Financial Energy Review
…….by Ben Ndubuwa……
Nigeria’s Minister of State for Petroleum Resources, Dr. Heineken Lokpobiri, has downplayed fears over the future of the country’s hydrocarbon resources in the face of the ongoing global energy transition. Addressing journalists at the recently concluded African Energy Week (AEW) in Cape Town, Lokpobiri emphasized that African countries, including Nigeria, would continue to harness their vast hydrocarbon resources despite global pressures for carbon neutrality and the deadlines set by Western countries for decarbonization.
The minister’s comments come at a time when many African nations, rich in fossil fuel deposits, are grappling with how to balance economic growth with the global push toward cleaner, renewable energy sources. Western countries, particularly in Europe, have set ambitious targets to achieve net-zero emissions by 2050, causing concern among African oil producers about the potential impact on demand for their oil and gas exports.
However, Dr. Lokpobiri was firm in his assertion that the global transition would not result in Africa abandoning its hydrocarbon resources. He argued that Africa has an internal market large enough to absorb its entire oil production, reducing the continent’s dependence on Western markets for crude exports.
“We have enough market in Africa. Africa has enough market for her entire crude production,” Lokpobiri declared. “All we do now in Africa is produce crude, we ship it to Europe, India, and Singapore, they refine it, and ship it back to us. We don’t need that. When we have the refining capacity, we have enough market to take all the products.”
This vision aligns with Nigeria’s broader strategy to develop its refining capacity, aiming to keep more of its oil revenues within the continent. Lokpobiri’s remarks underscore a shift toward local value addition, where African countries will no longer just be exporters of raw crude but will also refine and consume their own products.
Nigeria’s stance comes amid growing concerns over the environmental impact of fossil fuels. The African energy transition, driven by the Paris Agreement and subsequent climate summits like COP21 and COP26, has set ambitious carbon neutrality goals. At COP26, Nigeria pledged to reach net-zero emissions by 2060, a commitment that has led to the development of its Energy Transition Plan (ETP).
The Energy Transition Plan, launched in 2022, outlines a pathway to reduce carbon emissions across key sectors, including power generation, transport, oil and gas, and industry. It is a bold attempt to balance Nigeria’s energy needs, which rely heavily on oil and gas, with the global desire for cleaner energy sources.
Nigeria’s plan to achieve carbon neutrality by 2060 is part of the broader goals set out in the Paris Agreement, which seeks to limit global temperature rise to below 2°C, and ideally to 1.5°C, by the end of the century. While this ambitious target requires significant investments in sustainable technologies such as solar, hydrogen, and electric vehicles, the government is hopeful that the transition will unlock enormous economic opportunities and investments.
“The transition to a carbon-neutral economy will create huge transformation opportunities,” Lokpobiri explained. “It will drive investment in clean energy technologies, and Nigeria is positioning itself to be a major player in this space. However, achieving this will require substantial investment, and we are looking for both public and private sector involvement.”
One of the key challenges facing Nigeria in its transition to a greener economy is the financial burden of overhauling its energy systems and improving governance structures. According to reports from the World Economic Forum, Nigeria ranks poorly on the Energy Transition Index (ETI), which tracks the performance of energy systems across nations. The country ranks 108th out of 120 countries on the ETI, indicating the significant hurdles it faces in modernizing its energy infrastructure.
Despite these challenges, the Nigerian government is committed to reducing its reliance on fossil fuels. Dr. Lokpobiri’s comments at the AEW were a clear indication that Nigeria intends to maintain its position as a major energy producer while also pushing forward with renewable energy projects.
The Energy Transition Plan also aims to address energy poverty, which affects over 100 million Nigerians, by providing universal access to electricity. The plan’s objectives include driving sustainable growth across major sectors of the economy, such as manufacturing and transportation, while promoting private sector participation in the energy transition.
Nigeria’s industrial and transportation sectors account for a significant portion of its carbon emissions, with the power sector alone contributing about 27% of the country’s total emissions. Oil and gas emissions represent about 11%, while the transportation and cooking sectors together contribute more than 40% of in-scope emissions. These figures underscore the complex challenge Nigeria faces in decarbonizing its economy.
The country’s reliance on crude oil exports has also meant that much of its oil is refined abroad, particularly in Europe and Asia. This leaves Nigeria dependent on foreign markets and refineries for its finished petroleum products. However, as Dr. Lokpobiri pointed out, this reliance could change once the country invests in its own refining capacity, creating more jobs and economic opportunities within Nigeria itself.
“In the long run, the goal is for Africa to stop being just an exporter of raw materials,” Lokpobiri said. “We need to add value to our resources. That is the future we are working toward.”
Meanwhile, the global energy transition poses challenges for fossil fuel-rich nations like Nigeria, it also presents opportunities for growth and investment in cleaner energy technologies. Nigeria’s commitment to achieving net-zero emissions by 2060, alongside efforts to build local refining capacity, reflects a clear strategy to navigate the energy transition while continuing to benefit from its natural resources.
As the world shifts toward greener energy sources, Nigeria’s approach may serve as a model for other African nations seeking to balance economic development with sustainability.
