Energy resource structure and on-going sustainable development policy in Nigeria: a review

Nigeria has varied energy resources and primarily rich in crude oil and natural gas which placed her on the tenth and ninths positions, respectively, of the global world reserves in 2011 [9]. In spite of holding the largest natural gas reserves in Africa, the country lacks adequate infrastructure needed for the optimal development of the sector. Hence, natural gas related with oil production is usually flared thereby resulting to increase in environmental degradation. However, with the on-going development of regional gas pipelines, extension of the liquefied natural gas (LNG) infrastructure, and policies to stop gas flaring, development for export and domestic utilization in the sector are anticipated to accelerate [3, 9]. The geographical spreads of fossil deposits concentrate more in the south–south and southeast geo-political regions of the country. Energy transportation (particularly for refined petroleum products) throughout the remaining geo-political zones of the country poses a heavy burden on the Nigerian National Petroleum Corporation (NNPC) and the Independent Petroleum Marketers Association of Nigeria (IPMAN), leading to uneven product costs across the country due to varying transportation logistics and costs.

Nigeria is endowed with abundant deposit of renewable energy (RE) potentials ranging from solar, wind, hydro (small and large), biomass and fuel wood; RE has placed Nigeria in a better position to advance her internal energy strategies. However, the country is yet to integrate the vast RE potential into the energy mix. In addition, the mainstream energy supply chain is at present dependent on fossil fuels and firewood. These sources are grossly depleted due to the inability to harness other energy resources. The RE capacity is thus discussed in the following subsections.

The sectoral energy consumption in Nigeria for the year 2011 is presented in Fig. 6. The household (domestic) sector of the economy consumed the highest energy than other sectors. The energy consumption in the household increased from 25 % in 1980 to 30 % in the early 1990s. Domestic energy consumption has increased rapidly since 1990s to 38.16 % in 2011 [36]. The second largest consumer of energy in 2011 is the industrial sector which consumed about 28.91 % of the overall energy. Its share was 6.3 % in 1959 and rose to 15.7 % after the oil boom in 1979. The transportation sector also witnessed a rapid growth in energy consumption as more roads were constructed in the early 1980s. In 2000, energy consumption in transportation was about 13.6 % and further attained 27.62 % in 2011 as shown in Fig. 2. The service sector has been stable since 2005 [36].

The electric power generating sector in Nigeria is relatively small when compared with the teeming population and consequent energy consumption. The overall electricity production and consumption from 2000 to 2012 are presented in Fig. 7. The electricity production increased from 14.75 billion kWh in 2000 to 20.13 billion kWh in 2012 while consumption increased from 13.72 billion kWh in 2000 to 18.14 billion kWh in 2012. The net consumption in 2011 was 18.14 billion kWh and slightly less than the generation in 2012; due to an agreement with Niger Republic under the West African Power Pool [37], appreciable portion of the electricity generated was exported to Niger Republic leaving back a short fall for the entire citizenry.

The electricity consumption per capita in Nigeria is also relatively low (Fig. 8), decreasing from 143 kWh in 2005 to 106. 63 kWh in 2012. The power-generating sector at the moment is faced with numerous problems in the generation, transmission and distribution units coupled with low plants performance due to aging infrastructure. The current installed generating capacity of Nigeria is small with average production of about 3,200 MW (Table 6) for a population of approximately 170 million people [37, 38]. To meet the country’s power requirements, the current generation must be raised to more than twenty times the current value. Though the country has vast natural gas reserves that could be used to generate affordable and cheap power, its actual average production capacity has remained within 2,500–4,800 MW for the last decade. In a bid to meet the optimization plans through attaining the power generation gap of 26,561 MW by 2020 (Vision 20:2020), the Federal Government in October 2013 privatized the state-owned power firm to attract participations of foreign/private investments into the power sector [39].

Nigeria is a developing economy and gradually becoming more industrialized; however, much has to be done to catch up with the industrialized economies like China, Japan, etc. The energy consumption and GDP growth rates from 1980 to 2011 are presented in Fig. 9 [11, 12]. The energy consumption growth rate increased from 0.4 % in 1980 to 1.10 % in 2011 with an annual percentage change of about 1.6 %. The energy consumption growth rate was far less than those for the GDP with the exception in 1992 where the GDP growth rate declined to the minimum value of 0.43 %. This essentially shows an increase in energy demand owing to rapid population growth whose teeming energy demands are being met with meager supply. The electricity consumption per capita (kWh per person) was about 107 kWh as at 2012 (Fig. 8); this is lower than the world average value of 2,659 kWh and about 50,000 % far from the leading country (Iceland) with 52,621 kWh [11]. This low electric energy consumption is a strong pointer that the total energy demand will surely increase with a corresponding improvement of the economy that will be needed to attain an increase in the living standards. Nigeria has enough energy resources to meet with the challenges of energy demand. However, the major reason for the shortage of domestic energy supply may not be unconnected to the overdependence on oil and non-diversification of energy resources in the country. Hence, for sustainable development, the energy demand and supply chain must be repositioned to attain a reasonable equilibrium.

The domestic production of oil and gas has continued to grow in the last two decades while production of coal has declined to almost zero by 2011. Large percentage of the oil produced in Nigeria is exported. Though Nigeria still remains the largest producer of crude oil in the continent, her refining capacity is very low. Figures 10 and 11 show the distribution of petroleum products to the Nigerian market and the percentage import of petroleum products (PPs) from 1980 to 2010 [11, 40, 41]. The PPs supply has been through domestic crude refining capacities and from external supply. The difference between these two dimensions of supply depends on the refining strength of the local refineries. The country has five state-owned domestic refineries with cumulative production capacity of 450,000 barrels of oil per day. The country still imports over 50 % of PPs for her domestic consumption because of the inadequate refining capacity of these refineries. From 1980 to 2010 (Fig. 10) about 323.07 million tons of PPs was supplied to the domestic market out of which 206.19 million tons were supplied by local refineries and the rest (116.97 million tons) from external supply. The distribution system (Fig. 11) shows that 35.6 % of PPs was imported in 1980, reflecting a decreasing trend of about 0.4 % in 1991. The maximum imports of PPs were obtained in 2000 accounting for 73.7 % and followed by a decline of about 39.8 % in 2001 and 2002; about 34.76 million tons of PPs were imported from 2006 to 2010 and have remained relatively stable. A total of over 5,400 million USD was spent on subsidy for PPs between these years by the Nigerian National Petroleum Cooperation (NNPC). This situation is unhealthy for an economy that is characterized with a high level of unemployment and low technological capacity. The petroleum sector is also marked with structural problems ranging from inadequate human capacity and domestic technology needed to manage the oil dynamics especially in the downstream sector.

Furthermore, the following facts are required to move the sector forward: (1) a total restructuring of the hydrocarbon sector, (2) increase in PPs production, (3) rationalization of the decision-making mechanism by separating the different roles of NNPC, (4) privatization of the downstream activities of NNPC and (5) promotion of local contents. This becomes imperative because a robust sustainable domestic energy production will improve the standard of living, reduce poverty and boost industrialization.

Indicators that affect energy efficiency (EE) include energy intensity (EI) and consumption elasticity coefficient (ECEC). These indicators have a strong relationship with energy efficiency as they are related to economic growth and energy consumption. EI is the ratio of energy consumption to GDP output. It is the energy required to generate one dollar unit of gross output whereas ECEC is the rate at which energy is consumed to the GDP growth rate. Low value of EI in an economy shows a high level of efficiency. Equations (1) and (2) have been applied to data in [11] to obtain EI and ECEC from 1980 to 2011 as depicted in Figs. 12 and 13.

Figures 12 and 13 show the change in overall EI and ECEC from year 1980 to 2011. The EI values decreased by 57.47 % from 0.135 to 0.057 toe per US$1,000 GDP (2005 price). In the same vein, EI from 1998 to 2011 dropped by 64.54, 37.76, 29.78, 88.15 and 85.76 % for industry, transportation, agriculture, commercial and residential sectors, respectively [11]. The decline in EI is a sign of efficient improvements. However, the improvements in the overall EE have been remarkably small. The sectoral EI are thus discussed:

Crude oil and natural gas account for about 42 and 32 % of the country’s total energy consumption compared to 48 and 20 % of the world average values (Fig. 5). Pollutant emissions in Nigeria are mostly from consumption of these energy sources and accounts for over 75 % of CO₂ emissions. The major sources of CO₂ emissions are from coal and crude oil/petroleum consumption due to their respective carbon content. The total CO₂ emission has increased steadily from 94 to 101 million metric tons between 1992 and 1996. Coal accounted for 2.8 % of CO₂ emissions while natural gas consumption, natural gas flaring and petroleum consumption accounted for 15.69, 62.94 and 33.61 % of CO₂ emissions, respectively [11]. The total CO₂ emissions from gas flaring dropped from 62.94 % in 1996 to 47.23 % in 2011. This drop was due to government policy directing all oil-producing companies to shut in oil fields where the gas production and flaring were considerably more than the crude oil produced. This culminated into a reduction in the volume of gas flared from 2.5 to 1.5 bcf/d in 2010 [45]. With the country trailing the path of industrialization, there is large potential for the total CO₂ to increase as the energy consumption rises to compensate for the growing and economy. The comparison of per capita CO₂ emission for some selected African countries in 2009 is presented in Fig. 16. The world CO₂ emissions per capita were estimated at 4.49 tons in 2009 [45], with Nigeria having a share of 0.52 tons; Algeria and Tunisia emitted the highest value of 3.33 and 2.18 tons, respectively. In 2011, Nigeria contributed about 0.32 % to the world CO₂ emissions recording a dip of about 0.002 % from 2009 [46]. Furthermore, Africa has the potential of CO₂ increase and based solely on the ground that the majority of countries in Africa are growing almost simultaneously and struggling for economic independence from the large economies. This growth will inevitably be complimented with an increase in energy consumption and the consequent increase in CO₂ emission.

One of the major strategies to meet energy demand is through the adoption of energy-efficient appliances. ECN/UNDP through a project has completed energy efficiency and conservation plans to reduce energy consumption at the residential sector by the replacement of incandescent bulbs with energy-saving bulbs [compact fluorescent lamps (CFL)]. The commission has recognized the fact that lighting alone takes more than 18 % of the total power consumed in the residential sector compared to about 8–11 % in the advanced countries [47]. It is projected that Nigeria needs about 50 million CFL’s to replace the incandescent lamps in the residential sector; with this replacement, a saving of approximately 1,500 MW of electricity can be achieved. Other efficient master plan includes, the phasing out of backward generating capacity having low efficiency and rather investing in smart grid, enhancing electrical equipment through technological innovation for improved energy efficiency, introducing a national building codes, establishing federal efficiency standards to reduce electricity consumption, ensure appliances labeling and certification and energy conservation and management in industries.

In addition, the following sustainable strategies were pronounced according to the Renewable Energy Master Plan (REMP) [30] viz: (1) the need to move from a fossil economy to one driven by growing share of renewable energy and (2) harnessing renewable energy resources in a manner and at prices that will support the implementation of equitable and sustainable development. In this framework, the projected energy demands in the sectors of the economy are presented in Table 7 based on 7 % growth rate. To meet with this demand, the target is to get solar contribution of 5, 75, and 500 MW to the energy mix structure in 2012, 2015 and 2025, respectively, while wind power contribution is set at 1, 19 and 38 MW for same years for short term, medium term and long term in both cases [19].

The government expansion strategy in the energy sector includes the integration of energy resources that are non-fossil into the energy mix structure. Renewable energy is expected to contribute about 14, 23 and 36 % for short, medium and long term of the overall energy and electricity supply in Nigeria by 2030. The targets for renewable energy production are presented in Table 8. Furthermore, wind energy resources in the short term will require an increase of more than a hundred percentage to produce 30 MW in 2015 and 40 MW in 2030. Some wind power projects are being in existence and operational (though on a small scale). Solar PV installations are on the increase and about 1 MW total dispersed installations are going on country wide for low energy applications such as water pumping, street lighting, vaccine refrigerators and community lighting [48].