Access to energy financing and market demand level will determine both the direction and success of Nigeria’s energy transition journey, experts say.
Zainab Animashaun, a senior analyst at Control Risks, said there have been efforts by the country to move in the direction of accelerating its energy transition plans and renewed interest in oil and gas exploration.
In a presentation at the seventh edition of the Africa Risk-Reward Index event on Wednesday, hosted virtually by Control Risks and Oxford Economics Africa, she said the Nigerian government was not prepared just yet to jettison its vast oil and gas resources to focus on just clean energy on account of its reality including poor energy access and its record of low emissions.
According to her, the Nigerian government is juggling net zero commitments by 2060 and the current economic realities of being a hydrocarbon-reliant economy.
She said: “On one hand, the government, like many others across the world, has made commitments to reach net zero by 2060. And it recently released a very ambitious energy transition plan that maps out how it’s able to move from oil to gas and then to cleaner fuel sources over that period.
“But, on the other hand, we’ve also seen the government try to balance those climate ambitions, with its current economic realities of being a hydrocarbon-reliant economy. So what that means is that its annual national budget is benchmarked on the amount of crude oil that the country sells and this is a period of increased global demand for oil and gas.”
She reiterated that the determinants of these two directions will be access to energy financing and market demand levels.
“In terms of energy financing, you’re seeing fossil fuels like oil and gas providing the government resources to address its short to medium term financing challenges. Through the transatlantic gas pipeline and the Nigeria-Morocco gas pipeline, Nigeria’s shift to gas also provides opportunities,” she said.
Animashaun said getting funds for the country’s energy mix poses a challenge as Nigeria is having issues around investment.
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“Where the fund will come from is not necessarily clear at this point in time considering Nigeria’s sovereign constraints and we’re seeing divestment with major international oil companies moving into renewables.”
In August, the federal government, through the office of the minister of finance, said it needed $1.9 trillion to achieve its energy transition plan.
Vice-President Yemi Osinbajo, during the launch of the plan, said the country would need to spend $410 billion above business-as-usual spending to deliver Nigeria’s Transition Plan by 2060, which translates to about $10 billion per year.
He said: “Africa’s increasing energy gaps require collaboration to take ownership of the continent’s transition pathways and the action should be decisive and urgent.
“For Africa, the problem of energy poverty is as important as our climate ambitions. Energy use is crucial for almost every conceivable aspect of development. Wealth, health, nutrition, water, infrastructure, education, and life expectancy are significantly related to the consumption of energy per capita.”
Osinbajo said the plan could create about 340,000 jobs by 2030 and 840,000 by 2060.
“It also presents a unique opportunity to deliver a true low-carbon and rapid development model in Africa’s largest economy,” he said.
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