As stated by its national government, in Nigeria, desertification in the north, floods in the centre, pollution and erosion on the coast and the associated socio-economic consequences all allude to the reality and grave impacts of climate change.

Consequently, bold action to limit the impacts of climate change must be undertaken urgently.  At the same time, in light of the rapidly rising population, accelerated development is needed to ensure improved living conditions for millions of Nigerians.

The next couple of decades present a unique opportunity to merge these two priorities; economic development and climate action, and to achieve in Africa’s largest economy, one of the world’s first true just transitions.

Reducing emissions and powering development

In November 2021, during COP26, H.E. President Muhammadu Buhari announced Nigeria’s commitment to carbon neutrality by 2060.

Nigeria’s Energy Transition Plan (ETP) was unveiled shortly after, highlighting the scale of effort required to achieve the 2060 net zero target whilst also meeting the nation’s energy needs.

Since the announcement, the Climate Change Act 2021 has been passed, the ETP has been fully approved by the Federal Government and an Energy Transition Implementation working group (ETWG) chaired by H.E Vice President Yemi Osinbajo (SAN), comprising of several key ministers and supported by an Energy Transition Office (ETO) has been established.

Nigeria’s pathway to achieve carbon neutrality by 2060

The Nigeria ETP is a home-grown, data-backed, multipronged strategy developed for the achievement of net-zero emissions in terms of the nation’s energy consumption.

The Nigeria ETP sets out a timeline and framework for the attainment of emissions’ reduction across 5 key sectors; Power, Cooking, Oil and Gas, Transport and Industry; within the scope of the ETP, about 65% of Nigeria’s emissions are affected.

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Key ETP objectives

At the core of the plan are the following imperatives:

• Lifting 100 million Nigerians out of poverty and driving economic growth;
• Bringing modern energy services to the full population;
• Managing the expected long-term job loss in the oil sector due to the reduced global fossil-fuel demand;
• Playing a leadership role for Africa by promoting a fair, inclusive and equitable energy transition in Africa that will include Gas as a “transitory fuel”;
• Streamlining existing and new government related energy transition initiatives.

According to Osagie Okunbor, Country Chair at Shell, “Nigeria has gas in abundance, around 202 trillion cubic feet of proven gas reserves and about 600 trillion cubic feet of unproven reserves. Harnessing these vast gas resources, and on time too, is key in the next decade of Nigeria’s existence”.

Furthermore, he stated that an intentional expansion of the off-grid power and renewables industry, utilising foreign financial support and technology transfer, is another path that could be pursued if the country wishes to have a successful energy transformation.

Gas infrastructure value chain

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Key ETP insights

Nigeria’s net-zero pathway will result in significant net job creation with up to 340,000 jobs created by 2030 and up to 840,000 jobs created by 2060 driven mainly by the Power, Cooking and Transport sectors.

Gas will play a critical role as a transition fuel in Nigeria’s net-zero pathway particularly in the Power and Cooking sectors.

Nigeria’s energy transition creates significant investment opportunities such as the establishment and expansion of industries related to solar energy, hydrogen, and electric vehicles.

USD $1.9 Trillion is required to get to Net Zero by 2060, including USD $410 billion above projected usual spending. This additional cost translates to about USD $10 billion annually.

Most of the effort will be needed in the power sector: extra CAPEX is needed to finance the power sector generation capacity (USD $270 billion), and the T&D infrastructure (USD $135 billion).

Nevertheless, significant savings in terms of fuel costs for power considering the switch to 90% renewables (USD -$121 billion) compensates for some of the CAPEX increases.

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Complementary actions needed to realize Nigeria’s ETP

Identify (and support) low-carbon energy solutions that work for low-income Nigerians

The ETP envisages the adoption of clean technologies, such as electric vehicles and electric stoves, irrespective of income strata. However, over 40% of Nigerians live in poverty. Poor people tend to buy items with the least upfront cost, regardless of their carbon footprints. For example, research has shown income to be the determining factor for the adoption of clean cooking facilities. Given the significant population living in poverty today, research on low-carbon energy solutions for low-income households is needed, especially in the rural and peri-urban areas of Nigeria, to identify appropriate and affordable low-cost technologies.

Innovation in natural gas infrastructure development

Nigeria’s ETP sees the role of natural gas as a transition fuel on its journey to a net-zero economy. However, natural gas lead time and infrastructure lifetime mean it can take decades to change energy systems, potentially risking carbon lock-in. Nigeria should therefore invest in developing dual-use infrastructure, for example, pipelines and distribution that can also be used for green hydrogen or synthetic fuels. This is hypothetically possible but will require support for innovative materials and techniques.

Modernize biomass utilization

About 70% of Nigeria’s primary energy supply is from biomass, primarily used for cooking in the residential and commercial sectors and harvested in an unsustainable manner. The ETP targets expanded use of biomass for liquid fuels in transportation and agricultural industries and for direct combustion for industrial purposes. But this will not be possible without a broader re-engineering of how biomass is cultivated. If Nigeria intends to continue biomass use, the government must outline a strategy for industrial cultivation in a sustainable manner and at a greater scale.

Improve energy efficiency in small and medium enterprises (SMEs)

The ETP is silent on the role of energy efficiency in driving a net-zero emissions energy system. Energy efficiency is an essential tool in reducing carbon emissions in Nigeria because it will reduce power demand, and subsequently, the amount of fossil fuel that would have been burnt by the conventional gas power plants. SMEs account for 70% of Nigeria’s industrial employment and about 50% of manufacturing output. Given the role of SMEs in Nigeria’s industrial sector, large-scale adoption of energy-efficient technologies (e.g. advanced electric motors, fans, boilers, etc.) will be required to accelerate the transition to net zero by 2060 by reducing total power requirements in the sector.

Focus on natural carbon removal solutions

The ETP also emphasizes the role of Bioenergy with Carbon Capture and Storage (BECCS) in achieving net zero by 2060 which implies large-scale deployment of CCS technology within the next 38 years. While this ambition is commendable, it is worth noting that Nigeria is not ready for CCS anytime soon, given the high cost of implementation and uncertainty about the overall geological storage potential in Nigeria. Expanding the forest cover in Nigeria through large-scale afforestation and reforestation projects can offer a safer, cost-effective carbon sink in the short term while waiting on CCS technology to catch up.

Explore strategies for an integrated energy system

The ETP provides sectoral decarbonization strategies but has no integrated energy system plan. A net-zero emission energy system dominated by electrified end-uses and variable renewable energy supply needs top-down, integrated planning of the entire energy system in order to succeed. Achieving the targets of Nigeria’s ETP cost-effectively requires increased integration of the electricity sector, transportation, cooling, and heating sectors to improve the efficiency and flexibility of the entire energy system as well as its reliability, adequacy, and cost. For instance, Nigeria should explore the potential of integrating bidirectionally-charging electric vehicles and mini-grids into the main grid. This can create a cost-effective and flexible electricity supply system.

Incentivize change in transportation choices

The ETP proposes reducing transportation emissions through mode-shifting but does not provide any incentives to make it happen. While behavioral changes toward low carbon transportation can lead to huge emissions reduction opportunities, citizens need a reason to do so. In the USA, about 90% of households own a car but most households in Nigeria do not. The demand for private car ownership could rapidly rise as household incomes rise. Practical strategies will be needed to provide alternative pathways for Nigerians to change their travel behaviors. For example, high-speed intra- and inter-city rail running on renewable electricity needs to be developed as an alternative to private cars.

Reduce dependency on foreign climate finance

Nigeria will need USD $410 billion to deliver the ETP. Over the years, Nigeria has depended on external funds to finance its energy/climate plans which has resulted in delays in project implementation due to uncertainties in donor funding. Over-reliance on external financing will limit Nigeria’s ability to implement its ETP. Experience over the years has also shown that Nigeria’s energy challenges cannot be addressed without substantial doses of domestic financing. Nigeria must look inwards to mobilize all the financial resources for its ETP before seeking external funding. The World Bank prescribes a debt service to revenue ratio of not more than 22.5%; Nigeria’s debt service to revenue ratio is over 60%. It may be imperative for Nigeria, through its ministries of environment and foreign affairs, to explore debt-for-climate swaps as a means of raising domestic funds indirectly. This mechanism allows funds that would have been used to service external debts to be mobilized for domestic climate initiatives.

Harmonize climate-related policies

Nigeria has over 15 different policy frameworks related to a sustainable energy transition, including the National Energy Masterplan, National Biofuel Policy, Renewable Energy Masterplan, and its Nationally Determined Contribution, among others. These policy frameworks sometimes have different targets (e.g. the shares of renewable energy technologies targeted for a given year). Several uncoordinated government institutions manage these policy frameworks, including the Energy Commission of Nigeria, Rural Electrification Agency, and Ministry of Environment. To ensure that the ETP is implemented successfully, relevant institutions should coordinate to harmonize policies, strategies, and targets.

Raising funds

To kickstart the implementation of the ETP, Nigeria seeks to raise an initial USD $10 billion support package ahead of COP27; however, the nation has even greater room for investment. A USD $23 billion investment opportunity has been identified based on current in-country programmes and projects that are directly related to the just energy transition.

In August 2022, Nigerian Vice President, Yemi Osinbajo, and the Nigerian Energy Transition Implementation Working Group went to the United States to seek worldwide partnerships and support for the programme, highlighting the government’s determination to pivot to the global direction.

As stated by Osinbajo, “the plan recognises the role of natural gas in the short term to facilitate the establishment of this low energy capacity and address the nation’s clean cooking deficit in the form of LPG. It also envisions vibrant industries powered by low carbon technologies, streets lined with electric vehicles, and livelihoods enabled by sufficient and clean energy”.

Challenges moving ahead

These ambitious goals require that infrastructure be built at a pace unprecedented in developed countries let alone in Nigeria with the attendant investment risks and dearth of technical expertise, especially within the context of international oil company divestments.

The goals would also require significant public acceptance, grassroots infrastructure in rural areas and grant funding to replace firewood with LPG and provide off-grid electricity to millions.

The political will and capital to do this will probably have to come from a bipartisan agreement to sustain the plan regardless of who wins the presidential election and be translated to the state and local government levels.

The plan assumes that business as usual will generate USD $1.5 billion in financing, and only an incremental USD $410 billion additional is required. Given Nigeria’s current fiscal state, and the reluctance of new capital investment in the light of the security and foreign exchange environment, it is unclear that the business-as-usual scenario is plausible, let alone the additional financing.

Finally, the plan would require significant technology exchange; technologies like the clinker method for cement production or hydrogen production, or even electric vehicles and their supporting infrastructure need to be localised urgently to meet the goal.

The challenges to meeting the goals seem insurmountable, and the execution pathway would be vastly different from what the plan proposes in the face of market, financing and technological realities. But if Nigeria commits to these ambitious goals regardless of political expediency, nothing is impossible.

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