Addressing climate crisis in Nigeria through trade and trade policy

In November 2016, clouds of darkness filled the sky and descended over various parts of Rivers State, an oil-rich region in Southern Nigeria. These ominous clouds contained black particulate matter that spread across the environment, accumulating on every visible surface. Soon, it was identified as black soot—a hazardous by-product of incomplete combustion and refining of fossil fuels. In addition to soot, residents of the state were exposed to toxic hydrocarbon emissions. Between 2020 and 2021, an estimated 25,000 people lost their lives due to the severe health effects of black soot. This tragic event highlights the detrimental impact of fossil fuel dependency on both public health and the environment in Nigeria.

Nigeria, Africa’s largest economy, had a population of 218.5 million people as of 2022. The country has largely depended on oil since its discovery in 1956. As Africa’s biggest oil producer, fossil fuels account for 60 percent of budget revenue and 95 percent of foreign exchange earnings. In 2023, the petroleum industry accounted for 90 percent of all export value. While this reliance has provided economic benefits, it has also contributed significantly to environmental degradation and climate change.

According to the United Nations, climate change is a long-term shift in temperatures and weather patterns primarily caused by human activities, such as the burning of fossil fuels, which generate greenhouse gas emissions. As of 2019, Nigeria was the 25th largest emitter of greenhouse gases in the world and the second-highest in Africa. The heavy dependence on fossil fuels has exacerbated climate crises, including flooding, intense droughts, heat waves, desertification, and declining biodiversity.
The relationship between trade and climate change in Nigeria is like two sides of the same coin. While economic activities fuel the climate crisis, the climate crisis negatively affects economic activities in Nigeria. Therefore, it is crucial to examine the influence of trade and trade policies on climate change mitigation efforts. This article explores how trade and trade policy can address Nigeria’s climate crisis by reducing dependence on fossil fuels, promoting sustainable practices, and diversifying the economy.

Nigeria’s Dependence on Fossil Fuels and Its Impact on Climate

Climate change is a global challenge, and Nigeria is no exception. Several climate crises are intricately linked to Nigeria’s dependence on fossil fuels and unsustainable practices. These include:

• Black Soot: The indiscriminate and incomplete burning of fossil fuels during oil exploration has led to the deadly black soot crisis in southern Nigeria. Illicit oil operations, industrial emissions, and illegal refining significantly contribute to this environmental hazard.

• Global Warming: Global warming, primarily caused by greenhouse gas emissions, has led to a long-term increase in temperatures. The Paris Agreement aims to limit global warming to 1.5 degrees Celsius above pre-industrial levels. However, Nigeria’s average temperature reached 26.9 degrees Celsius in 2021. The consequences of global warming include extreme heat waves and flooding. On April 1st, 2024, Sokoto State in Northern Nigeria recorded a temperature of 44.8 degrees Celsius. Between May 1st and May 13th, 2024, no fewer than 200 Nigerians in Yola State lost their lives to heat waves.

Additionally, increased flooding has devastated homes and farmlands and in 2022, 64 percent of Nigerian households were affected by flooding.

• Rising Sea Levels: As a coastal nation, Nigeria is vulnerable to rising sea levels, which have led to recurrent flooding, particularly in the Niger Delta region. These floods have damaged infrastructure and agricultural lands, exacerbating food insecurity and economic instability.

The Role of Trade in Addressing Climate Crises Arising from Fossil Fuel Dependency

As a signatory to the Paris Agreement, Nigeria is making slow but steady efforts towards energy transition. Trade can play a pivotal role in addressing the climate crisis through several mechanisms:

• Promotion of Renewable Energy: Nigeria has significant untapped renewable energy resources, including solar, hydropower, and wind. A 2023 report estimated that renewable energy could account for 47 percent of Nigeria’s total energy demand by 2023 and 60 percent by 2025. Investments in renewable energy infrastructure through trade can accelerate this transition.

• Green Value Chain Development: Sustainable trade practices such as the green value chain ensure that raw materials are sourced responsibly and production methods are environmentally friendly. A circular economy approach, emphasizing recycling and waste reduction, can mitigate the impact of trade activities on climate.

• Diversification of Export Economy: Instead of relying primarily on crude oil exports, Nigeria can explore alternative markets such as manufacturing renewable energy equipment, agricultural products, and mineral resources.

• Carbon Trading: Implementing carbon pricing would incentivize industries to reduce their greenhouse gas emissions. Companies could engage in international carbon trading to offset their emissions.

• Green Bonds: Financial instruments such as green bonds can support climate-focused projects. In 2016, the Nigerian Exchange Group (NGX) launched the Green Bond Market Development Programme, leading to Nigeria’s first green bond issuance worth 10.69 billion Naira.

The Role of Trade Policy in Addressing the Climate Crisis

Trade policy can significantly mitigate climate change through the following strategies:

• Incentivizing Green Investments: Policies such as tariff exemptions and tax holidays for renewable energy investments can encourage private sector participation. The Electricity Act provides customs duty exemptions for machinery imported for off-grid renewable energy generation.

• Implementing ESG Standards: Environmental, Social, and Governance (ESG) standards ensure that corporate entities integrate climate-sensitive practices into their operations.

• Enforcing Penalties for Environmental Degradation: The National Oil Spill Detection and Response Agency (NOSDRA) reported that 19.14 billion SCF of gas was flared in January 2023, emitting 1.3 million tonnes of CO2. Strict penalties for harmful practices such as gas flaring and oil bunkering can deter environmental violations.

• Promoting Carbon Transparency: Policies mandating carbon disclosure in high-emission sectors will enhance corporate accountability and promote climate-friendly trade practices.

• Taxation on Fossil Fuels: The Petroleum Industry Act introduced a hydrocarbon tax on crude oil and natural gas. Revenue from these taxes can be rechanneled into renewable energy development.

Global Case Studies on Transitioning from Fossil Fuels

Nigeria can learn from other nations that have successfully transitioned away from fossil fuel dependence:

• Norway: A leading oil producer, Norway has invested heavily in renewable energy. In 2023, 95 percent of its electricity came from renewable sources, primarily hydropower. Public investments in clean energy totaled 289.8 million euros in 2019.

• Germany: Germany’s Renewable Energy Act has driven substantial progress toward net-zero carbon emissions. Policies such as carbon pricing, mandatory CO2 trading, and fuel taxes have facilitated the country’s transition to renewable energy. By 2023, Germany derived 50 percent of its power from renewable sources.

Policy Recommendations

To effectively leverage trade and trade policy in combating the climate crisis, Nigeria should consider:

• Investing in Clean Energy Projects through public-private partnerships and international financial institutions.

• Enhancing Public Awareness about the environmental and economic benefits of renewable energy.

• Facilitating Technology Transfer for renewable energy development.

• Improving Accessibility to Green Energy for low-income households.

• Strengthening International Collaboration on trade agreements that support green energy investments.

• Providing Financial Incentives such as reduced tariffs and subsidies for renewable energy technologies.

Conclusion

Addressing Nigeria’s climate crisis requires a shift from fossil fuel dependency to sustainable trade practices. While fossil fuels remain a significant revenue source, they also pose severe environmental and economic risks. By implementing strategic trade policies and fostering investments in renewable energy, Nigeria can mitigate the effects of climate change while securing a sustainable economic future.