Economy

Economic Diversification: Missing Out on the Untapped Benefits of Natural Gas

While successive governments have made efforts in diversifying Nigeria’s economy across major sectors, one segment that awaits the nation’s exploits is natural gas.

In all human existence, energy is of importance. Energy has always been a major means of wealth creation. It is therefore imperative that the role of energy as an economic driver is capitalised upon.

Natural gas is not only a major component of the energy configuration, but also a strategic natural resource for those who are privileged to have it in their energy portfolio.

Understanding this fact, the Managing Director of Nigeria Liquefied Natural Gas (NLNG), Mr. Tony Attah at a conference recently disclosed that, “Gas should now be everything for Nigeria. We must use what we have to get what we want. Saudi Arabia and Dubai used oil to move their economies to become one of the best in the world. Qatar has used gas to transform from a fishing economy to a global gas giant. Nigeria has both oil and gas.

It is a known fact that there’s a rising global demand for cleaner energy, as opposed to fossil fuels. Nigeria has the potential of 600 trillion cubic feet of gas, which is the most extensive in Africa, and in the top 10 globally.

Gas is now the heart of the global economy; a strategic input in nearly all the goods and services of modern living. In fact, without heat, light and power, one cannot build or run factories that provide goods and services, nor enjoy social amenities that make life more comfortable and enjoyable.

Nigeria is abundantly endowed with energy resources. These include crude oil, hydro-power, coal, tar sand, natural gas, solar energy, and fuelwood.

The rising global demand for cleaner energy has offered Nigeria the opportunity to exploit gas resources for the good of the country.

Recently, the Petroleum Products Pricing Regulatory Agency (PPPRA) reported that Nigeria’s domestic consumption of Liquefied Petroleum Gas (LPG), popularly known as cooking gas, exceeded 1 million Metric Tonnes (MT) in 2020.

In a statement, the agency said the consumption rate made 2020 the first year in the nation’s history when LPG consumption reached the 1 million MT threshold:

“Nigeria consumed 840,594.37 MT LPG in 2019, indicating an increase of 60.5 per cent over 635,452.061MT recorded in 2018.

“This steady and sustained pattern of growth culminating in the over one million metric tonnes of LPG domestic consumption milestone in 2020 has placed the country first in West Africa and one of the leading LPG consuming nations on the continent.

Read Also: Economic Diversification: Why FG Must Consolidate The Local Content Policy

“With this laudable feat, the country is on track to meet the five million MT by 2022 target set in the Nigeria Gas Policy (NGP) of 2017.”

 While players in the sector are celebrating this achievement, there is also a growing concern about the decline of locally sourced LPG.

The challenge now is how to adapt a change to become more sustainable in order to keep the trajectory.

Locally sourced  LPG declined to 0.2% as of October 2020, and it has continued to generate concern. But when the decline is compared to what the nation was sourcing in 2019, there is over 200% improvement.

A decline within a month could be worrisome, but it’s not something industry players should panic over. An increase in demand could have caused this fluctuation, but there is an improvement, and the Nigerian government has continued to do its best to utilise the nation’s gas reserve.

 Also, more can be done to develop and utilise gas consumption in Nigeria. For example, the Ghana gasification project turned out to be a success because their country took into consideration their peculiarities. They take their gas in badges and also work on their storage facilities and means of transportation. Their transporters are always ready to move gas from crude oil field to gas centres and to the end-users.

However, Nigeria does not necessarily need to adopt Ghana’s method in her gas project because she has her own peculiarities.

Currently, the transportation of natural gas network which was launched in February 2020 is working to see that the domestic gas market is deepened.

The national gas flare commercialisation program is also on to increase gas supply in the country.

The Federal Government is striving to improve the country’s utilisation of the nation’s gas reserve.

Concerned authorities need to encourage the transportation network to facilitate the movement of the product to the market place.

Another issue that is generating concern among stakeholders is that of pricing. Although the consumption of LPG has increased to a remarkable level, the price keeps going up. 

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However, that should not be a surprise at all, because the national forces of demand and supply played a dominant role in that regard. The change in price is just 1.7%  in November and December. 

Looking at it from the beginning of last year, it has been somewhat stable. But when one looks at it from 2021, it generates some concern.

Nevertheless, by the time an amendment is made to meet current demand that is increasing, prices will adjust on their own. This is provided supply can meet with the rise in demand.

More so, analysts are of the view that the best way to checkmate the increase in the price of LPG is to increase supply. This will help to make the price more affordable. As soon as this is done, the price will cease to increase.

It is also worthy of note that should the supply fail to meet the demand, consumers are likely to shift their focus to kerosene, charcoal, and firewood which is dangerous for women and children.

Conversely, it will hamper the progress of Greener and Cleaner Environment Initiative aimed at containing the challenges of gas flaring.

With the Federal Government trying to increase the nation’s utilisation of gas reserve, the country is on its way towards a Greener and Cleaner Environment.

Safety has also become an issue because there is an increasing occurrence of gas explosion. Though there are control measures put together by the regulatory body to limit the explosion, users at home must ensure that they keep to adequate safety measures.

To stimulate economic growth, further improve the energy mix, drive investments, and provide much-needed jobs for Nigerian citizens, gas development and utilisation must be a national priority.

Categories: Economy, Features

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