Soon, no one may buy Nigeria’s crude oil. Not even India
The accelerating pace of global energy transition is biting harder, posing further threat to Nigeria’s oil revenue as a foray of big players in India’s fossil-fuel industry are turning over a ‘green’ leaf, indicating uptake of Nigerian crude would diminish in the near future.
India, the largest buyer of Nigeria’s crude oil, is showing signs it could be one of the largest benefactors of a movement that could boost renewables in the Asian country.
This development is significant for Africa’s biggest economy because India represents the largest importer of Nigeria’s crude oil, earning the sub-Saharan country about N13.9 trillion since 2015, according to data gathered by BusinessDay.
Major players in India’s fossil-fuel industry are intensifying plans for green energy, signaling the importance of the renewable sector, and focusing on rapid energy transition.
Investors in conventional India’s energy industry had $6.6 billion for the renewables sector in the first four months of 2021, which could easily overtake the record of $8.4 billion in 2020, according to the Institute for Energy Economics and Financial Analysis (IEEFA).
Mukesh Ambani, the chairman of Reliance Industries Limited (RIL), while speaking at the company’s 44th annual general meeting, announced a new green energy business, stating that the age of fossil fuels cannot continue much longer.
He advocated for a “rapid transition to a new era of green, clean and renewable energy.”
Ambani, whose energy business till now has revolved around oil and gas, announced a massive $10.2 million investment in the clean energy sector over the next three years to ride the energy transition wave.
He also announced the setting up of 100GW of solar power generating capacity by 2030.
India’s other major energy player, Adani Green Energy of the Adani Group, announced a buyout of SoftBank Group’s renewable energy power business, which has almost 5GW of solar and wind power assets.
Other factors driving the increase in renewables investments in India include the government’s announcement that it plans to redouble its efforts in renewable energy to secure energy supply and self-reliance.
Corporates in India have also shifted their focus to clean energy to decarbonise their operations.
In addition, the lending portfolios of Indian financial institutions like State Bank of India (SBI) and Power Finance Corporation (PFC) now include more renewable energy assets than fossil fuels, a trend that has picked up significantly in the last one to two years, according to the note.
Apart from India, other biggest consumers of Nigeria’s crude oil such as Spain, Netherlands, and France are no longer considering petrol as a priority, thanks to an ambitious European Union plan to speed up the switch to zero-emission electric vehicles (EVs) as part of a broad package of measures to combat global warming.
This development is already affecting Africa’s biggest oil producing country; as much as two-thirds of Nigeria’s crude for October export are yet to find buyers, according to traders specializing in the West African market.
A major reason for this is because Indian Oil Corporation, Asia’s biggest buyer of Nigerian crude, has disappointed the market, buying only 3 million barrels of Nigerian oil in three weeks. The IOC typically bought as much as 20 million barrels of West African crude per month before the COVID-19 pandemic.
While other countries are investing in life after crude oil, Africa’s largest economy is tottering on the brinks, and the situation appears not to be getting any better as lack of jobs, failing healthcare, bad roads, insecurity in various parts of the country and an epileptic power supply continues to worsen.
“Relevance of oil is waning and Nigeria seems docile,” Luqman Agboola, head of research at Sofidam Capital, said, saying, “Having oil as a major source of revenue when your major buyers are looking for alternatives will lead to a dead end.”
An unprepared life beyond crude oil could be catastrophic for Nigeria where more than 80 million people already live on less than $1 a day.
“Nigeria is so calm and confident when its oil wealth is facing an existential risk,” Wummi Iledare, Ghana National Petroleum Corporation’s chair of Petroleum Economics at Institute of Oil and Gas Studies, IOGS, in the University of Cape Coast, said in a phone interview.