The World’s Quest for Cleaner Energy Spells Doom for Nigeria’s Oil Economy

A gloom future awaits the oil economy as climate change induced environmental concerns spur the world to seek cleaner energy. From factories to transportation to households, the push for replacement of fossil fuel has never been so momentous.

European aerospace giant Airbus announced Monday, the details of three hydrogen-fueled concept planes that could be launched by the year 2035. It’s a hydrogen-based energy design named ZEROe, meaning zero-emission.

Hydrogen is popular in land transportation and has powered a lot of vehicles. As more companies adopt the technology, the aviation industry is beginning to see it as a way out of carbon-emission controversy.

“I strongly believe that the use of hydrogen – both in synthetic fuels and as a primary power source for commercial aircraft – has the potential to significantly reduce aviation’s climate impact,” said Airbus CEO Guillaume Faury.

However, the push for zero-emission vehicles isn’t limited to hydrogen powered engines. Alstom, another Europe-based firm developed the Coradia iLint, a train that converts oxygen and hydrogen into electricity using fuel-cell technology.

The number of low or zero-emission planes is increasing, and new technologies are ushering in other alternatives too. In June, the UK tested its first commercial-scale electric flight, a battery-powered plane. In May, a Cessna 208B Grand Caravan aircraft with a 750-horsepower all-electric motor completed its maiden flight, taking off from Washington.

There is also the Solar Impulse 2, a sun-powered aircraft that circumnavigated the earth in 2016.

As the aviation industry pushes to improve its zero-emission technology, the automobile industry is recording strides that project a near future of little or no combustible vehicles. Deloitte Insights reported that the combined annual sales of battery electric vehicles and plug-in hybrid electric vehicles tipped over the two-million-vehicle mark for the first time in 2019.

There has been remarkable progress in support of electric vehicles from governments, industries and consumers since the past 10 years. Despite the short term impact of COVID-19 on the EV market, there is a progressive pattern of growth that is expected to be sustained throughout the year as more countries and consumers choose electric vehicles.

The progress is noted in the regional growth of the electric vehicles (EV) industry worldwide before COVID ushered in the unprecedented economic downturn that plummeted economies globally.

Deloitte reported that sales of EVs grew by 15% in 2019 compared to 2018, driven by the growth of BEVs in Europe (+93%), China (+17%) and other regions (+22%). While the record seems little, it’s quite significant to the 2030 EV goal as many countries and companies sign up.

On the other hand, industries and homes are becoming more welcoming to solar and hydrogen powered electricity, a situation which also has a significant bearing on oil demand.

Against this backdrop, oil companies are beginning to downsize their operational cost and to build new low-carbon businesses.

Reuters reported that Shell is exploring ways to reduce spending on oil and gas production by 30% to 40% for its upstream sector, its largest division. For the downstream sector, the company plans to cut 45,000 service stations, the biggest in the world, from its network. This will mean limiting its oil production to a few key places that include Nigeria, Gulf of Mexico and the North Sea.

Earlier in the year, Shells’ European rivals BP and Eni announced their plans to reduce focus on oil production and develop low-carbon businesses.

These developments and moves call for concern for oil producing economies like Nigeria. The oil rich West African country has been severely hit by the drop in oil prices due to the pandemic. Nigeria’s GDP is about 90% dependent on oil export, a situation that puts its destiny in the hands of oil buyers.

India is one of Nigeria’s oil biggest importers but the South Asian country is stricken with environmental pollution menace emanating from vehicle emission and industrial waste. And as part of Indian government’s efforts to curtail the pollution, it has joined the 2030 EV goal, aiming to make the country 100% electric vehicle nation 30 years from now.

This, like every other step the world has taken toward cleaner energy spells doom for Nigeria’s oil-based economy. The Africa’ biggest oil producer has recorded little gain in its effort to diversify its economy. Though President Muhammadu Buhari’s administration has been advocating agriculture as a way out, it seems more like re-echoing an age old mantra as infrastructural deficiencies and poor farming mechanisms stand in the way of progress.

The plunge in oil prices forced the Nigerian government to slash its oil benchmark from $57 to $30bp and cut 20% of the capital budget. Against this backdrop, the country is borrowing to fund its infrastructural projects and recurrent expenditure, which depicts more financial troubles for the coming years.

While transition to cleaner energy is a discussion for future generations in Nigeria, energy economics experts have called on the government to shift focus from oil and consider technology among other choices to avoid the looming doom.

“We need to get our economics right and have a judicious balance between politics and economics in order to transform our country. Politics should no longer outweigh economics and technological considerations.

“We need to look away from oil as a revenue generator but as value addition to the development of Nigeria. Countries have done it. Our federal constitution is about sharing and not producing. We should rework our constitution to bake the cake and not share the cake.

“Take a holistic view of our production, example in agriculture. Add value to agriculture and not the way it is talked about now,” former president of Nigerian Association of Energy Economics, NAEE, Prof. Akin Iwayemi said.