Amid escalating climate crisis and the global quest to transition to cleaner and renewable energy sources, the International Institute for Sustainable Development (IISD) has expressed concerns that Nigeria’s continued dependence on a fossil fuel economy amounts to short-term thinking will not be sustainable in the near future.
The IISD specifically stated that expanding Liquefied Natural Gas (LNG) production could put Nigeria in a “precarious economic situation,” insisting that this could prolong the country’s dependence on fossil fuels and create “stranded assets” as international demand for gas dips.
It raised the alarm in a report titled: A Balancing Act: Considerations for the Expansion of Liquefied Natural Gas Projects in Nigeria, which was released on Thursday, June 6, 2024 and warned of a high likelihood that increasing LNG production could leave Nigeria with “unprofitable assets” and reduced financing for clean energy resources.
It further expressed concern that Nigeria’s LNG exports may struggle to compete in the global market after 2030, adding that replacing oil revenues with LNG may not generate the expected income.
Maintaining that LNG expansion should not be at the expense of addressing inequality, energy access and socio-economic challenges, the report concluded that Nigeria must “realistically manage” its gas ambitions, align with transition plans and prioritize community development in gas projects across the country.
“Facing declining oil revenues, economic turmoil following the COVID-19 pandemic and Europe’s demand for LNG, Nigeria has moved to address its revenue shortfall by significantly scaling up LNG production.
“Oil revenues have long underpinned the Nigerian Treasury, accounting for about two-thirds of government earnings and 90 percent of its foreign exchange income. However, as production has fallen due to lower levels of investment and regional unrest, there is renewed focus on LNG, which provides considerably smaller, albeit growing, revenues.
“In 2023, LNG revenues reached N74 billion, accounting for about 7 percent of total government revenues. As of 2022, Nigeria was already the sixth-largest LNG exporter worldwide, with a 6 percent market share. As oil contributes less to revenues, the government plans to build on its existing LNG developments, with ministers declaring 2021 to 2030 the decade of gas.
“Currently, Nigeria has six operational LNG terminals; while nine more have been proposed, with LNG construction investment of N28.3 trillion. But to replace Nigeria’s falling oil revenues, LNG exports would still have to increase by an order of magnitude. Such a scenario would require sustained international demand and high prices for LNG,” the report stated.
Co-author of the report and Policy Advisor at IISD, Bathandwa Vazi, described Nigeria’s LNG expansion as “a short-term thinking that could end up costing the country dearly,” adding: “Economic diversification away from fossil fuels is critical in building a sustainable future for the country, not locking in further dependence on polluting commodities.
“Nigeria is already up against bigger players in the LNG market and new LNG developments take 8 to 10 years to produce gas. As international demand for gas peaks, Nigeria must recognize that a fossil fuel-based economy cannot carry it far into the future.”
Tagging gas as critical for Nigeria’s transition to Net-Zero Goal, a former member of the House of Representatives, Sam Onuigbo, said using gas as a transition fuel is critical to Nigeria’s Net Zero transition efforts, insisting that the transition will reduce the country’s greenhouse gas emissions and provide short-term revenue for a gradual and just phase-out of dependence on fossil fuels.
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“But we must be smart about this, and keep a finger on the pulse of international movements towards net zero transitions and the impact on potential gas revenue.
“It is important to have a proper plan, which takes into account the global Net Zero targets, the possibility of being left with stranded assets and ensure that we limit investments into LNG and have a fixed date for complete transition,” he said.
However, Executive Director of Health of Mother Earth Foundation (HOMEF), Nnimmo Bassey, argued that increasing Nigeria’s LNG production will delay speedy transitioning from fossil fuels, adding: “While increasing LNG production may boost Nigeria’s revenues in the short term, it will only serve to position the country to end up with stranded assets, damaged communities and continued dependence on oil and gas exports.
“Nigeria’s drive for expanded LNG investment is happening at a time when several African countries are being pushed in the same direction basically to meet temporarily inflated European demand.”
