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The Task of Greening the Nigerian Economy

Nigeria has $250 billion potential in green economy, which could play a vital role.This is a huge investment opportunity in the country’s green economy that entrepreneurs can tap into by creating solutions that are viable and sustainable to these challenges. Public and private policy coherence are critical for Nigeria to develop an economically and technically viable renewable energy sub-sector to supplement its current energy supply.

About half of the reported impoverished people globally reside in the sub-Saharan Africa (SSA) region and a sizeable portion of these people (up to 400 million) live in Nigeria, being the most populated country in Africa. The economic growth and social development of any nation depend remarkably on the adequate supply of its energy sector. Thus, the realization of the Sustainable Development Goals (SDGs) comes the year 2030, as projected by the united nations, in Nigeria and the entire SSA region depends heavily on energy.

The situation in the rural areas of the country is that most end users depend on fuel wood. Fuel wood is used by over 70% of Nigerians living in the rural areas. Nigeria consumes over 50 million tonnes of fuel wood annually, a rate which exceeds the replenishment rate through various afforestation programs. Sourcing fuel wood for domestic and commercial uses is a major cause of desertification in the arid-zone states and erosion in the southern part of the country. The rate of deforestation is about 350,000 ha/year, which is equivalent to 3.6% of the present area of forests and woodlands, whereas reforestation is only at about 10% of the deforestation rate.

The rural areas, which are generally inaccessible due to the absence of good road networks, have little access to conventional energy such as electricity and petroleum products. Petroleum products such as kerosene and gasoline are purchased in the rural areas at prices 150% in excess of their official pump prices. The daily needs of the rural populace for heat energy are therefore met almost entirely from fuel wood. The sale of fuel wood and charcoal is mostly uncontrolled in the unorganized private sector.

With the restructuring of the power sector and the imminent privatization of the electricity industry, it is obvious that for logistic and economic reasons especially in the privatized power sector, rural areas that are remote from the grid and/or have low consumption or low power purchase potential will not be attractive to private power investors. Such areas may remain unserved into the distant future.

The Nigerian cities such as Aba, Enugu, Onitsha, Kano, Ibadan, and Lagos are characterised by huge mounds of solid waste dumps generated from households, industries, markets, schools, and street trading. This can be attributed to migration, population increase, urbanization, constructions, and industrialization coupled with inefficient, improper and some times nondisposal of wastes. Solid waste dumps are indiscriminately formed on streets, homes, road side, markets, and other places where human activities take place in the cities.

The Increasing Threats of Climate Change in a Complicated Continent

Growing evidence signals that the development trajectory of Nigeria’s economy will need to change dramatically in the coming years. This has largely emanated from improper use of its natural resource endowment, particularly fossil energy which contributes over 80% to national revenue and the growing energy demand. The consequence is that the depletion of fossil fuel energy, fluctuations in oil prices and recent climate change and global warming constitute important developmental challenges for the country. It therefore means that Nigeria now has the twin problems of meeting her energy needs with her abundant fossil fuel sources as well as looking for ways to develop, acquire and deploy appropriate Alternative Energy Technologies (AET) and Clean Energy Technologies (CET). The ability to deliver on key national policy objectives, diversify the economy away from its heavy reliance on natural resources, increase food security, provide jobs for a rapidly growing population, and fill a substantial infrastructure gap these goals call for a new economic direction.

Road to a green future

The economic, social and solidarity implications of energy poverty are becoming massive, especially in regions where the income level is low and the average cost of modern energy technology is relatively high such as the sub-Saharan Africa. As at 2017, approximately 1.1 billion of people globally were living without access to energy in its clean, socio-environmentally and directly usable form.

In view of the depleting fossil resources that have been an ancient origin of the climate threatening gas, carbon dioxide, climate change and a growing world population, sustainable resource-efficient strategies are increasingly in demand to guarantee the well-being of societies. Green Energy alternatives like Hydro, Wind in the coastal regions, Bioenergy and Solar are far cleaner and cheaper alternatives.

There are large capacities of renewable energy sources in the country’s tropics, with its landmass widening amid latitudes 5 degrees south and 15 degrees north of the equator. Nigeria receives a large amount of sunlight particularly in the north where the sunlight can produce approximately 1850 X 103 Gigawatt hours per year (GWh/yr) of solar power. This exceeds the present grid of energy consumption in the country. Biomass is another renewable, low carbon fuel that is widely accessible throughout the country and it could ensure continuous energy supply to rural areas.

An estimated 27.9 million households and 10.6 million MSMEs have a critical need for access to electricity in Nigeria. With this demand projected to nearly double in the next 10 years. This has led to the emergence in Nigeria of a number of businesses and non-profit organisations focused on developing projects and products aimed at increasing access to power for homes, communities and businesses.

However, there is no comprehensible legal regime on renewable energy up till now in the country. The government has an enormous reserve of natural resources for alternative energy making such as productive cultivable fertile land, supportive climatic environments in feedstock fabrication, for instance, cassava, maize, sugarcane, palm oil, among others.

Why Climate Finance will Unlock New Economic Opportunities and Jobs in African Countries?

Expert says, if Nigeria is able to develop a conducive environment for the growth of the green economy, the country could have a massive share of the over $14 trillion global green economy. In Nigeria the challenges are enormous and if we can create some form of opportunities to support businesses in that space in terms of capacity, it will create a rival opportunity for the country to build an economy that does not depend on crude oil.

The green economy gives the country the opportunity to create more jobs and there are lots of opportunities in the green space with covers from media, to transportation, to waste management and even to educate among others.

Aggressive financial support

Green issuances are now considered mainstream. To drive this vision, the role of finance cannot be over-emphasized since no tangible investment can be done without funds. While sovereign issuers were initially slow to issue them, they now realize that green bonds offer easy access to a large and diverse funding pool, providing a source of low-cost and much-needed capital to finance infrastructure projects and set up green funding programs.
Nigeria could benefit from the targeted interventions that would reduce the local air pollution and help the country to tackle greenhouse gas emissions.

It has been predicted by green economists that the transition to a global green economy will require a significant investment of resources sustained over time. This investment will be necessary to fund the research and implementation of green technologies, the building of new infrastructure to support those technologies, and to soften the social losses incurred as unsustainable industries are phased out.In total, the United Nations Environment Programme (UNEP) estimates that the annual financing required to transition to a global green economy ranges from US $1.05 trillion to US $2.59 trillion, which roughly represents 10% of all current annual global investment, or 2% of world GDP. This shows that lots of financing will be required. The government, in a bid to create an enabling environment come up with a green subsidy policy. Green subsidies such as price support measures, tax incentives, direct grants and loan support, may be used by the government to among others, foster green infant industries as part of a well-coordinated strategy to build comparative advantage and drive long term employment and growth.

Green Investments Vital for Africa Post-COVID Development

While Nigeria possesses an abundance of access to renewable energy sources and a master plan for renewable energy, the country is still behind in renewable energy development and usage. This may be attributed to the cost of renewable resources when compared to costs associated with fossil-based fuels. Increasing the amount of renewable energy requires that exploiting these resources be made economically attractive. Interests in shifting renewable energy to mainstream sustainable development are recently growing, due in part to the expanding commercial markets for renewable energy that are shifting investment patterns away from traditional government and international donor sources toward a greater reliance on private firms and banks.

In 2017, the Federal Government of Nigeria (FGN) issued a N10.69 billion green bond. The issuance was the first sovereign green bond in Africa. The FGN green bond was subsequently listed on the Nigerian Stock Exchange (NSE). Still on the public sector side, last year, the country listed a N15 billion series II green bond, which the Debt Management Office (DMO) said it would follow-up with another issuance in 2020.

The African region’s vulnerability to climate change, translated as damage relative to GDP and population, is proportionally most acute. Financial requirements to adapt to climate change are projected to be between US$20 and US$30 billion annually until 2030, according to the African Development Bank (AfDB). These can only be met through diversification of finance mechanisms and sources of funding. The particular climate-related challenges depend on the circumstances and geography of each nation.

The AfDB has played a major role in sustainable investment in Africa and is promoting green projects in national development planning. Between 2011 and 2015, AfDB mobilized approximately US$12 billion to support climate-resilient projects as part of its Climate Change Action Plan (CCAP). The bank’s African Climate Change Fund (ACCF) is aimed at providing access to large amounts of funding for African countries to scale up green finance. Nations across Africa are also set to benefit from the International Finance Corporation (IFC) and Amundi’s joint US$2 billion “Cornerstone” fund designed to buy green bonds issued by emerging market banks that would not otherwise attract institutional investors owing to their risk-return profiles.

Right policy mix

There has been significant progress over the past 20 years. While the world’s population has increased by a third, world GDP has tripled, helping millions of people to work their way out of poverty. The number of children in developing countries who die before the age of five dropped from 100 to 72 per 1 000 live births between 1990 and 2008, and around 90% of children in developing countries are now enrolled in primary school.

However, economic expansion has come at a price to the planet. If we do not protect the environment and its natural resources, this expansion could grind to a halt because we will have destroyed or permanently damaged the water and mineral resources, ecosystem diversity and other natural foundations on which our well-being relies.

If we do not change course, the impact on our quality of life and health will be significant, with an increasing economic burden. More and more financial and human resources will need to be spent to make enough water available and drinkable, keep the land productive, ensure that the air is breathable, and supply industry with the raw materials it needs.

Heading Toward Stronger Climate Action in Africa

Inclusive green growth offers an optimistic, realistic alternative to countries looking for new sources of growth that make economic, environmental and social sense. Green growth is not a replacement for sustainable development. Together with innovation, going green can be a long-term driver for economic growth.

Thus, the intervening policy redirection for the emerging economies including Nigeria is advancing the promising features emanating from growth and reducing the negative spillovers on human welfare. This challenge has prompted a public health dimension to critically assess the threshold level of growth for environmental and health capital sustainability, so that the growth which creates the wealth of nations will not jeopardize sustainable development objective among nations.

The natural environment no doubt is an ultimate determinant of human state and survival. However, striking the balance between the use of the environment by humans to sustain its needs and the preservation of the environment to sustain man is another concern. Previous studies assume the earth to have an infinite ability to maintain ecological balance. However, some other studies maintained that the earth possesses an upper limit of the natural system, known as assimilative capacity, “throughput constraint,” or optimal level. It is expected that beyond this assimilative capacity, there could be adverse reaction on human capital development. This could be reflected in indices such as human health and existence, which could consequently compromise future development in terms of labor productivity and growth sustainability.

Moreover, Nigeria is a signatory to the United Nations Framework Convention on Climate Change and has also committed itself in the Paris Accord to reduce its national GHG inventory. However, the electricity system is dominated by natural gas, accounting for about 85% of the supply system while the transport sector is fully run by gasoline and diesel.

Nigeria has put in place a number of policies intended to promote the use of renewable energy, such as:

  • National Energy Policy (NEP), 2003, 2006, 2013 – developed by the Energy Commission of Nigeria (ECN) The main goal of the policy is to create energy security through a robust energy supply mix by diversifying the energy supply and energy carriers based on the principle of an energy economy in which modern renewable energy increases its share.
  • National Economic Empowerment and Development Strategy (NEEDS), 2004 – by the National Planning Commission (NPA) in 2004 this policy supports the creation of renewable energy agency and technologies which will be funded under the National Power Sector Reform Act.
  • National Power Sector Reform Act (EPSRA), 2005 – This policy seeks to privatize the Nigeria power sector thereby making it more efficient and effective.
  • Renewable Electricity Policy Guidelines (REPG), 2006 – This policy promotes the expansion of electricity generation from renewables to at least 5% of the total electricity generated in the country.
  • Renewable Energy Master Plan (REMP) 2005 and 2012 – by the Energy Commission of Nigeria (ECN), in collaboration with the United Nations Development Programme (UNDP) in 2005 but later in 2012. The REMP stress the need for the integration of renewables into buildings, electricity grids and for off-grid electrical systems. Further, the importance of solar power in the country’s energy mix is also highlighted. According to the REMP, Nigeria intends to increase the supply of renewable electricity from 13% of total electricity generation in 2015 to 23% in 2025 and 36% by 2030. However, the REMP have not been approved by the National Assembly to be passed into law.

In a bid to support the efforts of the Nigerian government and the private sector, international development finance institutions (DFIs), such as the United States Agency for International Development (USAID), the UK Department for International Development (DFID), and GIZ3 under its Nigeria Energy Support Program (NESP), have contributed to the growth of renewable energy development in Nigeria.

There are basic bureaucratic hurdles to effectively put into action an orderly energy policy in Nigeria. Throughout the country, there is an inadequate understanding of renewable energy, its source, how and what it can be used for. Though most renewable technologies have become popular in developing countries, it still seems new in Nigeria, despite all the policies on ground supporting renewables. The country should move toward a low-carbon economy in Nigeria, there is the need to institutionalize appropriate behavioural and social changes in the society as well as developing technological capabilities in the area of clean technologies.

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