Optimal Structure of the Nigerian Energy Supply Mix

Abstract

Nigeria, a member of the Organization of Petroleum Exporting Countries (OPEC), is blessed with relatively abundant energy resources like petroleum, gas, coal, solar, hydropower, etc. With an estimated population of 80 million, the country also has abundant human resources. In spite of her varied human and energy resources, the performance of the Nigerian economy has been closely linked with one resource, petroleum, a situation characteristic of most OPEC member countries. oil exports, energy consumption in Nigeria has been on the increase. The increase is attributed mainly to the consumption of petroleum products, especially gasoline, and to electricity production from fossil fuels. A simple extrapolation of the growth in the petroleum products experienced in the 1970s and early 1980s shows that there is a possibility that future petroleum exports may be severely curtailed, either due to production capacity limitations or to OPEC crude oil production quota (Dayo and Adegbulugbe, 1985). But due to the nation's diversified energy resource base and the possibility for fuel substitution, such a situation need not arise. One of the key energy policy issues for Nigeria is how to utilize the various domestic resources to achieve balanced development. My purpose is to examine, using a linear programming approach, what the long-term optimal structure of the Nigerian energy supply mix might look like. The aim of the exercise is modest in the sense that I am mainly interested in highlighting the potential roles of the various energy resources. I have not tried to give precise estimates of the future energy supply mix since (a) the objectives of government will necessarily be more complex than what is modeled here and (b) some of these objectives may not be quantifiable. The next section gives a brief description of the energy supply and demand situation in Nigeria. This is followed by a description of the analytical approach