

Coal prices rose 4 percent in the first quarter, following a surge of 34 percent in 2017, mainly due to strong consumption in China spurred by cold weather, low inventories and production constraints.

In early February, the Chinese government capped the coal import price at around $118 per metric tonne to encourage domestic production and curtail coal imports. Coal prices have since declined as the boost from winter demand has waned.

Meanwhile, several European countries plan to end coal consumption over the next decade, and India is seeking to reach peak coal consumption over the same period.

The bank projected that coal prices will average $85 per metric tonne in 2018, a slight shift from 2017, as inventories are replenished and consumption is curtailed.

China, which accounts for over half of global coal consumption, is expected to be a key driver of coal prices in the seaborne market, as it reforms its energy sector away from coal toward cleaner burning fuels.

Against this backdrop however, private investments continue to brew in Nigeria’s local mining to cut knee-jerking cost of gas supply.

The big fishes, Dangote Group and BUA Group have made forays into the sector, diverting billions expended on export to local mining. Two years ago, the Dangote Group invested $160 million in two coal mines in the Ankpa area of Kogi state, which have become operational.

Attributing its switch also to acute gas shortage, the company said many of its production lines were now capable of running entirely on coal, hoping that this development would eliminate the company’s dependence on gas supplies, importation of coal and more significantly, LPFO.

According to a leading operator, Eta Zuma West Africa Limited, ongoing exploration was saving the country about $200 million on coal importation as production hovers around the region of 200,000 tonnes monthly. Innocent Ezuma, its group executive chairman said the reason global operators in the sector have shunned Nigeria remains the dearth of geological data.

“The major operators or world players in the mining sector are interested in going to countries where there are scientific data on a particular mineral of interest. In Nigeria today, you cannot say that we have relevant data. Exploration of mineral resources is still at its infantry. So, I think that the government should encourage companies like ours, Eta Zuma Group West Africa Limited, that are totally committed to conducting exploration activities with all the state-of-the-art equipment,” he said.

Other experts have said that Nigeria’s solid mineral sector in general is capable of generating over N10 trillion from export, providing five million jobs and contributing over 20 percent to gross domestic products (GDP), if properly harnessed.

The Lagos Chamber of Commerce and Industry (LCCI), Mining and Solid Minerals Group in Lagos in March criticised the sectors’ roadmap, saying it should be revised to make explicit and clear provision for accountability and transparency in the industry.

According to them, lack of accountability and transparency in the industry could lead to loss of government revenue to business operators and regulatory bodies.

The chamber said there was need for the Federal Government to remove all obstacles to easy access of the N30 billion intervention fund for the development of the mining sector.

Earlier, the government had warned that coal mining licences would only be issued to companies that were interested in generating electricity from coal. Kayode Fayemi, the minister of Mines and Steel Development said: “As far as we are concerned in the Ministry of Mines and Steel, the process is easy. Once application is filed and is not encumbered by any other issue, legal or existing to the holder of the licence, the licence is issued but it must be for power generation.”

The fourth quarter of 2017 saw the mining and quarrying sector, comprising crude petroleum and natural gas, coal mining, metal ore exhibited a nominal growth of 32.57 percent, year on year. The sectors contributed 8.30 percent to overall GDP in the fourth quarter of 2017, higher than the contributions recorded in 2016 fourth quarter at 6.70 percent and annual contribution of 9.22 percent from 5.39 percent in 2016.