Posted October 24, 2023

Unlocking Nigeria’s Power Export Potential for Economic Diversification and Regional Influence

In a nation brimming with energy resources, Nigeria stands on the cusp of a transformative journey—one that could propel it to new heights of diversification and regional influence. With large

In a nation brimming with energy resources, Nigeria stands on the cusp of a transformative journey—one that could propel it to new heights of diversification and regional influence. With large reserves of oil and gas, in addition to vast sources of hydro energy, Nigeria is richly endowed with the means to export electricity to the whole West African sub region thereby growing the economy, further diversifying the economy and increasing its influence. Furthermore, the nation harbors an untapped solar energy potential of 5,000 trillion kilowatt-hours (KWh)¹, indicating a future where electricity is not just a local luxury but an exportable commodity that creates additional jobs, additional tax revenue and regional influence.

The Vision of Energy Abundance

Nigeria’s energy resources offer a myriad of opportunities for power generation. When we consider the plethora of energy sources at its disposal—oil, gas, hydro and solar power²—the vision of a nation where electricity is universally accessible and exportable to neighboring countries should be a priority. Such a vision is achievable, echoing the success stories of energy-exporting powerhouses like Germany³ and Russia⁴.

This article explores the untapped potential of power exports by Nigeria and the many facets of this transformation—from the economic and regional advantages to the obstacles that stand in its way.

Historical Perspective: A Diverse Past

Nigeria’s history showcases a diversified economic landscape. In the early 1900s, the nation relied on agriculture and mining to support the economy. Agriculture, in particular, played a pivotal role, contributing an average of 57.0% to GDP and generating 64.5% of export earnings⁵. The country was a significant exporter of a wide range of agricultural products, including groundnut, cotton, cocoa, palm oil, timber, hides, and skins. These exports fueled not only the domestic economy but also various manufacturing industries both at home and abroad.

In addition to agriculture, industries like the coal sector, with a capacity of 24,511⁶ metric tons, played a pivotal role in advancing the nation’s progress. However, the discovery of oil in the 1950s and its increasing focus in the 1970s gradually stifled the export of other products or commodities. Today, oil accounts for over 79.37⁷ percent of Nigeria’s total exports. While this shift has brought substantial gains to the nation, it has also exposed the perils of relying on a single, volatile commodity.

The Need for Diversification

To mitigate the risks associated with oil dependency and create a more stable economic base, Nigeria must diversify its export portfolio. One of the paths to achieving this diversification lies in the realm of energy, particularly power generation. The nation’s abundant energy resources, including coal, oil & gas reserves, peat, hydroelectricity, solar, and wind, provide an exciting opportunity to not only meet domestic energy needs but also to export electricity to neighboring countries. As the 9th largest gas reserve holder in the world⁸, energy resources are more than adequate to meet the nation’s own demands and contribute to the energy landscape of West Africa.

The Market for Energy Exports in West Africa

The West African region is home to a population of 423 million with a GDP of US$760,548M⁹.

Image for the GDP of western African states¹⁰.

The cost of infrastructure for ensuring steady power supply is prohibitively high for the region, where the annual GDP of some countries is less than US$3 million¹¹. For these nations, importing electricity from countries with surplus electricity is a cost-effective solution. Nigeria, with its vast energy resources and significant export capacity, is uniquely positioned to electrify the entire Western African region.

The electricity demand of a few states in the region, such as Senegal (1,350 MW)¹², Benin (500MW)¹³, Ghana (425 MW)¹⁴, Liberia (300 MW)¹⁵, Guinea (2,373 MW)¹⁶, and Guinea-Bissau (63 MW)¹⁷, clearly indicate the electricity demand, which Nigeria can potentially fulfill.

Benefits of Energy Export – Russia as a Case Study

Russia serves as an exemplary case study for the advantages of energy exports. Russia leverages a diverse energy mix, of natural gas, oil, coal, nuclear, and hydropower¹⁸, to meet domestic needs and actively engage in energy trade with neighboring countries and regions. In 2021, Russia supplied 40%¹⁹ of Europe’s gas needs and exported electricity to neighboring countries. The revenue generated from these exports significantly impacts the nation’s economic stability and development. It funds infrastructure projects, social programs, and technological advancements, fortifying Russia’s economy and regional influence.

Russia also uses energy exports as a diplomatic tool to influence the politics and policies of neighboring countries.

Additionally, Russia’s energy exports bolster its internal energy security. By prioritizing the provision of electricity to neighboring nations, Russia is driven to expand its investments in the power industry. This heightened investment enhances local distribution efficiency, consequently mitigating the potential risks of energy shortages or interruptions.

Nigeria stands to enjoy these benefits with electricity becoming a main export product.

Roadblocks to Nigeria’s Expanding Power Exports

While Nigeria has the potential to become a major electricity exporter in West Africa, several challenges impede the realization of this potential. The country is part of the West African Power Pool (WAPP)²⁰, an initiative designed to develop power infrastructure to serve the energy needs of member states. Currently, Nigeria supplies power to Niger, Togo, and Benin, but expanding this coverage to more countries faces significant hurdles:

  • Absence of Infrastructure: Nigeria’s inadequate power infrastructure within its own borders hampers its ability to expand exports to more countries. One potential solution is to encourage private investments in power infrastructure to manage the financial burden that comes with funding infrastructure like transmission lines to neighboring countries.
  • Policy and Regulatory Framework: Supportive regulatory and policy frameworks, such as tax breaks, reduced import taxes on machinery, and streamlined regulatory policies among countries, are essential to motivate private investment in the power sector.
  • Quality Manpower: New skills relating to cross-border electricity trading and network management will need to be learned.
  • Effective Contracts: Compelling agreements with neighboring nations are vital to ensure secure energy trade with these countries. The contractual framework must be both robust and efficient, assuring payments, among other factors, in order to attract private investment.

A Nigeria Where Power Exports Are Expanded

The vision of charting economic growth through the exporting of electricity by Nigeria is not merely a strategic opportunity; it is a visionary path to a brighter and more sustainable economic future.

Expanding electricity exports in Nigeria offers several significant advantages; this move further diversifies the economy and provides a more dependable and predictable income source when compared to oil, due to the long-term contracts involved.

Moreover, these long-term contracts guarantee a steady inflow of foreign exchange earnings. These foreign exchange reserves can be employed to stabilize the national currency, support the import of essential goods, and service foreign debt, thus contributing to macroeconomic stability. The development of the energy sector also has the potential to create a substantial number of jobs, promoting economic growth and addressing unemployment challenges.

As Nigeria rests on the largest gas reserves in Africa, efforts should be made to realize its potential of becoming a

By tapping into its energy resources and expanding electricity exports, Nigeria has the potential to transform its economy, create jobs, and play a pivotal role in the West African energy landscape. The journey toward energy abundance and regional influence is a promising one, but it requires overcoming infrastructure challenges, developing supportive policies, building a skilled workforce, and establishing effective contracts with neighboring nations. If these hurdles can be addressed, Nigeria’s vision of becoming a major electricity exporter holds the promise of a more diversified, stable, and prosperous economic future.

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