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China-Africa Trade Information Service
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China-Africa Trade Information Service
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Nigeria has prioritized the release and utilization of the country's vast natural gas resources to increase domestic and industrial power supplies, improve living standards and support sustainable economic growth and diversification.
According to the Nigerian National Petroleum Corporation (NNPC), Nigeria has around 202 trillion cubic feet (TCF) of proven gas reserves plus about 600 TCF unproven gas reserves. With this huge reserve, Nigeria is often said to be more of a gas zone than an oil zone.
Nigeria's gas reserves, estimated as the largest on the African continent and ninth largest globally, have been assessed at three times the value of her crude oil reserves. Given the role that oil has played in the Nigerian economy thus far, it is clear that domestic gas reserves, if harnessed properly, can play a vital role in the economy.
The strategic effort led to the categorisation of three broad areas for intervention: Strategic Domestic (initially gas to power for national grid supply), Strategic Industrial and Commercial Sectors. The Nigerian electricity framework is basically built around the gas master plan, which seeks to harness the abundant supply of natural gas for the purpose of combating the epileptic power supply situation that pervades the country.
Nigeria's proven gas reserves estimated at about 180 trillion standard cubic feet is substantially larger than its oil resources in energy terms. This presents a huge opportunity for lower cost of power generation, as the need for import and related charges are avoided. Moreover, gas to power is seen as one of the cheapest source of power generation when compared with options like Diesel Oil, Coal, Hydropower, and many of the renewable options.
However, the price of gas in the Nigerian domestic market is regulated, but various industry analysts have called for price liberalism which would see gas prices approximate export parity prices. They argued that the regulation of gas pricing is stifling investment in the gas market and portends negative implication for the electricity sector, which represents about 70 per cent of the domestic gas market in Nigeria.
The NNPC, is obvious not happy with current policy on gas pricing and has at various occasions voiced concerns over the issue. This, according to the corporation discourages investment, desired to end gas flaring in the country.
Gas Market For Investors
Basically, the power sector is the largest area of demand for domestic gas and the success or failure of the domestic gas industry is tied to the fortunes of the power sector. From having near constant supply of power in the 1980s, from the state owned electricity company, the Nigerian electricity industry moved to almost complete dependence on self-generation by the 1990s.
Nigeria has a per capita power consumption of only 151 kWh per year, which is amongst the lower end of the spectrum in Africa. Nigeria's population is three times that of South Africa's, but it only has less than a third of South Africa's installed power generation capacity. It is not only Nigerian consumers who are suffering, but their businesses as well, as power cuts in Nigeria have an adverse impact on the overall economy.
At present, less than half of Nigeria's population has access to grid-connected electricity. In 2015, power supply in Nigeria averaged 3.1 gigawatts, GW, which is estimated to be only a third of the country's minimum demand.
Nigeria's Power Initiatives
In 2005, under President Olusegun Obasanjo's leadership, a series of large-scale initiatives launched the power transformation journey. The National Electric Power Authority (NEPA), the sole provider of electricity, was replaced by the Power Holding Company of Nigeria (PHCN), which was unbundled into six generation companies, 11 distribution companies (DisCos) and the Transmission Company of Nigeria.
Furthermore, independent bodies such as the Nigerian Electricity Regulatory Commission (NERC) and the Rural Electrification Agency (REA) were formed to oversee progress and maintain transparency. Along the way, initiatives were launched to diversify the power sector through agreements to invest in hydropower, nuclear power and a range of renewable power sources.
In 2010, a Roadmap for Power Sector Reform was developed, which privatised the generation and distribution companies, while transmission of electricity remained state-owned. In addition, the Nigeria Bulk Electricity Trading Plc (NBET) was formed to ‘engage in the purchase and resale of electric power and ancillary services from independent power producers and from the successor generation companies.
Reforms in the Nigerian power sector are among the most renowned efforts at privatisation on a national scale throughout Africa. They have demonstrated public and private sector commitment to improving the power eco-system through investment, increased competitiveness and de- regulation.
However, there is still a long way to go before Nigeria's power infrastructure capabilities will be on a par with other emerging economies. The immediate focus needs to be towards removing or at least reducing the key barriers to generating, transmitting and distributing power nationwide.
