What Strategies And Policies Can Save Nigeria in the Energy Transition?

Abstract

The world is fast changing and so is the energy mix. A clarion call by scientists worldwide calls for immediate action to prevent the impact of climate change or face the consequences in the coming few years. Scientists and environmental activists are lobbying against the use of fossil-based fuel and mounting pressure on financial institutions and government to stop the financing of fossil fuel projects all over the world. The strategy is to dry-up investment from fossil fuel energy, then more investment will flow towards the greener alternatives in the next two decades to support the development of new technologies and other earth-friendly energy sources. Also, by clamouring for change, the cleaner technologies and alternative (greener) energy will create a substantial fall in the demand of fossil fuel, particularly crude oil. However, this move poses existential threat to third-world countries like Nigeria which is largely dependent on sales royalties and tax revenues from crude oil and natural gas reserves respectively. The future trends warn of a looming dooms day approaching when the remaining oil may not be able to attract foreign money for its development. Nigeria must therefore hasten in the effort to recover its reserves timeously and make the most of what it has before the green era. Since joining Organization of Petroleum Exporting Countries (OPEC) in 1971, Nigeria has established is membership status by steadily growing its reserves to now over 41 billion barrels of crude oil that is yet untapped mainly attributed to the Niger Delta basin. This means that Nigeria’s crude oil export is controlled by OPEC but this restriction does not apply to the export of Nigerian petroleum products. Hence, with investment into refineries and downstream value chain, Nigeria can afford to increase its production to maximize its resources and grow enormous wealth. Most of the other Nigerian petroleum basins in Nigeria are still under-explored and as such not accounted for in the nation’s wealth of resources. It is believed the nation can also benefit from significant amount of oil discoveries that are either invisible to conventional technologies or bypassed by natural recovery mechanisms. These presents an opportunity to uplift the nation’s reserves without risky investment in deep water exploration. Nigeria should aim to ramp up its production rapidly in the next couple of years to harness its available resources while there is still time to do so. To take advantage of Nigeria’s vast oil resources, the government must explore strategic policies that will enhance its exploration and development interests through the expansion of value chain and promote alternative energy. It must also exploit the remaining reserves quickly. Therefore, Nigeria must take advantage of its crude oil resources by exploring various fiscal incentives and take key regulatory steps to ensure that production is maximized to drain the technically recoverable reserves as quickly as possible. The wind fall from this can then be ploughed into the economy to develop value chain and also promote transition to greener energy alternative. To achieve this, a radical policy change is necessary such as incentivizing oil production and encouraging oil companies to change their direction. This paper presents some thought-provoking ideas of how this can be achieved in the near term.