July 14, 2024
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Cautious Energy Transition Crucial to Avoid Economic Disruption – Report

A recent report on the ‘Implications of Oil and Gas Transition to the Nigerian Economy’ has emphasized the need for a cautious approach to transitioning away from oil to prevent exacerbating the country’s current economic challenges.

Presented at a webinar by the Centre for Climate Change and Development (CCCD) at Alex Ekwueme Federal University, Ebonyi State, in collaboration with the World Resources Institute, Punch NG says the report highlights the dependency of many Nigerian states on oil proceeds from the federation account for survival.

According to the Director of CCCD, Prof. Chukwumerije Okereke, transitioning away from oil and gas could lead to job losses and revenue decline in Nigeria and other oil-dependent countries.

He stressed the importance of managing the transition carefully to mitigate the adverse effects on the economy.

Research fellow Mr. Uchenna Nnamani echoed these concerns, noting that sub-national governments heavily rely on oil and gas revenue to meet their obligations.

With the potential drop in oil revenue, states may face significant challenges in fulfilling their responsibilities.

“Most states of the country depend heavily on revenue accruing from the federation account on a monthly basis to meet their obligations to their citizens. Sub-nationals seem to be vulnerable to oil and gas revenue.

“28 states if the federation got a bailout in 2021 with oil and gas revenue. With a drop in oil and gas revenue, states will find it difficult to cope.”

According to Mr. Nnamani, the report recommends a strategic transition plan focused on utilizing gas as a transition fuel, considering its abundance in Nigeria.

It also underscores the importance of incorporating solar energy into the transition strategy.

Emphasizing the risks associated with the transition, such as fiscal vulnerability and stranded assets, the report urges careful planning to minimize adverse impacts.

Meanwhile, industry leaders say energy transition is driven by crude oil prices.

Energy Afrique, in conversation with Bashir Danmalam, Chairman of Arewa Oil Marketers (AROGMA), received confirmation that the energy transition is being driven by the global price of crude oil.

He emphasized that as long as crude oil remains expensive worldwide, the necessity for alternative solutions like compressed natural gas (CNG) and solar energy will persist, especially for countries without access to crude oil.

Danmalam highlighted three main reasons for this transition: firstly, the impact of global warming caused by emissions from car engines and vehicles; secondly, the continual increase in crude oil prices; and thirdly, the forecasted reduction in the availability of crude oil.

Energy Afrique also spoke with Hisham Mikail, a solar engineer, who emphasized the necessity of the transition, particularly in developing countries like Nigeria where electricity remains unreliable.

He pointed out that people in such countries are turning to solar energy to reduce costs and illuminate their homes.

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