Nigeria's energy infrastructure investment gathers steam

At least $10 billion investments are going on in the Nigeria energy sector. The investments are the first step in getting the country delisted from the list of most energy impoverished nations in the world. To enhance Nigeria’s energy investments, the Nigeria National Petroleum Corporation (NNPC) insists on the need for sustained deployment of oil and gas resources into Nigeria’s infrastructural development.

The agency also calls for increased tax collection and economic diversification to boost investments in the energy and other sectors of the economy, writes COLLINS NWEZE.

The state of a country’s energy infrastructure speaks volume of the investments opportunities it is likely to attract, locally and internationally.

For Nigeria, energy infrastructure has for years remained below expectations, with adverse impact on the country’s development agenda.

But new disclosure by the Nigerian National Petroleum Corporation (NNPC) on new investments in the energy infrastructure shows emerging light at the end of the tunnel.

According to the Group Managing Director, NNPC, Mallam Mele Kyari, there is at least $10 billion worth of investments currently ongoing in the energy sector. The projects, he maintained, would help to reverse the perception of Nigeria as one of the most energy impoverished nations in the world.

Kyari, who spoke on the second day of the Atlantic Council Global Energy Forum, 2021 on the topic “Delivering Energy Access in the Developing World,” noted that although the country aligns with the push for renewables, it is now focused on using its oil and gas resources in developing infrastructure till when the commodities become less relevant in about four decades.

For him, Nigeria with significant gas reserves, has approximately $3 billion to $4 billion projects currently going on, some of which have reached advanced stages. This, he said was in line with the country’s efforts to rev up production for domestic use and export.

He said: “We are not a petroleum country in the real sense. It’s agreed that we have the 10th largest reserve of oil and a significant gas reserves. Of course, what everybody recognises is the oil. The reality today is that we have a country over 200 million people. Seventy per cent of this population is well below 30, with a growing middle class and one of the fastest-growing economies in Africa.

“More importantly, for us today, an energy deficient country, over 60 per cent of our country is not electrified, the poverty level is very high, extremely challenging. But so much is going on to see how we can reverse this trend. When you combine all these, you will see that as a country of focus today, many things are happening in the energy sector.

“For instance, we are seeing investment in our energy infrastructure, especially in the area of gas in excess of $10 billion; this is ongoing. There are a number of gas-based projects about $3 billion to $5 billion and some of them are at the Final Investment Decision (FID) stage.”

According to him, Nigeria as a country is currently in transition and not necessarily in energy transition, adding that the country is not oblivious to the changes in the global oil and gas sector.

He explained that Nigeria is at the moment witnessing increased domestic gas demand in the industrial and power sectors, leading to increased production and reduced gas flaring.

Kyari added that the country is also witnessing increasing household access to gas networks and natural gas in the main cities, while there are deliberate plans to expand that access to rural areas.

He said the federal government’s recent plan aimed at deepening domestic gas consumption, led to the advent of Compressed Natural Gas (CNG) and Liquefied Petroleum Gas (LPG) and that it was part of the policy to deploy resources in the right places.

According to him, “The best of forecasts have said that in 30 years we will still have at least 100 million bpd of oil consumption.

“So, oil and gas will still remain relevant in the near future, but the transition is real. What countries and nations are doing is to move towards much cleaner fuel and this cleaner fuel is clearly gas and that’s why we as a company are focused on gas resources, making sure to supply the domestic market and create export opportunities.

“So, what we see as an energy resource-based country is to utilise the available resources of today to create the enabling environment for growth and prosperity in the country and that clearly aligns with the reality on the ground.

“We have significant goodwill and understanding across countries, nations and companies. For instance, we have significant engagement with the United States Department of Energy in the sense that we receive some support in our transition to cleaner fuels so that we can develop our gas infrastructure so that we move away from the liquids to gas ultimately.”

On whether or not Nigeria can survive without oil, especially given the current crisis in the global oil market, Kyari explained that Nigeria is gradually moving away from its dependence on oil.

“What does this mean for a country like ours which depends on oil for cash? Obviously, we have seen how we can transit to something better for our country, so we don’t depend on that today. You may be aware that today, the country’s resources are mostly coming from taxes and those taxes are growing because population and prosperity is growing and we want to get more work done”.

“As a country, we are facing the new realities and we are moving towards the use of gas and also we are developing our resources as quickly as possible so that when the real transition comes in 30 to 40 years, we will be in a position to say this is a developed country that has taken advantage of its resources,” he stated.

New investments in refineries

There Africa’s richest man Aliko Dangote is erecting the world’s largest single-train refining facility with a capacity of just 650,000 barrels per day at the Ibeju-Lekki axis of Lagos.

Although the Dangote refinery is yet to be completed, but when it eventually comes on stream, it is expected to boost Nigeria’s foreign exchange earnings, support job creation and economic growth.

Aside the Dangote Refinery, there also some modular refineries undergoing construction in Nigeria.

Speaking on energy and other investment opportunities in Nigeria, the Central Bank of Nigeria (CBN) Governor, Godwin Emefiele said the apex bank will do everything possible to support local and foreign investors interested in investing in the Nigerian economy.

Emefiele, who spoke during an assessment tour of the Dangote Refinery, Fertilizer Plant and Petrochemical Company in Ibeju-Lekki, Lagos, said local and foreign entrepreneurs will be encouraged to explore investment opportunities in the country and also enjoy government protection.

According to him, entrepreneurs should embrace the opportunity presented by low interest rate regime to thrive.

“We want to support any foreigner or Nigerian that finds Nigeria as a good investment destination. We support the person through the banking sector and foreign exchange allocations. Government stands ready to give them the needed protection and support they want,” he said.

The refinery, which will be refining 650,000 barrels per day and will not only satisfy local consumption, but also position Nigeria as major exporter of petroleum products.

“The refinery will serve the whole of Africa. This project is strategically positioned that it will only make the final cost of petrol within and outside Nigeria lower. Everything in Nigeria that has plastic will be produced from the plat and will satisfy not only domestic production but also for export,” Emefiele said.

The apex bank chief said the Dangote Refinery will employ over 70,000 Nigerians when it begins operation.

President of Dangote Group, Alhaji Aliko Dangote said he is on a mission to aggressively reduce the unemployment in the country.

He said the plant would also retain foreign exchange as Nigeria becomes self-sufficient in petroleum refining.

“Besides, we are going to help in terms of not only creating jobs but also in reducing the outflow of foreign exchange, not only in petroleum products but also in petrochemicals and fertilisers. We would be one of the highest foreign exchange generating companies, going forward,” Dangote said.

According to him, the company’s $2 billion granulated urea fertiliser plant at Ibeju-Lekki in Lagos State would make Nigeria the only urea exporting country in sub-Saharan Africa and biggest producer of polyethylene, which is capable of generating $2.5 billion annually.

He said: “Nigeria will soon become the biggest and only urea exporter in sub-Saharan Africa, for the first time. And we are not only exporting, we would be exporting, big time.

“We are also going to have polyethylene, which is about 1.3 million tonnes annually. These two products would bring in about $2.5 billion annually in terms of foreign exchange. A lot of forex would now come in and that $2.5 billion is only about 10 per cent of remittances.”

Dangote said the size of the project necessitated the construction of a jetty to take care of  over-dimensional cargoes.

“It is a huge project. That is why we have built a jetty and the pipeline through which we are bringing in the crude.

“One of the reasons the CBN is supporting us is that by the time we become operational, we will not only be creating jobs but we will reduce the outflow of foreign exchange not only in petroleum products but in petrochemicals and fertilisers”.

Tax collection, economic diversification crucial

Aside oil revenue, government is also encouraged to boost non-oil income from taxes, levies and loyalties.

Speaking on the need to increase revenue generation by government, President of African Development Bank,

Akinwumi Adesina, said building back the economy in the face of the COVID-19 pandemic would require a lot more resources, adding that taxes form a significant part of government revenue.

ADVERTISEMENT“It is crucial to ensure that the tax base expands. Given that over 60 percent of Nigerians are in the informal sector, priority should be to support measures to move a large part of this from informal to formal sectors. Making tax codes simpler and reducing administrative burdens and formalities are important to move from informality to formality. Doing so will allow people to be able to better assess their tax obligations,” Adesina said.

He said digitalization of tax collection and tax administration is critical to ensure greater transparency of the tax system, widening of the tax base while mitigating compliance risks and encouraging voluntary tax compliance.

“The government should focus a lot on corporate taxes, and ensure full compliance. But it is important to ensure that such taxes do not discourage investments. Nigeria can learn from the case of Estonia, which taxes corporate incomes but based on distributed profits. This allows corporations to re-invest their profits in expanding their businesses,” he said.