Exploring cleaner energy solutions for a developing Nigerian population

For many years, non-renewable energy — such as coal, fuel and natural gas — helped humanity. Its discovery ushered the world into an era of possibilities and innovation, especially during the industrial era.

Fossil fuel and other nonrenewable energy provided electricity, heat, transportation, easing humans’ day-to-day activities. They contribute about 80 percent of the world’s energy, contributing to the global economy.  Its importance is however causing the world through air pollution, greenhouse gas emission, water and land pollution.

Climate change experts have discovered how non-renewable energy affects the environment. When fossil fuels are heated, they release greenhouse gases and carbon dioxide into the atmosphere – which leads to global warming.

According to scientists the global emission of carbon dioxide, methane, nitrous oxide and certain manufactured greenhouse gases have increased higher now than at any time in the last 800 years, making the air warmer and increasing heat waves across the globe and in Nigeria’s south central Port Harcourt.  The extraction of fossil fuels in the oil rich region has led to multiple oil spills in the Niger-Delta region, damaging the environment.

As a result of the shortcoming of the non-renewable energy, countries across the globe are rallying together to replace fossil fuels. To strengthen their commitment of combating global warming, hundreds of countries at the international level have signed the 2015 Paris Agreement – which focuses solely on reducing fossil fuels and replacing it with renewable energy sources.

Locally, the commitment to combat global warming is gradually improving. Although much of the economy and human day-to-day activities is dependent on fossil fuels extraction, the Nigerian government and corporate bodies are investing in sustainable and cleaner energy alternatives.

For instance, the Liquefied Petroleum Gas (LPG), also known as cooking gas is experiencing an increase in demand in Nigeria. As the Nigerian government, through new policies, encourages the use of cleaner energy sources, the consumption of LPG in Nigeria is soaring.

Nigerians consumed 89,910 metric tonnes (MT) of cooking gas in January 2020, which is 7.9 per cent above the national consumption target of 83,330 metric tonnes (MT), according to the Petroleum Products Pricing Regulatory Agency, PPPRA.

The statistics from PPPRA showed a boom in consumption of LPG and an exciting market potential. In a country with a 200 million population, this number bodes well for operators and investors.

For years, Nigerians preferred dual purpose kerosene and the use of firewood. The latter, an old source of energy common in rural Nigeria, poses a challenge to climate change and leads to the death of about 93,000 Nigerians yearly, according to the International Centre for Energy and Environmental Development (ICEED).

The former, Kerosene, is a household fuel widely used among low income earners. Two decades ago, Kerosene lanterns lit homes and fueled cooking stoves, while cooking gas was limited to Nigeria’s wealthy class.

In 2000, the World Bank recorded the supply of LPG to Nigeria at 1,647 MT per annum, demand at 381 MT and an annual surplus of 1,932 MT. Fast forward to 20 years later, demand of LPG skyrocketed to 83,330 MT in January 2020 alone, and there are factors that have been critical to the commercial success of LPG.

Government’s support which has seen the encouragement of clean energy sources and the proliferation of LPG cylinders nationwide inspired the popular use of LPGs nationwide. Failure to implement favorable policies or provide the right environment for LPGs investors and operators to thrive can hinder progress.

For instance, the Nigeria government removed Value Added Tax (VAT) on LPG to increase penetration across the country and support operators and investors. The Nigeria government recognizes the market potential of LPG hence its continued support. The inauguration of the National Gas Expansion Programme (NGEP) committee to drive the awareness and penetration of LPG by the government is commendable. The private sector and investors are noticing the growth in the LPG market as well. These are indicators of an enabling business environment for both investors and operators.

Worthy of mention is how the supply chain structure has also contributed to the growth of LPG in Nigeria. In the past two decades, consumers have received LPGs through these three sources:

Local Refineries

Although they contribute less than 5% of the entire supply chain, local refineries mostly domiciled in Port Harcourt and Delta States have been pivotal to the supply chain of LPG. They produce for the local market while distribution and marketing are controlled by the Nigerian Petroleum Marketing Company (NPMC)

The NLNG Processing Plant

The Nigerian LNG gas processing facility, which is the largest in Nigeria, produces about 275,000 Metric Tonnes Per Annum. The company, jointly owned by the Nigerian government, and operating through the NNPC, Shell Gas B.V, Eni International, and Total LNG –is set to achieve 350,000 Metric Tonnes by 2021.

LPG Imports

Although local distributors like the NLNG and refineries contribute to the supply chain, Nigeria largely depends on imports from countries like the United States, Equatorial Guinea, Trinidad and Tobago, Algeria and Argentina.

For a developing country like Nigeria, dependence on LPG through these supply chains will increase its distribution of LPG across the country’s 200 million population.

This statistic offers Nigeria a great opportunity for both investors and operators in the alternative energy space and LPG market – but the sector also needs more infrastructure to meet the increasing demands of cleaner energy across Nigerian homes.

Lately, investment from the private sector is supplementing the Nigerian government’s effort to produce clean energy locally. Case in point is the construction of a 6,000-metric tonnes (MT) liquified petroleum gas plant in Delta, south-central Nigeria in 2019. The plant was completed by Lagos-based Prudent Energy and Services Limited, an indigenous operator in the downstream oil sector.

Another investment that encourages sustainable energy is from Nigerian renewable energy startup, Rensource. To reduce the over-dependence on fossil fuel generators, which is common in urban markets, the Lagos-based startup is building solar hybrid micro utilities for large urban markets with a focus on small and medium sized businesses across Nigeria.

In 2019, Rensource secured a $20 million funding, the largest for a renewable startup, to provide renewable base decentralized energy to SMEs in Nigeria.

These kinds of investments – if accelerated across Nigeria — would improve the use of clean energy. Although much of the country’s population still depends on non-renewable energy, direct investment into the construction of LPG plants, solar hybrid micro utilities, favorable policies from the government and relevant industry stakeholders in the downstream oil sector – will help Nigeria explore clean energy to its full potential.