Scaling-up renewable energy in Africa: Nigeria

June 2012

Tree Africa

Contacts

Introduction

In this edition of the Scaling-up renewable energy in Africa series of publications, we focus on the climate change investment policies and opportunities in Nigeria in the energy sector. This briefing is a high-level compilation of key policies and projects, based on publicly available sources, and is not intended to be comprehensive.

Key points on Nigeria

  • Nigeria has a population of more than 155,989,000. It is the most populous country in Africa, with more than 73 million living in urban areas.
  • Per capita emissions are relatively low, at about 0.64 tonnes of CO2 per year.
  • Nigeria has one of the least energy-efficient economies in the world (ranking 21 out of 186 globally)1.
  • As the biggest oil producer in Africa, Nigeria’s economy is dominated by oil and gas. Total CO2 in the energy sector are expected to grow by 2.2 per cent annually2.
  • Nigeria has implemented a variety of plans and policies with a view to scaling up investment in renewable energy.
  • Resources are being mobilised under the Clean Technology Fund to improve access to finance for energy efficiency and renewable energy roll-outs.
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UNFCCC/Kyoto Protocol

Nigeria submitted its First National Communication under the United Nations Framework Convention on Climate Change (the Convention) in November 2003. Though now relatively old, the First National Communication is still relevant to setting out Nigeria’s needs and aspirations to reduce emissions. Nigeria’s First National Communication indicates that options for reducing emissions in the energy sector include:

  • efficiency improvement options in the residential, industrial and commercial sectors
  • increased use of renewable resources, by introducing small-scale hydropower plants and solar-electric options
  • supply-side options, especially rehabilitation of some existing oil refineries and power plants, and the introduction of newer combined-cycle technologies and cogeneration at industrial facilities
  • increased use of associated gas to reduce gas flaring.

A Special Climate Change Unit has been created to implement the Convention and the Kyoto Protocol. Nigeria has established the Presidential Implementation Committee for CDM (PICCDM) as the DNA for CDM activities in Nigeria.

There are currently five CDM projects registered in Nigeria in the gas flaring, efficient stoves, and municipal solid waste sectors. As Nigeria is not a Least Developed Country, the CERs issued from CDM projects registered after 31 December 2012 will not be eligible for compliance under the EU’s Emissions Trading Scheme.

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Nigeria Vision 20: 2020

Vision 20: 2020 is a ten-year plan for stimulating Nigeria’s economic growth and launching the country onto a healthy path of sustained and rapid socioeconomic development. The overall objectives for the conservation of the environment include commitments to3:

  • prevent further loss of bio-diversity and restore already degraded areas and protect ecologically sensitive sites
  • harness and sustain natural resource use
  • reduce the impact of climate change on socio-economic development processes
  • make Nigeria a visible actor in global climate change response
  • halt land degradation, combat desertification and mitigate impacts of droughts
  • secure a clean environment through appropriate waste management
  • reduce the occurrence and impact of environmental hazards and disasters
  • raise the level of awareness on the state of the Nigerian environment
  • improve the overall governance of the environment.

Conventional (oil, gas, coal and nuclear energy), non-conventional (hydropower, solar, wind, and biomass) and electricity are the energy sources within the scope of the Vision 2020 Energy report. The strategic priorities identified for the Nigerian energy sector are as follows:

  • provide necessary commercial and market incentives in order to attract private investments (local and foreign) required to facilitate the necessary energy capacity expansions in a rapidly growing economy
  • consolidation of ongoing structural and economic reforms targeted at establishing effective institutional and regulatory frameworks in the energy sector
  • achieve energy supply security by utilizing the nation’s renewable energy resources (including wind, solar, hydro and biomass) to diversify the energy mix
  • development of efficient and sustainable energy generation and consumption patterns.

Under Vision 20: 2020, the government will focus on creating an enabling environment to facilitate the utilisation of Nigeria’s vast renewable energy resources (including hydropower, solar, wind energy and biomass) for electricity generation in rural areas. This is expected to boost private capital in the construction of mini power stations in rural communities using locally appropriate technologies (possibly hybrid) – hydro, wind, biomass, solar. Also, one of the Vision 20: 2020 policy objectives is to emphasise the exploitation of wind energy for rural water supply and also for electricity generation.

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Feed-in tariffs

We understand that the Nigeria Electricity Regulatory Commission (NERC) has been developing feed-in tariffs for renewable energy which would support off-grid and mini-grid systems in rural and semi-urban areas. As far as we are aware the feed-in tariff scheme is currently under development.

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Clean Technology Fund

The Clean Technology Fund (CTF) is one of the two multi-donor Trust Funds within the Climate Investment Funds (CIFs). The CIFs have been designed to support low-carbon and climate-resilient development through scaled-up financing channelled through Multilateral Development Banks (MDBs). The CTF aims to support the rapid deployment of low-carbon technologies on a significant scale, with the objective of cost-effective reductions in the growth of greenhouse gas emissions. The CTF finances programmes in 12 countries, including Nigeria, and one region. In order to access CTF, the MDBs concerned engage with stakeholders on how the fund may help finance scaled-up, low carbon activities in the given country. Investment Plans are designed under the leadership of the recipient country.

Nigeria’s CTF Investment Plan is a broad “business plan” by the Federal Government of Nigeria for the International Bank for Reconstruction and Development (IBRD), the African Development Bank (AfDB), and the International Finance Corporation (IFC). It supports the low-carbon growth objectives and priorities outlined in Nigeria’s First National Communication to the Convention (see above) and also Vision 20: 2020.

Nigeria’s Investment Plan envisages a total investment of US $1.316 billion leveraged through partners, counterpart funds and the private sector.4

Nigeria’s CTF Investment Plan highlights the following priorities:

  • transport and industry were selected as the key sectors as they are both end users of energy and are central to the Nigeria’s economy, its development and its environment
  • expanding transportation choices in Nigeria’s growing cities, will help to bend Nigeria’s emissions trajectory significantly in this sector, while contributing to a better quality of life in the short-to-medium term
  • catalysing markets for energy efficiency creates an opportunity for increased competitiveness for Nigeria’s industry, with the opportunity to leverage private sector capital to scale-up these low-carbon investments in a reasonable timeframe.

Reducing gas flaring from interventions in the broader energy sector was seen as critically important for Nigeria but the CTF was determined to be an inappropriate instrument for addressing this issue.

In terms of its focus on energy, the Investment Plan focuses on downstream energy:

  • The CTF initiative in Nigeria is intended to help overcome the financing and market barriers for low carbon investments (such as unfamiliarity with clean energy and energy efficiency as lines of business, high nominal interest rates and short loan tenors) through a combination of financial incentives, risk products or lines of credit, as well as institutional and market based capacity building and advisory services programs.
  • This will support the deployment and application of clean energy and energy efficiency solutions and fuel switching in various industrial and service sectors and in households.
  • In energy efficiency, the CTF investment would provide concessionary terms that will help overcome the concerns that Nigerian industry has about the high initial capital outlay of the technologies.
  • In renewable energy, CTF financing would help to fill financing gaps that may result from lack of familiarity and support for such projects from financial institutions. It would also provide concessionary terms that overcome the additional cost barriers of employing, for example, energy efficient boilers for agriculture and food processing companies.
  • CTF resources could also be used to provide appropriate incentives for qualified waste-to-energy developers and local financial intermediaries to ensure timely and sustainable delivery of such projects.
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Climate change legislation

Nigeria has no National Climate Change Policy and Strategy that presents Nigeria’s current and future efforts to address climate change vulnerability and adaptation.5 Nigeria is in the process of finalising a National Climate Change Policy and Response Strategy. It currently relies on environmentrelated policies and action plans to implement climate change initiatives and activities.6

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National Climate Change Commission and Renewable Energy Master Plan

On July 22, 2009, the Nigerian Senate passed a bill to establish the National Climate Change Commission as a statutory body and to vest it with the responsibility to regulate and coordinate policies and actions on climate change. The Commission is also to set up a National Carbon Market Scheme and tackle the effect of global warming and its impact on Nigeria. The Commission would be tasked with coordinating resources, policies and actions in the field of climate change, providing advice to the Federal Government and developing a national strategy for the reduction of greenhouse gas emissions and a low carbon economy.

The country’s Renewable Energy Master Plan was launched in 2006 and identifies considerable potential for generating solar, small and large hydro, biomass, biogas and wind energy across the country.7

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Footnotes

  1. Climate Investment Funds, (2010). CTF Investment Plan for Nigeria. Available at http://www.climateinvestmentfunds.org, p 5.
  2. Federal Ministry of Environment, Nigeria (Special Climate Change Unit), (September 2010). NEEDS for Climate Change in Nigeria, p 4.
  3. Nigeria Vision 2020 – Link: http://www.un-nigeria.org
  4. Ibid. p 4.
  5. Federal Ministry of Environment, Nigeria (Special Climate Change Unit), (September 2010). NEEDS for Climate Change in Nigeria, p 13.
  6. Ibid. p 38.
  7. Climate Investment Funds, (2010). CTF Investment Plan for Nigeria. Available at http://www.climateinvestmentfunds.org, p 10.
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