• Monday, July 22, 2024
businessday logo

BusinessDay

Nigeria has an energy transition plan, but what does the world think of it?

Time to collaborate on a workable energy mix for Africa

Last week, Vice President Yemi Osinbajo led a Nigerian team to Washington, USA, in the hope of persuading a skeptical world to support the country’s energy transition plan.

He met with US government senior officials as well as chiefs from the World Bank. As if to remind the Nigerian vice president how tough it would be for others to buy into the plan, the World Bank Group president, David Malpass, called the attention of the vice president to what is easily Nigeria’s biggest challenge at the moment – the failure of the country’s government to deal with the twin issues of a regressive fuel subsidy and the shame of a multiple exchange rate regime that creates massive arbitrage opportunities for the well-connected in Nigeria.

Nigeria does not stand on a good moral ground in its so-called energy transition plan. Unlike many other poor countries in the world, Nigeria has pumped out more than 2 million barrels per day (mbpd) of oil into the world for decades and it cannot say now that it is a victim.

In truth, Nigeria can do well by listening to the statement of Macky Sall, president of Senegal and chair of the African Union, who once said, “We will not accept that polluting countries responsible for the situation of the planet tell us that we are no longer going to finance fossil fuels.”

Many say by tackling these two problems, Nigeria would significantly improve it business environment and attract significant foreign direct investment while reducing inflation.

According to David Piling of the Financial Times, “Sall’s argument, increasingly familiar among leaders of poorer states sitting on large oil or gas reserves, is essentially that countries left behind by the rapid industrialisation of the richer world must be allowed to exploit their fossil fuels. To tell them not to, or to deny them financing, is humbug.”

Piling writes that Africa’s 54 countries, with about a fifth of the world’s population, are responsible for 2 to 3 percent of cumulative carbon emissions from energy and industrial sources, according to the World Resources Institute. That drops even lower if coal-intensive South Africa is excluded.

Read also: Global oil markets jittery as Chinese tech hub returns to lockdown

Poor countries in Africa and elsewhere have missed out on the magic of the fossil fuel-fuelled industrial revolution that, one by one, has conjured rich countries from poor ones. And though poorer nations have contributed virtually nothing to the climate crisis, they will be among the worst affected by changing weather patterns. Now they are being told they have missed the boat.

Piling says, “African leaders are rightly calling time on this hypocrisy. Rich countries got the world into a climate mess, they say, and it is their job to get the world out of it.”

Poor African countries including Nigeria insist that the rich nations of the West must also pay for technology to help countries transition to new forms of energy, such as hydrogen, and new mitigation efforts such as carbon capture. After all, rich countries have been shovelling coal and guzzling oil for decades.

However, according to Piling, “this argument is sound as far as it goes. But it cannot go entirely unchallenged. Yemi Osinbajo, Nigeria’s vice-president and another forceful proponent of the “it’s our turn to pollute” argument, has pointed out that nearly half of Nigeria’s 210 million people have no access to electricity.

“The country still has a nominal per capita income of only $2,400 and a life expectancy of 55. Nigeria needs more time, he says, to use its oil and gas to bring light and prosperity to its people.

“But Nigeria has had 60 years to do precisely that. It began serious oil production in 1960 and has been producing 2 million barrels per day or thereabouts for decades. Almost all of that oil, however, was exported to rich countries, which burnt it and benefited as a result. The lion’s share of profits — rent, as economists call it — went to Nigerian elites who controlled access to the resources and the multinational oil companies that persuaded them to part with it. The same goes for other oil-producing countries whose governments have failed to transform oil into prosperity. Angola, with 32million people but similar reserves, has squandered even more oil wealth per capita than Nigeria — no mean feat.”

James Mwangi, executive director of the Dalberg Group says, “For all the talk that exporting energy is going to make us rich, I refer you to Equatorial Guinea,” and he points us to another country whose ruling class has lined its pockets while most of its people remain poor.

Mwangi argues that poor countries can do much more to cash in on opportunities thrown up by the global push towards net zero. “For the just transition argument to land,” says Piling, “countries such as Nigeria must change what they use hydrocarbons for. Instead of flaring gas, as they have done in enormous quantities for decades, they need to pipe it ashore and transform it into power for homes and industry. Aliko Dangote, Nigeria’s top businessman, has finally opened a plant on the outskirts of Lagos to transform gas into fertiliser — it’s a no-brainer and ought to have been done decades ago. If countries argue for a just transition, it needs to benefit the majority of their people through electricity, power and industrial transformation. Anything else is just hot air.”

Not long ago, the same Piling wrote of his experience on a flight to Nigeria. “On the British Airways flight between London and Nigeria’s administrative capital of Abuja, one of the airline’s most profitable routes, nearly all the space is taken up with flatbeds. The unfortunate few making their way to a crunched economy section at the back must trudge through row after row of business class.

Evidently, there is plenty of money to be made in Abuja’s corridors of power. Nigeria’s economy may be flat on its back, but the political elite flying to and from London will spend the flight flat on theirs, too. Next year, many of the members of government will change, though not necessarily the bureaucracy behind it.

Campaigning has already begun for presidential elections that in February 2023, which will draw the curtain on eight years of the administration of Muhammadu Buhari, on whose somnolent watch Nigeria has sleepwalked closer to disaster. Buhari has overseen two terms of economic slump, rising debt and a calamitous increase in kidnapping and banditry — the one thing you might have thought a former general could control.”