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Nigeria is forecast to be more populous than Indonesia by 2034 and the United States by 2045 but it still struggles to power households and factories despite being home to the world’s 9th largest natural gas reserves.
The power sector consumes up to 70 percent of the domestic natural gas supply in Nigeria but the persistent liquidity crisis in the sector has negatively affected the country’s gas pricing framework, as a result, electricity generation and per-capita consumption suffer.
The Central Bank of Nigeria’s (CBN) annual reports show that substantial supply gap for electricity generation still exists in Nigeria, despite these variances in gas prices. Total installed capacity for electricity generation has stagnated at 12,232 mega-Watts (MW) for close to a decade. The average generation capacity of electricity has been oscillating within the range of 2,623.1 MW/hr and 4, 000 MW/hr against the estimated demand of 10,000MW.
According to the World Bank’s data, per-capita electricity consumption in Nigeria is 145 kiloWatts per hour (KWh) compared to other neighbouring West African countries, such as Ghana and Ivory Coast, which is not endowed with such resources, with per-capita electricity consumption of 351 KWh and 275 KWh respectively.
The key dilemma in Nigeria is that while lower gas prices are needed to encourage gas demand and support local industries and power generation, cost-reflective prices are needed to stimulate investment in gas infrastructure and assure supply sustainability.
“I believe that a market reflective pricing framework should come to full effect in Nigeria to incentivise investors into the gas sector,” said Victor Okoronkwo, GMD of Aiteo E&P Company Ltd.
But full monetisation of Nigeria’s abundant natural gas through gas exports on the one hand and domestic gas utilisation in gas-to-power, gas-based industries such as fertilizer, methanol, other petrochemicals as well as transportation initiatives on another hand will further propel the country’s economic diversification agenda.
To reach this, experts say there are gaps the country has to deal with to make the gas to value chain both profitable and sustainable. Some of these include solving the immediate liquidity issues in the sector, the non-cost reflective electricity tariff, payment securitisation, infrastructure deficits across the value chain and foreign exchange volatility.
