Nigeria and a future without oil

ONE of the climate deals from COP28 is the agreement among the close to 200 participating countries to transition away from fossil fuels. The agreement is the first time, since the Kyoto Protocol spanning about three decades, that the final conference agreement would unreservedly mention the need for fossil fuel transition.

For small Island nations, who are already feeling the severe impact of climate change, the use of the word transition may not have been far reaching enough because, according to them, it lacked a binding effect, but for other parties, transition was just enough concession that quite signals the beginning of the end, for oil.

Some of the other landmark agreements from Cop28 include the need to ramp up the renewable energy transition, stop deforestation, and commit $ 700m as loss and damage funds by developed countries, to help developing countries, including Nigeria, cope with the real impact of climate change through adaptation and mitigation.

Since the climate deal on fossil transition effectively marks the beginning of the end for fossil fuels, the question therefore is whether or not Nigeria understands the implication of this agreement, the climate urgency, and the need for action. At the moment, nothing suggests that those within government circles are aware of the full implication of such transition. In fact, it has been business as usual, and everyone is carrying on as though all is well. For the record, the gradual global transition from fossil fuels, affects every aspect of the economy and intersects every sector imaginable with significant implications for Nigeria’s economic future. From exports, to revenue, power, transportation, industry, waste, and other critical sectors. If Nigeria must therefore meet its nationally determined contribution ( NDCS), the government must realise that climate action has become the sole urgency of now. For several years, Nigeria has over relied on the prospects of crude oil, as a major source of export and government revenue.

Currently, crude oil accounts for 80 per cent of Nigeria’s export, a significant proportion of our foreign exchange earnings and government revenue. The 2024 budget estimates that the oil sector will contribute 42 per cent to government revenue. Crude oil, without any doubt, remains the centerpiece of the Nigerian economy, the Dubai declaration, on the need to ramp up transition from oil, implies that the government must rethink what Nigeria would sell to the world, in a post- oil global economy.

Electricity generation and distribution is another sector that will be impacted by the transition. According to data tracker Statista, renewable energy sources constitute only 27 per cent of Nigeria’s total energy mix, while electricity from thermal ( gas) sources, currently constitutes over 70 per cent of the total energy mix. The implication of the fossil fuel transition is that Nigeria’s electricity must operate 100 per cent on renewable energy sources by 2050. This will require a significant overhaul of the country’s electricity infrastructure, and improved investment in renewable energy sources, especially hydro, solar, and wind, where the country appears to enjoy some advantage.

Transportation is another sector that would be impacted by the decarbonisation agenda. The sector is estimated to contribute 24 per cent of Nigeria’s total emission mix. These include emissions from passenger vehicles, buses, and trains. To achieve a fully decarbonised and zero- emissions transport sector, it requires an overhaul of the entire transport system, from fossil fuels to electric trains, electric buses, and electric vehicles.

The country must also go a step further to incentivise the import of electric vehicles through import tax waivers, build electric vehicle recharge stations throughout the country, and prepare for the gradual phase- out of fossil- driven cars. I would expect the Nigerian government to already have a projection for the phaseout. It would be technically impossible to outlaw fossil- driven cars within short notice; countries typically provide an average 20– 30year notice period.

For industries, decarbonising the sector requires industrial processes to adopt technology that is efficient and has low or zero emissions. In the short term, this can also be achieved using market- based policy instruments, including emission trading, which involves setting an emission cap that enables industry players to trade their permits. Other efforts include an efficient waste management system that provides guidelines for the treatment of waste on an industrial and domestic scale.

The government must discourage single- use plastics; it is estimated that Nigeria generates 2.5 million metric tons of plastic waste annually. It must also introduce a recycling policy that will compel industrial and domestic waste recycling. I understand that Lagos is already gearing up to ban single- use plastics; this is an example that should be replicated at the national level. Nigeria must also take rural, urban, and coastal protection of biodiversity seriously through regenerative efforts and discourage the indiscriminate depletion of biodiversity.

The big- elephant in the room I reckon is the conversation on financing, Nigeria Energy Transition office, estimates that Nigeria requires $ 1.9trillion in investment to meet the net- zero target by 2060, which would require a minimum $ 10bn annually. Already, there are multiple financing options, including equity, debt, and grants that the country can leverage. I believe that the country is not doing enough to access these financing options; they require us to be more bullish in our approach. I should add that while the country is looking to leverage the multiple financing option, in the short term, the country must set aside some revenue from oil proceeds, to diversify the economy and decarbionise critical sectors.

Climate action has become a global emergency, and Nigeria cannot afford to be left behind. To achieve a modern, emission- free, resilient, and inclusive economy by 2050, Nigeria must move away from rhetorical ambition to real, tangible, and urgent action. The country must make investments in critical sectors to build resilience and adaptation. The climate investment is expected to yield outcomes that outweigh the costs in the long term.