• Monday, February 26, 2024
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A look at Nigeria’s transition to a clean energy economy

Cross River partners CYNK, Bridge Synergy on sustainable clean energy

Nigeria, the most populous country in Africa, stands as an economic powerhouse with a dynamic and evolving energy landscape. Historically, the nation has heavily relied on fossil fuels, particularly oil, as the backbone of its energy production. As one of the top oil producers in Africa, Nigeria’s energy sector has played an important role in its economic growth. However, this heavy dependence on fossil fuels has not only led to environmental degradation but has also made the country vulnerable to fluctuations in global oil prices. The demand for energy in Nigeria continues to rise, driven by a growing population, urbanization, and industrialization. To address these challenges and sustain its development, Nigeria is now facing the pressing need to transition to cleaner and more sustainable energy sources.

The importance of transitioning to clean energy in Nigeria cannot be overemphasized. Fossil fuel dependence not only contributes to harmful environmental impacts such as air pollution and climate change but also poses significant economic and security risks. Nigeria’s overreliance on oil exports makes its economy highly susceptible to global oil price fluctuations, as seen in the past, which can destabilize the country’s financial stability. Moreover, the environmental consequences of fossil fuel usage, including air pollution and deforestation, negatively affect the health and well-being of its citizens. Clean energy sources, on the other hand, offer a more sustainable and environmentally friendly solution to meet the nation’s growing energy needs. By diversifying its energy mix to include renewable sources like solar, wind and hydroelectric power, Nigeria can reduce its carbon footprint, improve energy security, and stimulate job creation in the renewable energy sector.

This article aims to explore the urgent need for Nigeria to transition to clean energy sources and several potential benefits associated with such transition.

Current energy situation in Nigeria

Nigeria is the largest economy in sub-Saharan Africa, but its energy sector is struggling to meet the needs of its rapidly growing population. The country is heavily dependent on fossil fuels, with oil and gas accounting for about 90% of total energy consumption(World Bank, 2021). This dependency is due to several factors, including the abundance of oil and gas resources in Nigeria and the relatively low cost of fossil fuels.

Indeed, Nigeria’s reliance on fossil fuels has led to several challenges, including limited access to electricity, unreliable power supply, and high cost of energy. Only about 45% of Nigerians reportedly have access to electricity, and even those who are connected to the grid often experience unsteady power supply. The cost of energy is also relatively high in Nigeria, due to a combination of factors, including the country’s reliance on imported oil and gas, the high cost of generating electricity and the inefficiency and financial crisis plaguing the power sector.

These challenges with energy supply have a significant impact on the Nigerian economy. They hamper economic growth by making it difficult for businesses to operate efficiently. They also lead to lower living standards for Nigerians, as they make it difficult to access basic services such as healthcare. In addition to the economic and social challenges, Nigeria’s dependency on fossil fuels also has several negative environmental consequences. The burning of fossil fuels releases greenhouse gases, which contribute to climate change. Fossil fuels are also a major source of air pollution, which can cause respiratory problems and other health issues.

The Nigerian government is aware of the challenges facing the energy sector and is taking steps to address them. The government has launched several initiatives to promote renewable energy, improve energy efficiency, and reform the power sector, as we will highlight in the following paragraphs, however, more needs to be done to reduce Nigeria’s dependency on fossil fuels and transition to a more sustainable energy future.

Read also: Changing the face of the energy sector: Gender parity and inclusion

Opportunities for clean energy

Nigeria is endowed with abundant clean energy resources, including solar, wind, hydropower and biomass. These resources offer significant opportunities for the country to develop a more sustainable energy future.

Solar: Solar energy is one of the most promising renewable energy sources due to its apparent “limitless” potential. Due to the high irradiation in Nigeria, research has shown that if 1% of the land mass in Nigeria (920 km2) is covered with solar PV, Nigeria has the potential to generate over 200 GWh annually, which is nearly 10 times more than the current electricity generated. Investment in solar energy includes but is not limited to large-scale solar power plants, rooftop solar systems, utility-scale solar farms, and solar microgrids.

According to the Rural Electrification Agency, scaling rural electrification through distributed solar generation, mini-grids, and off-grid technology alternatives has the potential to generate $9.2 billion in annual market investments for solar mini-grids. This can also save Nigerian households and companies $4.4 billion annually.

Wind: Nigeria also has significant wind energy potential, with an estimated 10 gigawatts of technically feasible wind power capacity. The strongest winds are found along the coastal regions and in the northern part of the country. Kaduna State in Nigeria currently has an underinvested 10 megawatts wind farm due to security challenges and funding. To match the demands of the ever-growing energy population, there are several opportunities for investment in wind energy projects in the coastal and northern regions of Nigeria, provided that critical issues like insecurity and maintenance of the facilities are tackled efficiently.

Hydropower: Hydropower is the world’s biggest source of renewable electricity generation supplying 70–80% and currently accounts for 16% of the world’s total power supply. The total exploitable potential of hydropower resources in Nigeria is 3500 MW for small hydropower and a massive 11,250 MW for large hydropower, which is enough to solely power Nigerian electricity generation. Opportunities for investment in hydropower include the establishment of new hydropower plants, and rehabilitation and expansion of existing ones.

Biomass: Nigeria has a large amount of biomass waste, including agricultural waste, wood waste, and municipal solid waste. This waste can be converted into energy using a variety of technologies, such as biogas digesters, gasifiers, and incinerators. There are several opportunities for investment in biomass energy projects in Nigeria, including Biogas digesters, Gasifiers, and Incinerators.

Maximization of Natural Gas Reserves as a Transitionary Mechanism: Natural gas continues to serve as the primary energy source for power generation in Nigeria, despite the transition towards alternative renewable sources. The current appeal of natural gas is attributed to its low-carbon attributes, rendering it a comparatively “clean” and cost-effective choice, in contrast to oil. It is estimated that maximizing the use of gas sources can foster some $18.3 billion in gross value added (GVA) to the local economy. This potential, coupled with the global difficulties the gas sector is facing, can create exponential growth in the nation’s domestic value chain.

Challenges in transitioning to clean energy in Nigeria and the way forward

While Nigeria has a wealth of clean energy resources and opportunities, several challenges need to be addressed to facilitate the transition to a sustainable energy future:

1. Funding: Despite its massive potential, renewable energy remains heavily underfunded. The Federal Government announced in 2021 that the country would need more than $400 billion to reduce dependence on fossil fuels and successfully implement energy transition. According to the International Energy Agency, Nigeria accounted for only a total of USD 509 million in investments in renewable energy over 10 years (2010-2020). Securing sufficient funding to aid Nigeria’s transition to cleaner energy sources will necessitate a strong partnership between the public and the private sector, as well as government assurances and guarantees for large-scale renewable energy projects.

Read also: Netherlands, partners launch solar marketplace to support Nigeria’s energy transition

2. Infrastructure and Investment: Developing renewable energy infrastructure requires significant investment. The Nigerian government needs to create a conducive investment environment and provide incentives for both domestic and foreign investors to participate in clean energy projects.

3. Grid Integration: Integrating renewable energy sources into the national grid requires a reliable and modern transmission and distribution system. Nigeria needs to invest in upgrading its grid infrastructure to accommodate the intermittent nature of renewable sources of energy.

4. Policy and Regulation: Clear and stable policies and regulations are essential to attract investment and create a predictable business environment. Nigeria must establish supportive regulatory frameworks and long-term energy plans that prioritize renewable energy. Initiatives to make clean energy technologies more affordable and accessible, particularly to low-income households, are essential.

5. Capacity Building: Building a skilled workforce is crucial for the successful deployment and maintenance of renewable energy projects. Investing in education and training programs for the clean energy sector is essential.

6. Energy Storage: Overcoming the intermittency of renewable energy sources, such as solar and wind, is a key challenge. Developing energy storage solutions like batteries can help store excess energy for later use, ensuring a stable power supply.

Government initiatives and policies

Some concerted efforts have been made by the Nigerian government in recent years to promote the development and deployment of renewable energy, through policies and initiatives. These include:

– The National Renewable Energy and Energy Efficiency Policy (NREEP)
– The Renewable Energy Master Plan (REMP)
– Building Energy Efficiency Code (2017)
– Sustainable Energy for All (SE4ALL)
– Nigeria Climate Change Act of November (2021)
– Long-Term Low Emissions Development Strategy (LTS) (2022)
– Energy Transition Plan (ETP) (2022)
– The Electricity Act, 2023

In addition to the key policies listed above, the Nigerian government has also implemented several solar power initiatives to support the development of clean energy.

While Nigeria has a new plan for energy transition for universal energy access by 2030 and a carbon-neutral system by 2060, it is necessary to ensure a detailed action plan with clear targets and timelines for effective monitoring and attainment of the objectives of the Plan.

Way Forward

Nigeria’s transition to a clean energy economy is essential for the country’s long-term economic development and environmental sustainability. A risk analysis of the country reveals that the major obstacles to upscaling the sector are currency convertibility issues, financing and lack of technology and expertise, hence, more targeted efforts and practical solutions will be required to mitigate this issue.

By investing in renewable energy, Nigeria can reduce its reliance on fossil fuels, improve air quality, mitigate climate change, and boost the economy overall. This transition will require a significant investment of time and resources, but it is achievable.

Ozioma Agu is a partner at Stren & Blan Partners and heads the Firm’s Energy, Finance and Infrastructure Practice Group. Kolajo Onasoga is an Associate in the Firm’s Energy, Finance and Infrastructure Practice Groups.

Stren & Blan Partners is a full-service commercial Law Firm that provides legal services to diverse local and international Clientele. The Business Counsel is a weekly column by Stren & Blan Partners that provides thought leadership insight on business and legal matters.

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