Nigeria energy sector under
the universal principles of the Energy Charter
DRAFT
Brussels, May 2015
Energy Charter Secretariat
1
Pre-Assessment Report of the Nigerian Energy Sector under the Principles
of the International Energy Charter and the Energy Charter Treaty1
Brussels
May 2015
1 This publication has been produced with the assistance of the European Union. The contents of this
publication are the sole responsibility of the author and can in no way be taken to reflect the views of the
European Union.
The contents of this work do not necessarily represent the views of the Energy Charter Secretariat or any
members of the Energy charter Treaty nor those of the Government of Nigeria.
This Report was drafted by Uwakwe Ukuta Azikiwe (Nigerian Electricity Regulatory Commission). The research
work was guided by Ernesto Bonafé (Energy Charter Secretariat).
2
link to page 6 link to page 8 link to page 10 link to page 10 link to page 12 link to page 14 link to page 14 link to page 16 link to page 21 link to page 22 link to page 23 link to page 23 link to page 25 link to page 28 link to page 29 link to page 30 link to page 30 link to page 32 link to page 32 link to page 32 link to page 34 link to page 34 link to page 35 link to page 36 link to page 36 link to page 38 link to page 39 link to page 40 link to page 41 link to page 41 link to page 41 link to page 42
Table of Contents
Executive Summary ................................................................................................................................ 6
1. Introduction ......................................................................................................................................... 8
2. Country Profile.................................................................................................................................. 10
2.1. General Features ........................................................................................................................ 10
2.2. The Economy ............................................................................................................................. 12
2.3. Administration of the Energy Sector ......................................................................................... 14
2.3.1. The Presidency .................................................................................................................... 14
2.3.2. Federal Ministry of Petroleum Resources (FMoPR) .......................................................... 16
2.3.3. The Federal Ministry of Power (FMoP).............................................................................. 21
2.3.4. Federal Ministry of Mines and Solid Minerals ................................................................... 22
2.3.5. Federal Ministry of Environment (FMoE) .......................................................................... 23
2.3.6. Federal Ministry of Water Resources (FMoWR) ................................................................ 23
2.3.7. Federal Ministry of Trade and Investments ........................................................................ 25
2.3.8. Nigerian Electricity Regulatory Commission (NERC) ....................................................... 28
2.3.9. National Inland Waterways Authority (NIWA) .................................................................. 29
2.3.10. The Nigerian Bulk Electricity Trading Co. (NBET) ......................................................... 30
2.3.11. The Niger Delta Power Holding Company Limited (NDPHC) ........................................ 30
3. National energy sovereignty ............................................................................................................. 32
3.1 National energy sovereignty as a universal principle ................................................................. 32
3.2 Nigerian Constitution .................................................................................................................. 32
3.3. Reforms in the Energy Sector .................................................................................................... 34
3.3.1. Power Sector Reform .......................................................................................................... 34
3.3.2. Reform of the Oil and Gas Sector ....................................................................................... 35
3.4. National strategy ........................................................................................................................ 36
3.4.1. General Energy Policies ...................................................................................................... 36
3.4.2. Electricity Sector ................................................................................................................. 38
3.4.3. Oil & Gas ............................................................................................................................ 39
3.4.4. Renewable Energy .............................................................................................................. 40
3.4.5. Rural Electrification ............................................................................................................ 41
4. Energy Security ................................................................................................................................. 41
4.1 Energy security as a universal principle ..................................................................................... 41
4.2 Energy security in Nigeria .......................................................................................................... 42
3
link to page 45 link to page 46 link to page 46 link to page 47 link to page 48 link to page 54 link to page 59 link to page 63 link to page 74 link to page 75 link to page 76 link to page 76 link to page 85 link to page 85 link to page 85 link to page 85 link to page 86 link to page 87 link to page 90 link to page 91 link to page 93 link to page 93 link to page 93 link to page 94 link to page 97 link to page 100 link to page 100 link to page 100 link to page 101 link to page 104 link to page 104 link to page 104 link to page 104 link to page 105
4.3. Energy consumption and production ......................................................................................... 45
5. Open Markets and technological transfer ......................................................................................... 46
5.1 Open energy markets and technological transfer as a universal principle .................................. 46
5.2 Open energy markets .................................................................................................................. 47
5.2.1 Hydrocarbons ....................................................................................................................... 48
5.2.2. Natural Gas ......................................................................................................................... 54
5.2.3. Coal Energy ........................................................................................................................ 59
5.2.4. Electricity ............................................................................................................................ 63
5.2.5. Nuclear energy .................................................................................................................... 74
6. Sustainable energy ............................................................................................................................ 75
6.1. Sustainable energy as a universal principle ............................................................................... 76
6.2.1 Renewable energy sources ................................................................................................... 76
7. Regional and International Frameworks ........................................................................................... 85
7.1. Regional integration as universal principle ................................................................................ 85
7.2. Nigeria regional leader and committed partner .......................................................................... 85
7.2.1. Regional integration ............................................................................................................ 85
7.2.2. Joint Development with Sao Tome and Principe ................................................................ 86
7.2.3. West African Gas Pipeline (WAGP)................................................................................... 87
7.2.4. The Proposed Trans-Saharan Gas Pipeline (NIGAL Project) ............................................. 90
7.2.5. The West African Power Pool ............................................................................................ 91
7.3. International cooperation as universal principle ........................................................................ 93
7.4 Nigerian international commitments ........................................................................................... 93
7.4.1. Investment Agreements & Related Instruments ................................................................. 93
7.4.2. International Initiatives for Investments in the Power Sector ............................................. 94
7.4.3. International Assistance for the Reform Programme .......................................................... 97
8. Investment protection ...................................................................................................................... 100
8.1 Investment protection as universal principle............................................................................. 100
8.2 Nigerian experience and commitment on investment protection .............................................. 100
8.3. Incentives for Investors in Nigeria ........................................................................................... 101
9. Added Value of Acceding to the International Energy Charter and Energy Charter Treaty .......... 104
9.1. At political level ....................................................................................................................... 104
9.1.1. Political signal of the country to international community ............................................... 104
9.1.2 Effects of modernization of the Energy Charter Process ................................................... 104
9.2. At strategic level ...................................................................................................................... 105
4
link to page 105 link to page 105 link to page 106 link to page 106 link to page 106 link to page 106 link to page 107 link to page 108 link to page 108 link to page 109 link to page 109 link to page 112 link to page 113
9.2.1. Promotion of energy investments and trade ...................................................................... 105
9.2.2. Engagement in multilateral cooperation and good governance ........................................ 105
9.2.3. Influential and confident position within the Energy Charter Process .............................. 106
9.3. At practical level ...................................................................................................................... 106
9.3.1 Observer status with the Energy Charter Conference ........................................................ 106
9.3.2. Getting familiar with the Energy Charter Treaty .............................................................. 106
9.3.3. Possibility to initiate the Early Warning Mechanism ....................................................... 107
10. Conclusions and recommendations ............................................................................................... 108
10.1. Challenges .............................................................................................................................. 108
10.2. Open issues ............................................................................................................................ 109
10.3. Recommendations .................................................................................................................. 109
10.4. Procedure to adopt the International Energy Charter ............................................................. 112
Bibliography ....................................................................................................................................... 113
5
Executive Summary
The Energy Charter is an international organization that promotes the rule of law and
regulatory stability for investment, trade, transit and efficiency in the energy sector across the
world. As part of the objective to expand its principles and rules beyond its traditional
borders, the Energy Charter has updated the 1991 European Energy Charter into the 2015
International Energy Charter in order to reflect some of the most topical energy challenges of
the 21st century. These challenges include the energy “Trilemma,” between energy security,
economic development and environmental protection, the need to promote access to modern
energy services, diversification of energy sources and routes, regional integration of energy
markets and the growing importance of developing and emerging countries in the global
energy mix.
The International Energy Charter is in line with the EU and international policy agenda as
reflected in the UN Sustainable Energy for All (UNSE4All) initiative, which mandates a 3-
goal target of ensuring universal access, doubling the share of renewable energy and doubling
the rate of improvement in energy efficiency by 2024. The European Union has allocated
more than €3 billion over the next seven years (2014-2020) to promote sustainable energy in
Sub-Saharan Africa. The importance of these efforts has been reinforced by the 2014 G7 and
G20 meetings in Brussels and Brisbane, respectively, which highlighted the need to provide
strategic assistance for sustainable socio-economic growth and financial rebalancing in
developing and emerging countries.
In this context, the Energy Charter Secretariat, in collaboration with the European
Commission, has developed a capacity building programme with African countries to
introduce them to the universal market-based principles enshrined in the International Energy
Charter and the Energy Charter Treaty and to assess their energy sectors against these
universal principles. The objective is to promote an investment-friendly regulatory
environment that is needed to address the huge energy challenges facing the African
continent. This Report is the result of that capacity building programme, which brings
secondees from African countries to the Secretariat in Brussels for three months.
This report provides an overview of the Nigerian energy sector, and presents national reforms
against the core principles embodied in the International Energy Charter and the Energy
6
Charter Treaty: Security of supply and universal energy access, open and sustainable markets,
national sovereignty, regional market integration, regulatory stability and predictability,
research and technology transfer, and international cooperation. Accession to the
International Energy Charter and the Energy Charter Treaty will contribute to upgrading the
national energy policy and legal framework according to international standards. This will
eliminate uncertainty and unpredictability, while improving trust and reliability in an
increasingly global and interdependent energy sector. The more countries subscribe to those
principles, the more they will effectively set the necessary standard for international energy
relations.
7
1. Introduction
The Energy Charter Treaty is an international legally binding document providing clear and
predictable rules in the areas of investments, trade and transit, and energy efficiency. It
provides dispute resolution mechanisms, while explicitly recognising and protecting national
sovereignty over natural resources. The Energy Charter Treaty creates an environment in
which international energy markets can function effectively, helps to create a level
international playing field, and promotes the rule of law in the energy sector. The Energy
Charter Treaty was signed in 1994 and entered into force in 1998. It currently has been
signed, or acceded to, by 54 countries, including the European Union.
The political foundation of the Energy Charter Treaty was the European Energy Charter of
1991, a political declaration expressing the commitment of a signatory country to move
towards an upgraded international legal system. The European Energy Charter is a political
commitment by its members to encourage energy cooperation with the following objectives
and principles: development of open and efficient energy markets; creation of conditions to
stimulate the flow of investment into the energy sector and encourage the participation of
private enterprise; non-discrimination among participants; respect for state sovereignty over
natural resources; and recognition of the importance of environmentally sound and energy
efficient policies. To date, the European Energy Charter has been signed by sixty-four
European, Asian, Australasia, North American and African states, as well as the European
Union.
The Astana Declaration of November 2014 highlights the strategic objective of the Energy
Charter to expand the principles of the Treaty beyond its traditional borders by maximising
on the increasing interest of new countries in different continents/regions around the world.
The adoption of the International Energy Charter in 2015 reflects the implementation of this
objective.
Nigeria became an invited Observer by the Energy Charter Conference at its 12th meeting
held on June 26, 2003 in Brussels.2 Having Nigeria sign the International Energy Charter, and
later the Energy Charter Treaty, sends a political signal to the international community that it
2 Decision of the Energy Charter Conference (CCDEC 2003) Brussels, 26 June 2003 retrieved from
http://www.energycharter.org/fileadmin/DocumentsMedia/CCDECS/CCDEC200301.pdf
8
shares a number of international energy principles on trade, investment, transit and energy
efficiency. This will upgrade its national energy sector according to international principles,
raise its investment profile, and help to attract the needed foreign investment.
The objective of this report is to present the Nigerian energy sector and compare it with the
universal principles enshrined in the International Energy Charter and the Energy Charter
Treaty. The conclusion is that Nigerian energy objectives and structural reforms match the
principles of the International Energy Charter and therefore Nigeria should embrace it, and
thereafter, the Energy Charter Treaty.
9
2. Country Profile
2.1. General Features
Figure 1: Map of The Federal Republic of Nigeria
3
Source: Ezilon Maps
The Federal Republic of Nigeria gained its independence on October 1, 1960. It has 36 States
and the Federal Capital Territory, Abuja, and is located in West Africa. Nigeria lies between
latitude 10o North and longitude 8o East, and is bordered on the west by Republic of Benin,
on the north by Niger and Chad Republics, on the east by Cameroon and on the South by the
Gulf of Guinea in the Atlantic Ocean. The Rivers Niger and Benue merge to form a ‘Y’
shaped confluence at Lokoja, and divides the country into three major geographical sections,
west, east and north as it flows southward through tropical rain forests and swamps to its
delta in the Gulf of Guinea. The Niger Delta is one of the world’s largest accurate fan-shaped
river deltas. Nigeria is covered by three types of vegetation, forest, savannahs, and montane
land (found mostly in the mountains near the Cameroonian border).
Nigeria is blessed with natural resources, e.g., natural gas, crude oil, tin, iron ore, coal,
limestone, niobium, lead, zinc, and arable land. Agricultural products include cocoa, peanuts,
cotton, palm oil, corn, rice, sorghum, millet, cassava (manioc, tapioca), yams, rubber, cattle,
3 Ezilon Maps. Retrieved fro
m http://www.ezilon.com/maps/africa/nigeria-maps.html
10
sheep, goats, pigs, timber, and fish. Furthermore, industries include crude oil, coal, tin,
columbite, rubber products, wood, hides and skins, textiles, cement and other construction
materials, food products, footwear, chemicals, fertilizer, printing, ceramics, and steel. The
climate in Nigeria is equatorial in the south, tropical in the centre, and arid in the north, and is
characterized by high humidity and substantial rainfall. There are two seasons –wet and dry.
The wet season lasts from April to October, while the dry season lasts from November
through March.
Nigeria has a total area of 923,773 square km (made up of 909,890 square km of land area
and 13,879 square km of water area) The longest distance from East to West is about 767km,
and from North to South 1,605km. Nigeria is the most populous country in Africa and the
eighth most populous in the world with a population estimated in July 2014 at 177.2 million
(140.4 million after the last census exercise, in 2006) and a population growth rate of 2.47%
per annum (33rd in the world).4
Figure 2: Linguistic Groups in Nigeria
Source: University of Texas5
The population is made up of 0-14 year olds (43.2%), 15-24 (19.3%), 25-54 (30.5%) 55-64
(3.9%), and 65 and over (3%), meaning that about 70% of Nigerians are below the age of 40.
4 CIA Factbook on Nigeria. Retrieved
from https://www.cia.gov/library/publications/the-world-
factbook/geos/ni.html.
5 University of Texas. Retrieved
from http://www.lib.utexas.edu/maps/africa/nigeria_linguistic_1979.jpg
11
Nigeria has between 250 and 400 ethnic groups with the Hausa and Fulani, Yoruba, Igbo
(Ibo), Ijaw, Kanuri, Ibibio, and Tiv being the most populous and politically influential. The
country is made up of Christians, Moslems, and people with indigenous beliefs. The official
language is English, but about 400 different languages are spoken in Nigeria.
2.2. The Economy
The National Bureau of Statistics recently conducted a rebasing and re-benchmarking
exercise of the national account series (GDP) from the first quarter of 2011 to the third
quarter of 2014. The statistical exercise involved the replacing of the old base year used to
compile volume measures of GDP (i.e., 1990) with a new and more recent base year (i.e.,
2010). The next exercise will be done in 2016, in line with the UN Statistical Commission
recommendation that such exercises be carried out every 5 years. Following the exercise,
Nigeria emerged as Africa’s largest economy with 2013 GDP (current) estimated at US
$521.8 billion, and the 26th largest economy in the world.6
Figure 3: Nominal GDP of Largest African Economies in 2013
Source: CEIC Data7
6 World Bank Global Economic Prospects for Sub-Saharan Africa. Retrieved from
http://www.worldbank.org/content/dam/Worldbank/GEP/GEP2014b/GEP2014b_SSA.pdf
7 CEIC, News Alert. Retrieved from
http://www.ceicdata.com/en/blog/ceic-newslert-nigeria-becomes-largest-
economy-africa-after-gdp-rebase
12
The economy of the country in previous years and prior to the rebasing relied heavily on
crude oil and gas, but since the rebasing heavily depends on agriculture, trade, information &
communication, and crude oil and natural gas, which respectively account for 20.24%,
17.64%, 10.96%, and 10.80%, while Electricity, Gas, Steam, and Air Condition Supply
contribute only 0.60%.8 Prior to the rebasing, the three sectors of agriculture, crude oil and
gas, and trade accounted for 85% of GDP, but these sectors now cover only half, about 54%,
of Nigerian output. Even though the share of oil and gas has been reduced, it still accounts for
a strong majority of exports and budgetary revenues in the country, and is therefore critical to
macroeconomic and budgetary stability. The real GDP growth rate is 5.49% for 2013
(estimated to be 6.23% in 2014), and the inflation rate for the same year stood at 8.50%
(estimated to be 8.05% in 2014). The literacy rate is about 61.3% (2010 est.), life expectancy
is 52.62 years (2014 est.), and unemployment rate is 23.9% (2011 est.).9
Figure 4: Distribution of Sectors a component of the Total Nominal GDP - 2013
Source: CEIC Data10
Nigeria’s top trading partners include the US, India, France, South Africa, Netherlands,
Spain, Brazil, Indonesia, China, the UK, Germany, Japan, South Korea, and Thailand. Capital
8 NBS Nigerian GDP Report, Quarter Four, 2014, Issue 04. Retrieved from
http://www.nigerianstat.gov.ng/pages/download/272
9 CIA Factbook on Nigeria. Retrieved
from https://www.cia.gov/library/publications/the-world-
factbook/geos/ni.html
10 CEIC, News Alert. Retrieved fro
m http://www.ceicdata.com/en/blog/ceic-newslert-nigeria-becomes-largest-
economy-africa-after-gdp-rebase
13
importation into Nigeria has gone from US $6 billion in 2010 to US $21.3 billion in 2013,
and at the end of the third quarter of 2014, capital importation into Nigeria stood at US $16.3
billion.11
2.3. Administration of the Energy Sector
The energy sector operates under various organizations which are mandated to develop
policies and/or regulate activities affecting the different areas of the sector, or provide unique
services required for the operation of the sector. They include the Presidency, Ministries,
Regulatory bodies, Commissions, Authorities, Agencies, Offices, Bureaus, and Incorporated
Companies.
2.3.1. The Presidency
The Presidency is headed by the President, whose chief duty is to make sure that the laws of
Nigeria are executed. He performs these duties through executive agencies that include
Federal Ministries headed by Ministers, and the Departments and Agencies headed by
Chairmen, Director-Generals, Managing Directors, or Executive Secretaries. Some specific
Departments and Agencies are under the supervision of the President, and have
responsibilities related to the energy sector, such as The Presidential Task Force on Power
(PTFP), the Bureau of Public Enterprise (BPE), The Energy Commission (ECN), the
Nigerian Atomic Energy Commission (NAEC), and the National Energy Council.
The Presidential Task Force on Power (PTFP) was established in 2010 to drive the
implementation of the reform of Nigeria's power sector as outlined in the Road Map for
Power Sector Reform.12 The PTFP co-ordinates the activities of several agencies that have
specific contributions to the reform process such as the Federal Ministry of Power, the
Federal Ministry of Finance, the Bureau of Public Enterprises (BPE), the Nigerian Electricity
Regulatory Agency (NERC), the Nigerian National Petroleum Corporation (NNPC), the
11 NBS Capital importation Summary Report 2007-2014. Retrieved from
www.nigerianstat.gov.ng/pages/download/211
12 PTFP. Retrieved from
http://www.nigeriapowerreform.org/content/Roadmap%20for%20Power%20Sector%20Reform%20-
%20Revision%201.pdf
14
Bureau of Public Procurement, and National Gas Company Limited (NGC). It also monitors
the planning and execution of various short-term projects that are critical to meeting the
milestones and targets in the Roadmap for the transformation of the power sector into a self-
sustaining and largely privatised industry.13
The Bureau of Public Enterprise (BPE) is established to be the secretariat of the National
Council on Privatisation (NCP) by the Public Enterprises (Privatisation and
Commercialisation) Act Cap P.38 LFN (LFN) 2004 (the Act).14 The NCP formulates and
approves policies on privatisation and commercialization of government-owned entities,
while the BPE implements those policies. In addition, the BPE is responsible for preparation
of public enterprises approved for privatisation and commercialization, advising on further
public enterprises which may be privatised or commercialized, advising on the capital
restructuring needs of Nigerian public enterprises to be privatized, and account management
for all commercialised enterprises, etc. The BPE recently concluded unbundling and
privatization of the generation and distribution companies owned by PHCN, in addition to the
concession for the hydropower plants and executing a management agreement on behalf of
the transmission licensee. Presently, the privatization of the generation projects under the
NIPP is being finalized. A decision has not been made on the privatization of the refineries
and other assets owned by the Federal Government.
The Energy Commission of Nigeria (ECN) was established by the Energy Commission of
Nigeria Act 1979 as amended by the Energy Commission of Nigeria (Amendment) Acts 32
of 1988 and 19 of 1989,15 with responsibility for conducting strategic planning and
coordination of national policies in the energy field, as well as preparing periodic master
plans for the development of energy in Nigeria. It was established in line with the declaration
of the Heads of The Economic Community of West African States (ECOWAS) in 1982 for
the establishment of an Agency in each member state charged with the responsibility of
coordinating and supervising all energy functions and activities. The functions of the ECN
include the gathering and dissemination of information relating to national policy in the field
of energy, advising on adequate funding of the energy sector, monitoring the performance of
13 PTFP. Retrieved from
http://www.nigeriapowerreform.org/index.php?option=com_content&view=article&id=76&Itemid=302
14 BPE. Retrieved fro
m http://www.bpeng.org/sites/bpe/Documents/BPE%20Act%201999.pdf
15 Energy Commission of Nigeria.
http://www.energy.gov.ng/index.php?option=com_docman&task=doc_download&gid=71&Itemid+49
15
the energy sector in the execution of government policies, and providing solutions to
technical problems that may arise in the implementation of any policy relating to the field of
energy.
The Nigeria Atomic Energy Commission (NAEC) was established through the enactment of
Act 46 of 197616 as a specialised agency empowered and designated as the national agency
vested with responsibility for the promotion and development of nuclear technology, and the
implementation of the national nuclear power programme. It has the mandate to provide the
pathway for the exploration and harnessing of atomic energy for application in the country
according to the economic policies of Nigeria. In order to accomplish this, the Commission is
responsible for research and development activities in nuclear technology, development and
deployment of nuclear power plants, along with a manpower development programme.
The National Energy Council was inaugurated by the Federal Government to advise the
President on long term and broad national objectives, and strategic policy directions for the
oil and gas industry. The Council is also empowered to conduct periodic reviews of the
National Oil and Gas Policy, Energy Master Plan, Strategic National Investments in the
sector, and long term projects. The Council has also contributed in promoting energy
cooperation with other countries, companies, international entities and investors through the
Nigerian-German Energy Partnership, Nigeria-Brazil Energy Cooperation, General Electric-
Nigeria Country to Company Energy Partnership, and the World Bank Energy Development
Project Concept. These partnerships have leveraged expertise and comparative advantages to
provide sustainable solutions to Nigeria's energy challenges.17
2.3.2. Federal Ministry of Petroleum Resources (FMoPR)
The Ministry of Petroleum Resources (FMoPR) has the mandate to initiate and supervise the
implementation of government policies for the oil and gas sector. The Ministry is responsible
for creating an internationally competitive oil and gas sector that contributes maximally to the
growth and development of the Nigerian economy, as well as effective implementation of
16 FAO Legal. Retrieved from
http://faolex.fao.org/docs/texts/nig120577.doc
17 NEC. Retrieved from
http://energycouncil.gov.ng/default.aspx
16
policies on oil and gas exploration, exploitation and utilization in accordance with best
international practice.
The Minister is empowered by the Petroleum Act No 51 of 196918 to issue various licences
for the exploration of petroleum, construction and operation of refineries, or for the storage,
selling, or distribution of petroleum products. The Oil Exploration Licence (OEL) is a non-
exclusive licence that only permits exploration for petroleum in an area. It is granted for one
year and is renewable upon satisfaction of certain conditions.19 The Oil Prospecting Licence
(OPL) grants the exclusive right to explore and prospect for petroleum, as well as carry away
and dispose of petroleum won during prospecting operations, subject to fulfilment of certain
obligations. The duration is determined by the Minister, but shall not exceed five (5) years for
onshore areas and shallow waters,20 and ten (10) years for Deep Offshore and Inland
Basins.21 The Oil Mining Lease (OML) confers on the holder the exclusive right to search
for, win, work, carry away and dispose of petroleum within an area for a period of 20 years. It
is granted only to the holder of an OPL upon satisfaction of all conditions of the license and
the Act, and oil in commercial quantity has been discovered, i.e., a flow rate of 10,000 bpd.22
In addition, participatory rights are granted to contractors to conduct sole risk petroleum
operations with respect to OMLs held by the NNPC.23 Furthermore, abandoned or
unproductive fields in lease areas covered by OMLs are farmed out to independent
leaseholders and indigenous companies pursuant to the Guidelines for Farm-out and
Operation of Marginal Fields 2011.24 The Minister is also vested with the power to grant
permits to survey routes for oil pipelines, and to grant licenses for the construction,
18 Petroleum Act. Retrieved fro
m http://www.lexadin.nl/wlg/legis/nofr/oeur/arch/nig/petroleumact.pdf
19 Petroleum Act. Schedule One, Paragraph 1-4. Retrieved from
http://www.lexadin.nl/wlg/legis/nofr/oeur/arch/nig/petroleumact.pdf
20 Petroleum Act. Schedule One, Paragraph 5-7. Retrieved from
http://www.lexadin.nl/wlg/legis/nofr/oeur/arch/nig/petroleumact.pdf
21 Deep Offshore and Inland Basins Production Sharing Contracts Act 1999, Section 2. International Centre for
Nigerian Law . Retrieved from
http://www.nigeria-
law.org/DeepOffshoreAndInlandBasinProductionSharingContractsDecree1999.htm
22 Petroleum Act. Schedule One, Paragraph 8-13. Retrieved from
http://www.lexadin.nl/wlg/legis/nofr/oeur/arch/nig/petroleumact.pdf
23 Deep Offshore and Inland Basins Production Sharing Contracts Act 1999. Retrieved from
http://www.nigeria-
law.org/DeepOffshoreAndInlandBasinProductionSharingContractsDecree1999.htm
24 Aina Blankson LP. Retrieved from
http://documents.mx/documents/marginal-fields.html
17
maintenance and operation of oil pipelines pursuant to the provisions of the Oil Pipelines Act
of 1990.25
The holder of an OPL or OML may assign the interests to other persons, subject to the
consent of the Minister.26 In the PIB, a takeover, merger or acquisition shall be deemed as an
assignment which shall require the Minister’s consent. The Minister may decline the
application for consent where he/she is not satisfied that the proposed assignee at least has the
required technical and financial capacity to effectively carry out the obligations of the
Licence.27 Other than the foregoing, the Petroleum Act allows the government to acquire
interests in any licence or lease upon paying adequate compensation to the licensee or
leaseholder.28 The major challenge with respect to the assignment of interest is a lack of clear
guidelines for the exercise of the Minister’s discretion, which has led to some measure of
arbitrariness and uncertainty. A notable example of inadequate guidelines is the absence of
any timelines for the exercise of the Minister’s powers to grant consent or otherwise.
There are various agencies and parastatals under the supervision of the Ministry that ensure
the implementation of approved policies for the sector. The include The Department of
Petroleum Resources (DPR), the Nigerian National Petroleum Corporation (NNPC),
Petroleum Products Pricing and Regulatory Agency (PPRA), the Nigerian Content
Development and Monitoring Board (NCDMB), the Gas Aggregation Company Nigeria
Limited (GACN), the Nigeria Nuclear Regulatory Authority (NNRA), and the Nigerian Gas
Company (NGC).
The Department of Petroleum Resources (DPR) has the responsibility of ensuring compliance
with laws, regulations and guidelines in the industry through monitoring operations where
crude oil, natural gas, and petroleum products are explored, refined, stored, pumped, sold,
and transported.29 DPR supervises all petroleum industry operations, enforces safety and
environmental regulations, keeps records on petroleum industry operations, advises
25 International Center for Nigerian Law. Retrieved
from http://www.nigeria-
law.org/Oil%20Pipelines%20Act.htm
26 First Schedule, Para. 14, Petroleum Act. Retrieved from
http://www.lexadin.nl/wlg/legis/nofr/oeur/arch/nig/petroleumact.pdf
27 Section 16, Petroleum Act. Retrieved from
http://www.lexadin.nl/wlg/legis/nofr/oeur/arch/nig/petroleumact.pdf
28 Para 35, First Schedule, Petroleum Act. Retrieved from
http://www.lexadin.nl/wlg/legis/nofr/oeur/arch/nig/petroleumact.pdf
29 DPR website. Retrieved from
https://dpr.gov.ng/index/about-dpr/functions-of-dpr/
18
Government and relevant Agencies on technical matters and policies, processes applications
for licenses, ensures timely and adequate payments of all rents and royalties, and monitors the
implementation of the local content policy.
The Nigerian National Petroleum Corporation (NNPC) was established by the Nigerian
National Petroleum Corporation Act No 33 of 1977 (now Cap N320 LFN 1999)30 to
undertake commercial ventures on behalf of the Federal Government in the petroleum
industry. In addition to its exploration activities, the NNPC has powers and operational
interests in refining, petrochemicals and products transportation, as well as marketing. In
1988, the NNPC was commercialised into 12 strategic business units, covering the entire
spectrum of oil industry operations: exploration and production, gas development, refining,
distribution, petrochemicals, engineering, and commercial investments. An oil marketing
company seeking to market Nigerian crude must obtain a crude oil licence (COL) from the
NNPC. The NNPC Guidelines for Lifting of Nigerian Crude 200331 lays down the procedure
and requirements for obtaining the licence, and shortlisted companies are considered on the
basis of successful economic intelligence reports in respect of the requirements. Successful
companies are granted the licence, and awarded a crude oil allocation contract that entitles
them to lift crude, sell to refineries, refine for export or for sale in Nigeria. The price at which
crude oil is sold in Nigeria is unregulated, but the NNPC is, however, responsible for setting
the price for federal government crude. This price is known as the official selling price, and
the Dated Brent-Forties-Oseburg-Ekofisk crude grade32 is used as a marker to determine the
prices for the different grades of Nigerian crude.
The Petroleum Products Pricing and Regulatory Agency (PPRA) is an agency established by
the Petroleum Products Pricing Regulatory Agency (Establishment) Act No 8 of 2003 (now
Cap P43, Vol. 14, LFN 2004) to fix the benchmark prices of petroleum products, and also
regulate and monitor the transportation and distribution of petroleum products in Nigeria. Its
other functions include ensuring reasonable returns to operators, creating an information
databank for decision-making, overseeing the implementation of the relevant
recommendations and programmes in the White Paper on the Report of the Special
Committee on the Review of the Petroleum Products Supply and Distribution, approving
30 International Center for Nigerian Law. Retrieved
from http://www.nigeria-
law.org/Nigerian%20National%20Petroleum%20Corporation%20Act.htm
31 NNPC. Retrieved fro
m http://www.nnpcgroup.com/PublicRelations/bidinvite.aspx
32 Platts. Retrieved
from http://www.platts.com/price-assessments/oil/dated-brent
19
benchmark prices for products, preventing collusion and restrictive trade practices, and other
necessary activities.33
The Nigerian Content Development and Monitoring Board (NCDMB) was established by the
Nigerian Oil and Gas Industry Content Development (NOGICD) Act of 2010. The NCDMB
is responsible for supervising, coordinating, monitoring and managing the development of
Nigerian content in the oil and gas sector in accordance with the requirements and
prescriptions of the NCDA. The Board provides a framework for promoting participation of
Nigerians in the oil and gas industry, and lays down minimum thresholds for Nigerian
content utilised by the industry. Some of its responsibilities include increasing indigenous
participation in the industry, building local capacity and competencies, creating linkages to
other sectors of the national economy, and boosting industry contributions to the growth of
GDP.
The Gas Aggregation Company Nigeria Limited (GACN) was incorporated in 2010 for the
purpose of stimulating growth of natural gas utilization in the Nigerian domestic market.
GACN was formed in line with statutory requirement of the National Domestic Gas Supply
& Pricing Regulations of 2008 and is the vehicle for the implementation of the Nigerian Gas
Master Plan (NGMP) commercial framework. The NGMP requires the establishment of the
GACN, as the Strategic Aggregator for the domestic gas market responsible for processing
requests from gas buyers, managing allocation of gas to buyers, facilitating negotiations for
Gas Sale and Aggregation Agreement (GSAA), managing escrow accounts on behalf of gas
sellers, and managing dispute resolution process for stakeholders.34
The Nigeria Nuclear Regulatory Authority (NNRA) regulates and monitors all activities
involving development and use of nuclear tools and radioactive materials. The Nuclear Safety
and Radiation Protection Act 19 of 199535 establishes the Authority, and empowers it to
regulate all nuclear activities and enforcing all nuclear laws and regulations in Nigeria. Its
responsibilities include registering, licensing, inspecting and enforcing nuclear safety
33 NASS. Retrieved
from http://www.nassnig.org/nass/legislation.php?id=1167
34 GACN. Retrieved from
http://www.nigeriaelectricityprivatisation.com/wp-
content/uploads/downloads/2011/02/Gas_Aggregation_Company_of_Nigeria_Investor_Forum_Presentation.
pdf
35 LawNigeria.com. Retrieved from
http://lawnigeria.com/LawsoftheFederation/NUCLEAR-SAFETY-AND-
RADIATION-PROTECTION-ACT.html
20
and radiological protection in all practices in the country and enabling Nigeria to meet its
international obligations on the peaceful uses of nuclear technology.36
The Nigerian Gas Company (NGC) is a subsidiary of the NNPC charged with the
responsibility of serving Nigeria's energy needs through an integrated gas pipeline network,
as well as exporting natural gas and its derivatives to customers in West African. The
company was initially established to gather, treat, transmit and market Nigeria’s natural gas
and its by-products. Its business philosophy was later reviewed to focus only on transmission,
distribution and marketing of natural gas. Furthermore, the NGC is expected to seek new gas
marketing opportunities by executing new GTAs, GSAs and GPAs to supply customers,
explore opportunities in the region, partner with other investors to develop and expand CNG
& LPG business in Nigeria and the region, and invest in new distribution pipelines. NGC
currently operates 12 gas supply systems comprising of 16 compressor stations, 18 metering
stations, and over 1,250 km of pipelines (4" to 36" in diameter), with a capacity of more than
2.5 bscf of gas per day.37
2.3.3. The Federal Ministry of Power (FMoP)
The Federal Ministry of Power has the overall responsibility of formulating electric power
policy. The Ministry’s powers are guided by the National Electric Power Policy (NEPP) of
2001, the Electric Power Sector Reform Act of 2005, and the Roadmap for Power Sector
Reform of August 2010.38 The NEPP is the national policy document for the power sector,
the EPSR provides the legal framework, and the Roadmap is an implementation document for
reforms in the sector. Entities under its supervision include the Rural Electrification
Authority (REA) and Electricity Management Services Limited (EMSL).
The Rural Electrification Authority (REA) is established under the EPSR Act with the
mandate to implement the Rural Electrification Strategy and Plan for Nigeria under the
36 NNRA. Retrieved from
http://www.nnra.gov.ng/page-about_us
37 NNPC. Retrieved fro
m http://www.nnpcgroup.com/nnpcbusiness/subsidiaries/ngc.aspx
38 PTFP. Retrieved from
http://www.nigeriapowerreform.org/content/Roadmap%20for%20Power%20Sector%20Reform%20-
%20Revision%201.pdf
21
supervision of the Minister of Power.39 The Rural Electrification Strategy and Plan covers
expansion of the national grid to rural areas, the development of isolated and mini-grid
systems all over the country, and the administration of the Rural Electrification Fund.
The Electricity Management Services Limited (EMSL) is established by the Federal
Government to take over the responsibilities of some non-core operational and subsidiary
assets of the defunct PHCN, with the mandate to provide ancillary and support services to the
electricity generation, transmission, distribution segments of the power sector, end-user
consumers and other related businesses. Their responsibilities include carrying out
inspections, tests and certification of equipment; providing data, information, and library
services; maintenance, repairs, and re-conditioning of transformers; printing security and
non-security documents; operating the National Meter Test Stations in Nigeria; and providing
storage facilities for operators.
2.3.4. Federal Ministry of Mines and Solid Minerals
This ministry was established in 1985 to encourage development of the country’s solid
mineral resources. It formulates policies, provides information on mining potential and
production, and regulates operations of operators. The Mining and Mineral Act of 200740
clearly defines the Government’s role as a regulator, facilitator and supervisor of activities in
the sector.
The Mining Cadastre Office (MCO) is established by the Act as an autonomous body
responsible for granting and managing of mining titles/rights, protection of rights of
investors, monitoring and administration of mining title/rights, and use of time limits for
granting titles. In order to allow the private sector to take a pivotal role in the growth of the
sector, the MCO was created for a stable regulatory, economic and political environment
which will encourage foreign investors to make long-term commitments to exploration and
mine development in Nigeria.
39 Electric Power Sector Reform Act No 6 of 2005 Cap. E7 LFN 2004, Section 88. Retrieved from
http://www.placng.org/new/laws/E7.pdf
40 MCO. Retrieved from
http://www.miningcadastre.gov.ng/pages/pub/pdf/Nigeria%20Minerals%20and%20Mining%20Act%202007.p
df
22
2.3.5. Federal Ministry of Environment (FMoE)
The Federal Ministry of Environment was established by a Presidential approval in June 1999
to ensure effective coordination of all environmental matters which hitherto were fragmented
and resident in other Ministries. Subsequently, the Environmental Impact Assessment (EIA)
Act No. 86 of 1992 Cap E12, LFN 200441 was enacted, requiring any person planning a
project/activity which may have an impact on the environment to conduct an EIA study and
submit a Report for approval and issuance of a Certificate. The Report shall also set out the
plans for preventing and mitigating such impacts, as well as clean-up plans where necessary.
The Schedule to the Act lists industries for which such studies are mandatory, and includes
some activities in Mining, Petroleum, Power Generation and Transmission, and Quarries. The
regulatory body responsible for enforcement of environment laws is the National
Environmental Standards and Regulations Enforcement Agency (NESREA).
The National Environmental Standards and Regulations Enforcement Agency (NESREA)
was established by the NESREA Act of 30 July, 200742 to enforce all environmental laws,
guidelines, policies, standards and regulations in Nigeria. It also has the responsibility to
enforce compliance with international agreements, protocols, conventions and treaties related
to the environment.43 The Federal Court of Appeals in Nigeria recently held that
“…NESREA…is the statutory body established by the National Assembly to replace Federal
Environmental Protection Agency (FEPA)… It is therefore the body that is vested with
powers to issue Environmental Impact Assessment Certificates”.44
2.3.6. Federal Ministry of Water Resources (FMoWR)
In April 2010 the FMoWR was separated from the Ministry of Agriculture with the
responsibility of managing the nation’s water resources. Its mandate includes formulation and
implementation of Water Resources Policies and Programmes, coordination of hydro-
meteorological and hydrological data, monitoring and evaluation of water projects and
41 International Center for Nigerian Law. Retrieved
from http://www.nigeria-
law.org/Environmental%20Impact%20Assessment%20Decree%20No.%2086%201992.htm
42 FAO Legal Office. Retrieved from
http://faolex.fao.org/docs/pdf/nig120569.pdf
43 NESREA. Retrieved from
http://www.nesrea.org/about.php
44 Guardian Newspaper of February 22, 2015. Retrieved from
http://www.ngrguardiannews.com/2015/02/court-bars-states-on-issuance-of-eia-approval-certificate/
23
programmes for effective performance, formulation and review of national water legislation,
and liaison with relevant agencies on matters relating to water resources development. The
Ministry engages in the construction, operation and maintenance of dams nationwide for
water supply, hydro power, irrigation, fishery development, flood control, tourism and
recreation. The entities under its supervision include the River Basin Authorities and the
Nigerian Integrated Water Resources Commission (NIWRC).
The Nigerian Integrated Water Resources Commission (NIWRC) was created by the NIWRC
Act
to regulate and manage water resources all over the country, and other related matters.
The Act also gives it responsibility for the economic and technical regulations of all aspect of
water resources, namely including exploitation and commission, construction, operation and
maintenance, and tariffs of public and private water resource infrastructure. The Commission
was created for proper management and conservation of the resources as the Water Resources
Act CAP W2 LFN 2004,45 only focused on water resource development. Included in the
functions of the Commission is the issuance of Water Resources Development or Operating
Licences, under the Act. Such a licence is required for any promoter intending to undertake a
hydro-electric power project.
The River Basin Authorities were created by the River Basins Development Act
Cap 396,
LFN 1990.46 This Act establishes and regulates the eleven (11) River Basin Authorities in
Nigeria. Their functions include undertaking comprehensive development of surface and
underground water resources for various uses, as well as to construct, operate and maintain
dams, dykes, polders, wells, boreholes, irrigation and drainage systems, and other works
necessary for the achievement of the Authority's functions. Furthermore, given the potential
for small hydro power generation within the jurisdictions of these River basins, investors will
require the collaboration, and possible issuance of authorizations from the Authorities prior to
engaging in construction of hydroelectric plants within the territories of the Authorities.
45 Lawnigeria.com. Retrieved from
http://lawnigeria.com/LawsoftheFederation/WATER-RESOURCES-ACT.html
46 FAO Legal Office. Retrieved from
http://faolex.fao.org/docs/pdf/nig18394.pdf
24
Figure 5: The River Basin Authorities
Source: Scientific Research47
2.3.7. Federal Ministry of Trade and Investments
The Federal Ministry of Trade & Investment (FMTI) was created with the responsibility to
diversify the economy by promoting trade and investment, with special emphasis on
increased production and export of non-oil and gas products. It has jurisdiction over business
standards and practices, consumer protection, and bilateral and multilateral trade relations
and exports. The FMTI implements the National Trade Policy with the aim of keeping up
with global trends in international commerce while providing detailed guidelines for
importers and exporters in conjunction with the Ministry of Finance.48 The Ministry has
responsibility for issuing export permits for the export of petroleum products, as well as
setting the Domestic Gas Supply Obligations (DGSO) volumes under the National Domestic
Gas Supply and Pricing Regulations 2008.
47 Surface Temperature Anomalies in the River Niger Basin Development Authority Areas, Nigeria. Atmospheric
and Climate Sciences. Vol.3 No.4(2013). Retrieved from
http://file.scirp.org/Html/14-4700203_37125.htm
48 Orlean Investment. Role of Government Agency (2014). Retrieved from:
http://www.orleaninvest.com/roles-of-government-agencies-feb-13-2014/
25
Export Processing Zones and Free Trade Zones Authorities are authorized by law to operate
and regulate Zones which are clearly delineated and fenced, and are deemed to be outside the
customs’ territory within which national laws related to production, trade and other economic
activities are not applicable or partially applicable. These zones are normally set up for
manufacturing concerns producing mainly for the export market. The common features of a
free zone include a location-specific and clearly delineated area, world-class infrastructure
and facilities, special tax and physical incentives, and streamlined administrative
arrangements (one-stop-shop window). In Nigeria, there are two types of free trade concepts:
the specialised and the general-purpose trade/export zone. For effective management of these
zones, two bodies are in place: the Nigerian Export Processing Zone Authority (NEPZA)49
for general-purpose zones and the Oil & Gas Free Zone Authority (OGFZA)50 for oil & gas
zones.
The Zones are as follows: Calabar Free Trade Zone, Cross River State (1), Kano Free Trade
Zone, Kano State (2) Tinapa Free Zone & Resort, Cross River State (3), Snake Island
Integrated Free Zone, Lagos State (4), Maigatari Border Free Zone, Jigawa State (5), Ladol
Logistic Free Zone, Lagos State (6), Airline Service Export Processing Zone, Lagos state (7),
ALSCON Export Processing Zone, Akwa Ibom State (8), Sebore Farm Export Processing
Zone, Adamawa State (9), Ogun Guangdong Free Trade Zone, Ogun State (10), Lekki Free
Trade Zone, Lagos State (11), Abuja Technology Village Free Zone, Abuja (12), Ibom
Science & Technology Park Free Zone, Akwa Ibom (13), Lagos Free Trade Zone, Lagos
State (14), Olokola Free Trade Zone, Ogun & Ondo States (15), Living Spring Free Trade
Zone, Osun State (16), Brass LNG Free Zone, Bayelsa State (17), Banki Border Free Trade,
Borno State (18), OILS Logistics Free Zone, Lagos State (19), Kajola Specialized Railway
Free Zone, Ogun State (20), Imo Guangdong Free Trade Zone, Imo State (21), Kwara Free
Trade Zone, Kwara State (22), Koko Free Trade Zone, Delta State (23), Oluyole Free Trade
Zone, Oyo State (24), and Ibom Industrial City Free Zone, Akwa Ibom State (25). See the
locations on the map below.
49 Nigeria Export Processing Zones Authority. Retrieved from
http://www.nepza.gov.ng/downloads/NEPZA631992.pdf
50 Lawnigeria.com. Retrieved from
http://lawnigeria.com/LawsoftheFederation/OIL-AND-GAS-EXPORT-FREE-
ZONE-ACT.html
26
Figure 6: Location of Free Zones in Nigeria
18
2
5
9
22
12
24
16
10
20 15
6 19
11
4
14
7
3
23
21
1
8
17
13 25
Source: NEPZA51
The Nigerian Export Promotion Council (NEPC) is established by the NEPC Act No. 41 of
198852 to enhance the performance of the Council by minimizing bureaucratic bottlenecks
and increasing autonomy in dealing with members of the private sector. The statutory roles of
the Nigerian Export Promotion Council are to promote the development and diversification of
Nigerian’s export trade, assist in promoting the development of export related industries in
Nigeria, spearhead the creation of appropriate export incentives, and articulate and promote
the implementation of export polices and programs of the Nigerian Government. Another
relevant law related to their responsibilities is the Export (Incentives and Miscellaneous
Provisions) Decree No. 18 of 1986.53
51 NEPZA. Retrieved from
http://www.nepza.gov.ng/freezones.asp
52 Lawnigeria.com. Retrieved from
http://lawnigeria.com/LawsoftheFederation/NIGERIAN-EXPORT-
PROMOTION-COUNCIL-ACT.html
53 Lawnigeria.com. Retrieved from
http://www.nigerianexporter.org/laws/Export%20Incentives%20And%20Miscellaneous%20Provisions%20Act.
doc
27
The Nigerian Investment Promotion Commission (NIPC) was established by the NIPC Act
No. 16 of 1995 (now Cap N117 LFN 2004)54 to promote, facilitate and advocate investments
in Nigeria. The basic functions and powers of the NIPC55 as listed in the Act are to provide
necessary assistance and guidance for the establishment and operation of enterprises, enhance
the investment climate in Nigeria, promote investments, disseminate information about
opportunities, provide information on available incentives, support incoming and existing
investors, and advise government policies that will promote the industrialisation of Nigeria.
2.3.8. Nigerian Electricity Regulatory Commission (NERC)
Under the Electric Power Sector Reform Act of 2005, the Nigerian Electricity Regulatory
Commission was created as the sole and independent regulator of the power sector, with the
authority to interpret and implement the NEPP as it applies to the industry. In regulating the
power sector, NERC is mandated to promote competition and private sector participation,
establish and approve appropriate operating codes and standards, establish consumer rights
and obligations, licence and regulate operators in the sector, approve amendments to the
market rules, and monitor the operation of the Nigerian electricity market.56
In order to perform its duties, the Commission has approved various regulatory tools
including the following industry guidelines:
a)
The Market Rules provide guidelines for the pre-transition, transition, medium and
long term stages of the Nigerian Electricity Market, with the objective to establish and
govern an efficient, competitive, transparent and reliable market.
b)
The Multi-Year Tariff Order (MYTO) is the tariff vehicle designed to provide a
unified way to determine efficient total industry revenue requirement, and provide a
15‐year view ahead for tariffs in the sector. MYTO is based on several principles and
assumptions which are used to set wholesale and retail prices. NERC has determined
that the price of wholesale electricity will be at the level required by an efficient new
entrant to cover life cycle costs. The costs of the entire value chain are reflected in the
54 International Center for Nigerian Law. Retrieved
from http://www.nigeria-
law.org/Nigerian%20Investment%20Promotion%20Commission%20Act.htm
55 Section 4 of the NIPC Act No. 16 of 1995 (now Cap N117 LFN 2004)
56 NERC. Retrieved from
http://www.nercng.org/
28
retail tariff, beginning with fuel costs for generation, up to when the electricity gets to
the consumer. The Commission has approved MYTO II to replace MYTO I, which
was in effect from 2010-2015. MYTO is reviewed every 5years, but minor reviews
take place every six (6) months.
c)
The Grid Code contains the day-to-day operating procedures and principles
governing the development, maintenance and operation of an effective, well
coordinated and economic transmission system for the electricity sector in Nigeria.
d) The Metering Code was approved by the Commission to ensure financial viability of
the electricity industry after the unbundling and privatization. It requires that modern
accurate meters systems with reliable communication facilities shall be deployed
across the industry production and supply chain to measure and record energy
production and utilization.
e) The Distribution Code is the reference for all distribution networks operated by the
DISCOs that perform the functions of distributing electricity in networks, in the
voltage range from 240 V up to 33 kV.
2.3.9. National Inland Waterways Authority (NIWA)
The National Inland Waterways Authority (NIWA) Act Cap N47, LFN 200457 provides for
the establishment of the National Inland Waterways Authority with responsibility to regulate,
improve and develop inland waterways in Nigeria for navigation. Its functions also include
developing infrastructure, undertaking dredging of waterways and hydrological and
hydrographic surveys, designing ferry routes, operating ferry services, issuing licences for
local ships, collecting river tolls, etc. Hence, all inland waterway courses are managed by this
authority. The agency is under the Federal Ministry of Transportation. A Permit/Licence must
be issued by NIWA where utility lines would cross the inland waterways or for projects
requiring water intake, such as hydro projects and power plants requiring water for their
cooling systems.
57 Lawnigeria.com. Retrieved from http://lawnigeria.com/LawsoftheFederation/NATIONAL-INLAND-
WATERWAYS-ACT.html
29
2.3.10. The Nigerian Bulk Electricity Trading Co. (NBET)
The NBET was established under Section 8 of the EPSR Act of 2005 to purchase electricity
from generating companies through bankable Power Purchase Agreements (PPAs) and sell to
the distribution companies through Vesting Contracts (VC) with security. Its mandate
includes creating an effective transaction environment which minimizes risk and allocates it
fairly to the parties best able to manage it, implementing a transparent procurement process
which would result in the economic procurement of power, and entering into contracts that
are well structured and managed in a manner that precludes recourse to any credit guarantee
instrument. The NBET is not envisaged to be the sole bulk buyer of electricity, as other
entities such as distribution companies will also be able to procure power directly from the
generation companies once they have attained commercial viability. In performing its duties,
the NBET works with several Ministries in the course of negotiating PPAs with generation
companies, namely:
a) The Bureau of Public Procurement is empowered by the Public Procurement Act
200758 to grant prior approval for the procurement of goods and services by any
government-owned entity, including the purchase of electricity.
b) The Attorney-General of the Federation approves all agreements executed by any
government-owned or funded entity, including the NBET.
c) The Federal Ministry of Finance approves any PPA that is to be backed by the partial
risk guarantees provided by World Bank and the African Development Bank.
2.3.11. The Niger Delta Power Holding Company Limited (NDPHC)
The NDPHC is a special purpose vehicle jointly owned by the three tiers of government
(Federal-47%, States-35% and Local-18%) with responsibility for the implementation of the
National Integrated Power Project (NIPP). The NIPP was established in 2004 by the Nigerian
government as a plan to construct gas-fired power plants using natural gas that was being
flared. It was a fast-track initiative to stabilize Nigeria’s electricity supply system while the
private-sector led structure envisaged in the EPSR Act develops. The project includes 10
58 Lawnigeria.com. Retrieved from
http://lawnigeria.com/LawsoftheFederation/PUBLIC-PROCUREMENT-
ACT.html
30
generation plants, 110 transmission infrastructure facilities (including 3,000 km of high
voltage lines, transformers and substations),59 250 distribution projects (including 4,100 km
of low voltage lines, transformers and substations),60 as well as gas projects at nine of the
power plants.61 The privatization process for the ten power plants started last year, and will
be concluded soon, and hand-over thereafter to the preferred bidders.
59 Federal Ministry of Power. Retrieved
from http://image.slidesharecdn.com/power-141124035719-
conversion-gate01/95/ministerial-press-briefing-2014-presentation-by-the-minister-of-power-prof-nebo-44-
638.jpg?cb=1416823291
60 Federal Ministry of Power. Retrieved
from http://image.slidesharecdn.com/power-141124035719-
conversion-gate01/95/ministerial-press-briefing-2014-presentation-by-the-minister-of-power-prof-nebo-55-
638.jpg?cb=1416823291
61 NDPHC. Retrieved from http://ndphc.net/?page_id=2900 &
http://ndphc.net/?page_id=3429
31
3. National energy sovereignty
3.1 National energy sovereignty as a universal principle
The 2015 International Energy Charter explicitly recognises the sovereignty of each state
over its energy resources and its right to regulate energy transmission and transportation
within its own territory, respecting all relevant international obligations. In the spirit of
political and economic cooperation, signatories agree to promote the development of
efficient, stable and transparent energy markets at regional and global levels, taking into
account environmental concerns and the role of energy in each country’s national
development. To this end, signatories agree to take coordinated action to achieve greater
coherence of energy policies, which should be based on the principle of non-discrimination
and on market-oriented price formation.
3.2 Nigerian Constitution
Between 1914 and 1960, during the colonial era, Nigeria was governed by orders in council,
since the country was administered as a Crown Colony. These constitutions include those of
1913 (which came into effect on 1 January 1914), 1922 (Clifford Constitution), 1946
(Richardson Constitution), 1951 (Macpherson Constitution) and 1954 (Lyttleton
Constitution). During the first democratic era, Nigeria had the Independence Constitution in
1960, its first constitution as a sovereign state, which come into force immediately upon
independence, on 1 October 1960. The 1963 Constitution for the First Republic, which was
based on the Westminster System ( parliamentary system of government), was subsequently
enacted, and continued in operation until a military coup in 1966.
Upon return to civilian rule, the 1979 Constitution was enacted for the Second Republic, and
it abandoned the Westminster System in favour of an American-style Presidential System.
This Constitution was again suspended in 1983 by a military coup. Based on the intention of
the military to see the return of democratic rule to Nigeria, the 1993 Constitution was drafted
for the establishment of a Third Republic, but it was never fully implemented as the military
annulled the election and resumed power until 1999. After the various successive military
governments between 1979 to 1999, democracy was restored, and the Fourth Republic was
32
ushered in by the 1999 Constitution,62 which still remains in force today with some minor
amendments.
The Constitution establishes the basic principles of Nigeria, and sets out the country’s
fundamental objectives, which include the defence of independence and sovereignty,
consolidation of national unity, the promotion of balanced economic, social and regional
development, the defence and promotion of human rights and the equality of citizens before
the law.
Under the constitution, Nigeria has acceded to and observes the United Nation Organizations
Charter and African Union Charter principles. All international treaties and protocols ratified
by the country remain in force under Nigeria legal framework. In terms of international
solidarity, Nigeria actively participates in the international area to restore a fairer and more
equitable economy, both domestically and regionally.
In terms of economic rights, the Constitution recognizes and guarantees private property
rights. Expropriation is carried out in utility and public interest under the national laws and
with right to fair compensation. In terms of labour rights, the national constitution establishes
the right of freedom of association and membership of labour unions. The national
constitution also emphasizes that natural resources within the territory are state property. The
Constitution vests ownership of mineral resources, including oil and gas, exclusively in the
federal government, and further confers on the federal government exclusive powers to make
laws and regulations for the governance of the industry.63
Generally, there are no laws or regulations that hinder the participation of foreign investment,
and firms do not restrict foreign participation. In fact the government has through various
reform processes opened up various sectors for participation by foreign companies interested
in doing business in Nigeria. Foreign investors are mandated to operate within the national
economic policy framework, which allows foreign enterprises to participate in all national
territory and economic sectors, except for sectors where it is reserved for state operation. The
62 International Center for Nigerian Law. Retrieved fro
m http://www.nigeria-
law.org/ConstitutionOfTheFederalRepublicOfNigeria.htm
63 CFRN, Item 39, Second Schedule, Part 1. Retrieved from
http://www.nigeria-
law.org/ConstitutionOfTheFederalRepublicOfNigeria.htm
33
constitution establishes that land is the property of the state and therefore it cannot be sold,
transferred or mortgaged without the consent of the government.
3.3. Reforms in the Energy Sector
3.3.1. Power Sector Reform
In 2005, the Electric Power Sector Reform (EPSR) Act was enacted to provide a framework
for the liberalisation of the power sector with a view of making it competitive and more
efficient. It provided for the unbundling of the National Electric Power Authority (NEPA),
the establishment of the Nigerian Electricity Regulatory Commission (NERC) as the sole and
independent regulator (economic and technical), the privatization of the successor companies
created from NEPA, and the establishment of the Rural Electrification Agency (REA). The
Commission was set-up by the Federal Government (FG) in 2006, and began operation in
2007.
In July of 2008 a new electricity pricing mechanism, the Multi-Year Tariff Order (MYTO) ,
was introduced by the NERC to help determine charges and tariffs for electricity generation,
transmission, as well as distribution (retail) tariffs, over the period from July 2008 to June
2013. The MYTO provides a 15-year tariff path for the sector with limited minor reviews bi-
annually in the light of changes in select parameters and periodic reviews every five (5)
years. This pricing regime provides the structured framework to ensure that tariff is cost
reflective thereby reassuring and encouraging investors, and also providing a fair entry levels
for them. In 2014, the NERC reviewed the Tariff Order, and introduced MYTO II as the
present tariff regime in Nigeria.
The reform and privatization framework requires that the NEPA unbundle its activities in the
generation, transmission and distribution sub-sectors. The Electricity (Amendment) Decree
1998 and the NEPA (Amendment) Act 1998 were passed, terminating the monopoly status of
the NEPA, and officially inviting the participation of the private sector. In November 2005,
18 new successor companies were incorporated by the Federal Government, comprising six
(6) generation, one (1) transmission, and eleven (11) distribution companies were
incorporated.
34
Subsequently, the market rules and network codes (grid, distribution, and metering codes) to
guide the operations in the sector were approved by the NERC. In January 2012, the Power
Ministry liquidated the Power Holding Company of Nigeria (PHCN), and unbundled it into
18 successor companies which were sold to successful bidders in November 2013. The
distribution companies were privatized through the sale of majority shares to core investors,
the transmission company was handed over to a management company, the thermal
generating companies were sold to private investors, and the hydroelectric industry began
operating as a concession.
3.3.2. Reform of the Oil and Gas Sector
The principal legislation for oil and gas activities in Nigeria is the Petroleum Act of 1969 (the
Act). The Act was enacted primarily for crude oil operations and provides very little on gas
development and utilisation. A need for reforms has been recognized in Nigeria, and this has
led to the development of the National Oil and Gas Policy (NOGP) in 2004 which establishes
a comprehensive National Gas Master Plan (NGMP). The NGMP comprises of the gas
pricing policy, the domestic gas supply obligation, and the gas supply infrastructure
blueprint. The National Domestic Gas Supply and Pricing Policy 2008 (the Policy) and the
National Domestic Gas Supply and Pricing Regulations 2008 (the Regulations) focus on the
pricing for the supply of gas to strategic sectors of the economy, and the establishment of a
Department of Gas (DoG) and the domestic gas aggregator (i.e., GACN).
Presently, the Petroleum Industry Bill (PIB) of 2012,64 which was drafted by the Ministry of
Petroleum Resources, is before the National Assembly. The PIB, which is expected to reform
the petroleum sector, was first proposed in 2008, but the most recent draft was submitted in
July 2012. The PIB includes provisions that could cause the following: increase exploration
activities and expand reserves; monetize natural gas reserves and reduce flaring; create
separate regulators for the upstream, midstream, and downstream sectors; deregulate the
downstream sector; offer acreage through bid rounds, increase government take, higher
royalties, lower production taxes, increase local participation; and establish the Petroleum
Host Communities Fund (PHCF). This delay in enactment has also slowed the development
64 International Centre for Nigerian Law. Retrieved
from http://www.nigeria-
law.org/Legislation/LFN/2012/The%20Petroleum%20Industry%20Bill%20-%202012.pdf
35
of natural gas projects (as it is expected to introduce new fiscal terms to govern the natural
gas sector), as well as investment in deep-water projects (it is expected to provide for an
increase in the government's share of production revenue from such projects).
The PIB also proposes the creation of two new regulators to take over the functions, assets
and liabilities of the DPR and the DoG relating to downstream gas, and the DPRA will also
assume the role of the current Petroleum Products Pricing Regulatory Agency. The PIB also
incorporates key provisions of the DGB which focuses on the efficient regulation of a
liberalised downstream gas sector.
The passage of the PIB is expected to strengthen competition and improve the prevailing
business environment in the industry to attract investors into the oil and gas sectors, just like
the EPSR Act of 2005 is doing in the electricity sector.
3.4. National strategy
3.4.1. General Energy Policies
Various legislative, policy and regulatory documents have been developed and approved by
the federal government for the energy sector in Nigeria.
The National Energy Policy (NEP) of 2003 is the basis for the energy sector. It was
developed and implemented by the Energy Commission of Nigeria (ECN). It covers all
aspects of the energy sector, including renewable energy, energy efficiency and rural
electrification, and sets the target of 75% electrification by 2020. Although the policy may
require updates, it still remains in force as the guiding principle for the direction of sector
reforms. On renewable energy, it made provisions for all forms of renewables energies and
how they can be effectively utilised. On energy efficiency, it called for the promotion of
energy conservation at all levels of exploitation of energy resources by adopting energy
efficient methods in energy utilisation. On rural electrification, it recommends the promotion
of off-grid and standalone systems in order to supply electricity to remote areas of the
country.
36
The National Economic Empowerment and Development Strategy (NEEDS) was developed
by the National Planning Commission, and approved in 2004. It was intended as the response
to the development challenges of Nigeria, and envisaged as a medium-term plan for 2003-
2007, and places high priority on the development of the power sector. In regards to
infrastructure, the policy promotes the privatisation of infrastructure regarded as key instru-
ment for achieving improved service delivery. The government would still fund projects with
high investment requirements or low attractiveness for the private investors. The document
further suggests increasing the share of renewable energy in the total energy mix in Nigeria.
The National Energy Master Plan (NEMP) of 2007 sets the implementation framework of the
National Energy Policy for the development of the sector and its effective contribution to the
country’s economy. It covers the development, exploitation, and supply of all energy
resources (petroleum and electricity), utilisation of renewable energy sources, their use by
different sectors, and other related topics such as the environment, energy efficiency, energy
financing, and energy policy implementation.
Vision 20-2020 was developed by the National Planning Commission in 2009, as the long
term development strategy for the country in order to ensure that Nigeria becomes one of the
top 20 economies of the world by 2020. The programme identifies the barriers to the
country’s development, including unreliable power supply, and decaying infrastructure. It
recommends the directions for achieving the target using a strategy of three main pillars
building one on the other, and the provision of energy is regarded as a key component of all
three pillars. Its development is intended to be led by the private sector in a liberalised
market, while the government and agencies provide the legal and regulatory environment.
Overall, an increase of the installed capacity to 35,000 MW by 2020 is planned (a 6 GW
capacity base by 2009 achieved by rehabilitation of the existing Power Holding Company of
Nigeria’s plants and completion of on-going Independent Power Producer (IPP)projects,
20GW through the increase of capacity by IPPs and the National Integrated Power Projects
(NIPP) , and final target capacity of 35 GW by adding large hydro-power schemes, coal-fired
power facilities and renewable energy plants. Since these plans require a considerable amount
of investment, the vision creates an environment that is purportedly attractive to outside
investors. The idea in the Vision is to achieve this through deregulation and a transparent
regulation, provision of guarantees for investments, and allowance for a reasonable rate of
return for investors.
37
3.4.2. Electricity Sector
The National Electric Power Policy (NEPP) of 2001 sets the specific framework for the
power sector. It was developed and approved by the former Ministry of Power and Steel. It
defined the three principal phases for achieving the reform goal of a reliable and sufficient
energy system, namely: the privatisation of the vertically-integrated NEPA and the
introduction of IPPs; increasing the competition between market participants, reduction of
subsidies, and sale of excess power to distribution companies; and intensification of the mar-
ket and competition, liberalised selection of supplier by larger customers, and full
competitive market trading. The provisions were mostly incorporated into the EPSR Act of
2005 which provides the legal and regulatory framework for the sector.
The Renewable Electricity Action Programme (REAP) was launched in 2006 by the ECN
and the United Nations Development Programme (UNDP) to operationalize the REPG. It
gives an overview on the Renewable Energy potentials, technologies and market, and then
elaborates on the development targets per technology and application, and strategies for their
achievements. It also outlines financing procedures via the Renewable Electricity Fund (REF)
and other sources, as well as the roles of government bodies in achieving the targets. The core
focus of the document is on utilising all forms of renewable energy sources for electricity
generation and highlights potential gaps, technical assessments, financial implications,
benefits and limitations of Nigeria’s renewable energy sources potentials.
The Roadmap for Power Sector Reform was created by the Presidential Taskforce on Power
(PTFP) in 2010 (reviewed in 2013). It does not introduce new policies but rather sets
strategies to accelerated actions for achieving the objectives of the National Energy Policy
(2003) as enshrined in the EPSR Act of 2005. It aims at providing an update on the status of
the reform as well as pointing out critical issues and challenges which should be addressed in
the period of 2013–2014. The Roadmap is very limited in terms of renewable energy, energy
efficiency and rural electrification. The core focus of the Roadmap was on other forms of
energy delivery systems. In order to bridge the gap between supply and demand, the
Roadmap sets the ambitious targets to increase installed hydro to 5,690MW, thermal to over
20,000MW, and 1000 MW of renewable generation capacities by 2020.
38
3.4.3. Oil & Gas
The National Oil and Gas Policy (NOGP) of 2004 provides for the establishment of a
comprehensive National Gas Master Plan (NGMP), liberalisation of the downstream gas
sector and open access, appropriate gas pricing, attention to domestic growth as well as
revenue from gas export. The Plan recommends the enacting of a law that addresses all the
objectives of the Policy.
The NGMP of 2008
includes the gas pricing policy (provision of a framework for
establishing the minimum domestic gas price), the domestic gas supply obligation (an
obligation on upstream gas producers to supply gas to the domestic market) and the gas
supply infrastructure blueprint.
The National Domestic Gas Supply and Pricing Policy of 2008 (the “Policy”) and the
National Domestic Gas Supply and Pricing Regulations 2008 (the “Regulations”) were made
pursuant to the petroleum Act of 1969. The Policy focuses on the pricing for the supply of
gas to the three strategic sectors of the economy identified under the NGMP, while the
Regulation establishes a Department of Gas (DoG) within a “Ministry of Energy” to regulate
the gas sector, and the Gas Aggregation Company of Nigeria (GACN) Limited for processing
requests from domestic gas buyers, managing the allocation of gas to domestic buyers,
facilitating negotiations of Gas Supply and Aggregation Agreements (GSAA), etc.
The PIB of 2012 proposes the creation of the Downstream Petroleum Regulatory Agency
(DPRA) and the Upstream Petroleum Inspectorate (UPI) to take over the functions, assets and
liabilities of the Department of Petroleum Resources and the DoG relating to downstream
gas. The DPRA will also assume the role of the current Petroleum Products Pricing and
Regulatory Agency. The role of the domestic gas aggregator is also recognized, and the Draft
Bill reflects the key provisions of the DGB, NOGP and NGMP. The key provisions of the
Downstream Gas Bill (DGB) 2005 has been included in the PIB, focusing on the efficient
regulation of a liberalised downstream gas sector.
39
3.4.4. Renewable Energy
The Renewable Energy Policy Guideline (REPG) issued by the Federal Ministry of Power
and Steel in 2006 stipulates that the federal government would expand the market for
renewable electricity to at least five per cent of total electricity generation and a minimum of
5TWh of electric power production by 2016. The document is the government’s overarching
policy on all electricity derived from renewable energy sources, and sets out its vision,
policies and objectives for promoting renewable energy in the power sector.
The Renewable Energy Master Plan (REMP) was drafted in 2006 by the ECN and the UNDP,
and was reviewed in 2013. It defines a road map for increasing the role of renewable energy
in achieving sustainable development in the country. In addition to the overall increase in
power supply from renewable energy sources, it targets higher electrification rates, from 42%
in 2005 to 60% in 2015 and 75% by 2025. It stresses the importance of solar power in the
country’s energy mix. Based on the Plan, supply of renewable electricity is expected to
increase from 13% of total electricity generation in 2015 to 23% by 2025 and 36% by 2030.
Renewable electricity is projected to account for 10% of the total energy consumption by
2025. The Plan has not been approved by the government.
The National Bio-fuel Policy and Incentives was issued in 2007 by the National Nigerian
Petroleum Corporation (NNPC) for a biofuel support programme aiming at integrating the
agricultural sector of the economy with the downstream petroleum sector. The objective of
the policy was the development and promotion of a national fuel ethanol industry utilising
agricultural products in order to improve the export properties of automotive fossil-based
fuels produced in Nigeria. The policy sets out to link the agricultural and energy sectors with
the underlying aim of stimulating development in the agricultural sector.
The National Renewable Energy and Energy Efficiency Policy (NREEEP) was finalized as a
draft in 2013 by the Federal Ministry of Power, and aims to provide a framework for the
promotion of renewable energy and energy efficiency. It recommends that an appropriate
strategy should be developed to harness the potentials in renewable energy to add value to the
ongoing changes in Nigeria’s power sector, and calls for an integrated renewable energy and
energy efficiency policy. Also, it encourages the development of national action plans for
40
renewable energy and energy efficiency. The overall focus of the policy is on optimal
utilisation of the nation’s energy resources for sustainable development.
3.4.5. Rural Electrification
The Rural Electrification Policy Paper (REPP) was created by the Federal Ministry of Power
(FMP) and approved in 2009. It establishes the framework and objectives for a rural
electrification programme. It sets the target of 10% of rural electrification mix by 2025.
The Rural Electrification Strategy and Implementation Plan (RESIP) which was developed in
2013 will establish a clear institutional step-up for the sector and set a roadmap that results in
the establishment of an enabling framework. The draft RESIP, which is also an outline of the
policy on rural electrification, is a national document that applies
pari pasu to the states and
local government areas. The primary objective of the Rural Electrification Policy and the
Plan is to promote rapid expansion of access to electricity in a cost-effective manner through
the use of the grid and off-grid approaches. It expects subsidies to be primarily focused on
expanding access rather than consumption. The draft is still awaiting approval, as well as the
draft Guidelines to Operationalize the Rural Electrification Fund (REF).
4. Energy Security
4.1 Energy security as a universal principle
41
The 2015 International Energy Charter recognizes the importance of energy Security, a
concept that embraces the needs of energy producing, transit and consuming countries, as
well as access to modern energy services that is based on environmentally sound, socially
acceptance and economically viable policies. In order to achieve energy security,
International Energy Charter signatory affirm the importance of freedom of movement of
energy products and of developing an efficient international energy infrastructure in order to
facilitates the development of stable and transparent trade in energy. In addition to this,
signatories to the International Energy Charter highlight the importance of diverse energy
sources and supply routes to enhance energy security.
4.2 Energy security in Nigeria
Energy is a critical prerequisite for all sectors of the economy. It is an essential service that
determines the success or failure of development endeavours. The importance of energy as a
sector in the national economy can therefore not be overemphasized. Nigeria is endowed with
enormous energy resources (non-renewable and renewable) but most of its economic
activities are oil and gas based which is finite and environmentally unfriendly. For example,
oil and gas account for about 80% of government revenues, 90-95% of export revenues, and
over 90% of foreign exchange earnings. Also, about 64% of the nation’s electricity
generation comes from oil and gas, and the transportation system is almost completely
dependent on oil and gas. Sole dependence on a particular energy option does not guarantee
the energy security of the nation. A 1999 UNDP report defines energy security as the
continuous availability of energy in varied forms in sufficient quantities at reasonable
prices.65 Thus, energy security not only entails sufficient energy reserves or potentials, but
also its availability, accessibility and affordability.
No access to power hinders the country’s development in all sectors from education up to
industrial production. Nigeria’s Achilles heel is therefore electricity, and priority is being
given to the power sector to avoid the risk of the country stagnating economically in the
coming years. The Nigerian power sector has been in crisis for many years. Much of the
generation, transmission and distribution capacity has become obsolete or dilapidated. In
2010 the average annual per capita power consumption in Nigeria was only 120 kWh, among
the lowest in the world, even though Nigeria is the world's 5th largest oil producer.
65 J, Ikeme, Assessing the Future of Nigeria's Economy: Ignored threats from the global climate change debacle.
African Economic Analysis, De Montfort University, Leicester, UK, 2008.
42
Figure 7: Efficiency of Power generation and Energy Per Capita in Nigeria and other
countries, 2010.
Source: Action Nigeria, Power66
In Nigeria nearly half of the population do not have access to power, but those with access
frequently experience outages that can amount up to several hours a day. This leaves them
with no other option other than purchasing generators, and thus 60 million Nigerians67 spend
an average of N3.5 trillion a year ($17.5 billion US dollars)68 on personal generators.
66 Action Nigeria, Power. Retrieved fro
m http://www.actionnigeria.com/power.html
67 BBC. Retrieved from
http://www.bbc.com/news/world-africa-25056721
68 Vanguard Newspaper. Retrieved from
http://www.vanguardngr.com/2013/01/nigeria-spends-n3-5trn-
annually-on-power-generators/
43
Nigerians pay more than N80 (£0.32)/kWh burning candles and kerosene, manufacturers pay
in excess of N60 (£0.24)/kWh on diesel generation, those that can afford personal generators
pay around N50-70 (£0.20-0.28)/kWh for self-generation, whereas the inconsistent grid
power costs only between £0.18 and £0.23/kWh.69 Absence of adequate power is the most
significant barrier to economic growth in Nigeria, and if the power situation continues as is
until 2020, £81b in GDP would be lost by Nigeria every year.70
The poor state of the power system is the result of many years of neglect, and a poor
maintenance record for the existing facilities. The FG neglected investing in the government-
owned electricity company, thereby causing the available generation capacity and
transportation infrastructure to not grow with the population (which has almost doubled in the
past 30 years), and infrastructural development in the country with their accompanying
energy demands. This has made access to electricity the most problematic obstacle to
Nigeria’s growth.
Investment in power generation, transmission and distribution is required to address the
problems of low access to electricity, as well as technical and non-technical losses. The
government is putting a lot of effort to achieve this by implementing different projects
discussed in previous section, in addition to implementation of various policies. Presently,
energy is the key focus of various reform programmes, with a view to librelaize the sector,
attract investments (especially FDIs) to enable Nigeria to reach the various targets set in
policies documents. The privatization of the PHCN-successor companies indicated the
governments commitment to liberalise the power sector and attract private investment.
Nigeria has ambitious and progressive expansion plans for its energy industry, particularly in
the urban and semi-urban areas. In terms of the challenge of universal access, the goal is to
ensure universal access by diversifying the country’s energy mix, and renewable energy is
becoming an attractive sector for many investors.71 Encouraging the installation of PV
systems in schools, hospitals, and public buildings in remote areas is gaining momentum. The
69 The Guardian. Retrieved from
http://www.theguardian.com/global-development-professionals-
network/adam-smith-international-partner-zone/nigeria-power-electricity-africa
70 The Guardian. Retrieved from
http://www.theguardian.com/global-development-professionals-
network/adam-smith-international-partner-zone/nigeria-power-electricity-africa
71 Deutsche Welle. Retrieved from http://www.dw.de/nigerians-turn-to-renewable-energy-as-solution-to-
power-crisis/a-18216818
44
use of solar energy as option to deal with increasing energy demand in the public services,
i.e. schools, health centres, buildings and housing, is a viable option for increasing energy
access in remote areas.
Energy security in Nigeria is also associated with policies of energy efficiency that are being
put in place, including the creation of a coherent legal framework with the production and use
of energy resources in a rational and responsible way. Several programs have been adopted
encouraging the efficient use of renewable energy sources. In this context, Nigeria has been
adopting measures of policies and strategic programs of production and the efficient use of
electricity, creating conditions for national energy security as well as regional energy
security, taking advantage of these trade gains.
Taking into account the evolution of the ongoing reform programmes in the energy sector,
the focus on diversifying the energy mix in the country, as well as the various ongoing
projects previously discussed, the assessment on energy security in Nigeria under the
definition of the International Energy Charter is promising. Nigeria is heading towards a
direction in which, if all projects in the generation sub-sector, as well as the expansion and
fortification of the distribution and transmission infrastructures are completed, Nigeria can be
self sustainable to meet the growing domestic demand.
In addition to this, regional integration is also considered to increase energy security of
supply. Under the West African Power Pool (WAPP), Nigeria is part a plan by 14 countries
in ECOWAS region to integrate the operations of their power systems into a unified
electricity market for the sale of electricity, and to accommodate the transit of electricity
between countries in order to assure energy security in the region.
4.3. Energy consumption and production
Nigeria has abundant indigenous energy resources including hydro, natural gas, coal, solar,
geothermal, wind power, uranium and biomass, much of which is untapped. Social and
economic development of the country will be accelerated through effective exploitation and
utilisation of these resources. Based on that, the government is encouraging the private sector
to participate in the development of these energy resources for power generation which will
be used at local as well as regional level.
45
Figure 8: Primary Energy Consumption in Nigeria for 2012
Source: U.S. Energy Information Administration (EIA) International Energy Agency72
The U.S. Energy Information Administration (EIA) estimates that total primary energy
consumption in Nigeria was about 4.5 quadrillion British thermal unit (Btu) in 2012. About
80% is traditional solid biomass and waste in the form of wood, charcoal, manure, and crop
residues. Commercial energy sources such as oil, natural gas, and hydro account for the
remaining 20%. That means that oil accounts for about 13% , natural gas 6%, and hydro 1%
as shown below. It is believed that approximately 100 million people in Nigeria are without
access to electricity, meaning that the electrification rate in Nigeria is estimated at 48%.73
5. Open Markets and technological transfer
5.1 Open energy markets and technological transfer as a universal principle
Under the 2015 International Energy Charter, open markets refers to the liberalisation of
the energy sector, and signatories agree to participate in joint efforts to facilitate and
72 U.S. Energy Information Administration (EIA) International Energy Agency Country Analysis: Nigeria, page 2.
Retrieved fro
m http://www.eia.gov/countries/analysisbriefs/Nigeria/nigeria.pdf
73 World bank. Retrieved fro
m http://data.worldbank.org/indicator/EG.ELC.ACCS.ZS/countries
46
promote market-oriented reforms and modernisation of the energy sector. The signatories
also agree to promote open and competitive markets for energy products, materials,
equipment and services, as well as remove barriers to energy trade in a manner that is
consistent with the provisions of the WTO Agreement and other international obligations. It
is important to note that under the International Energy Charter, liberalisation is not an
obligation, but a principle that countries are encouraged to develop according to their
national sovereignty and national strategy.
5.2 Open energy markets
Within the context of the International Energy Charter, open markets imply having a
competitive market for energy products, materials, equipment and services. It also includes
the transparent access to energy resources, removal of barriers, promoting the development
and interconnection of energy transport, promoting access to capital, and facilitating the
transit of the energy.
The economic and social reforms that have been implemented for many years has brought
profound changes in the economic landscape of the country, with privatization programs and
legal framework reform. The laws on Investment in Nigeria arose as a result of these
changes.
The investment laws have come to embody the need of the country to attract more
investment, to be open for private investors, and to set a basic and uniform legal framework
for the process of conducting national and foreign investments. Under this law, foreign
investors enjoy the same rights, duties and obligations as nationals. The guarantees and
incentives are also part of the provision for investors, and establish the protection of property
rights, the transfer of funds abroad (profits, royalties, amortization and other funds), as well
as the possibility of mediation and conflict resolution among investors using international
mediation or arbitration conventions.
The NIPC was established to promote investment for the country by attracting and retaining
substantial direct domestic and foreign investment to boost economic growth and wealth
creation, including the promotion of public-private partnerships for economic and
infrastructure development. For the past nine years, investment in Nigeria has grown
annually, and Nigeria has also been the final destination of a large volume of foreign capital,
47
including in the energy and mining sectors. The volume of FDI has evolved considerably
over the past ten years as a result of this market opening.
Besides this, Nigeria has been taking steps to reduce barriers to investment and improve the
business environment in the country, which has resulted in encouraging progress. An
important improvement in the last two years is the country’s position in the environment
index, which is currently placed 139 out of 189 countries in the world. As an Extractive
Industry Transparency Initiative (EITI) member, Nigeria has complied with the principles
and provisions of the initiative in terms of transparent access to mineral resources.
As the energy sector is liberalised, there are many private companies operating in the power
generation sector, and several that have been licensed but are yet to be operational.
The
PHCN-successor companies are responsible for 10% of the energy production, but the
companies are fully or majority-owned by private companies. While thermal stations were
sold 100%, the hydro-electric plants were given under concession to private companies. It is
important to note that the private companies that participated in the privatization process for
the utilities are made up of local and international companies that formed consortia to bid for
the government-owned companies. Presently, the last set of government-owned power plants
are being auctioned to private investors.
At the distribution level, the Commission is also issuing licences to a private company to
manage off-grid independent electricity distribution networks in areas in Nigeria without
distribution networks, or places where the existing networks are unreliable. The transmission
company is being managed by a private company, Manitoba Hydro International of Canada,
to ensure its operation and the reliable and efficient expansion of electrical energy supply.
Presently, the FG is reviewing options available for attracting investors to participate in the
expansion and operation of the transmission grid.
In the oil and gas sector, there are a number of multinational corporations engaged in the
various activities, including ExxonMobil, Shell, Total, Agip, Chevron, Eni, Elf,
ConocoPhilips, in addition to various indigenous companies.
5.2.1 Hydrocarbons
48
5.2.1.1. Oil
Nigeria is the largest oil producer in Africa, and also holds the largest natural gas reserves on
the continent. Oil production began in the oil-rich Bayelsa State in the 1950s,74 but Nigeria
became a member of the Organization of the Petroleum Exporting Countries (OPEC) in 1971.
Nigeria is among the world's top five exporters of liquefied natural gas (LNG).
Nigeria's oil and natural gas industry is primarily located in the southern Niger Delta area, but
the industry is the mainstay of the country's economy as it accounts for 75% of government
revenue and 95% of total export revenue.75 Nigeria's economy is vulnerable to a drop in
crude oil prices as it is very dependent on oil revenue, and in has recently been affected by
the drop in oil price.
Figure 9: World Energy Consumption by Fuel for 2013
76
Source: Value Edge
The Nigerian National Petroleum Corporation Act No 33 of 1977 (now CapN320 LFN
1999)77 created the NNPC to regulate the oil and natural gas industry, and it was later divided
into 12 subsidiary companies to regulate the various subsectors within the industry. The
NNPC uses Joint Ventures (JV) to fund most projects, with NNPC as the majority
74 Secretariat of the Organization of the Petroleum Exporting Countries, Nigeria facts and figures. Retrieved
from http://www.opec.org/opec_web/en/about_us/167.htm
75 International Monetary Fund
, Nigeria, IMF Country Report No. 14/103, (April 2014), page 10 and 25.
76 Value Edge, Introduction to Oil and the Energy Industry, by Sui Chuan, December 17, 2014. Retrieved from
http://www.value-edge.com/introduction-to-oil-and-the-energy-industry/
77 International Center for Nigerian Law. Retrieved from http://www.nigeria-
law.org/Nigerian%20National%20Petroleum%20Corporation%20Act.htm
49
shareholder. To encourage investments in deepwater areas which involve higher capital and
operating costs, Production-Sharing Contracts (PSCs) are also offered to IOCs as it provides
a more favourable fiscal terms for them, by ensuring that the companies receive a greater
share of the revenue as the water depth increases.
5.2.1.2. Petroleum and other Liquids
Nigeria has the tenth largest crude oil reserves in the world and second largest in Africa with
an estimated 37 billion barrels of reserves.78 These reserves are mostly found along the Niger
Delta, and offshore in the Bight of Benin, the Gulf of Guinea, and the Bight of Bonny, even
though onshore exploration activities have been undertaken in the Chad basin located in
northeast Nigeria. Nigeria produces mostly light, sweet (low sulfur) crude oil which is mostly
exported. Crude oil production in Nigeria reached its peak of 2.44 million bbl/d in 2005, but
by 2009, production plummeted to an average 1.8 million bbl/d. Oil production rose again
after 2009 mostly due to the implementation of the amnesty program which helped reduce
attacks on oil facilities, and the increase in new deep-water offshore production. In 2014,
Nigeria produced 2.4 million bbl/d of petroleum and other liquids (i.e., crude oil, condensate,
natural gas plant liquids, and refinery processing gains).
Restrictions on the production of oil and gas in Nigeria are as contained in the OPEC’s
annual production allocations. Nigeria’s OPEC crude oil production allocation has fluctuated
between 1.3 million bpd79 and 2.5 million bpd80 since the 1980s. Nigeria became a member
of OPEC in 1971 and has since then been bound to comply with production restrictions
imposed on each member country. Subject to the restrictions mentioned, parties to any
exploration and production (E&P) arrangements are entitled to lift their portion of production
provided that they meet all their tax and royalty obligations.
Figure 10: Nigeria’s Crude Oil and Condensate Export by Region, 2014
78 Oil & Gas Journal, Worldwide Look at Reserves and Production, (January 1, 2015). Retrieved from
http://www.ogj.com/articles/print/volume-112/issue-1/drilling-production/worldwide-look-at-reserves-and-
production.html.
79 OPEC, Annual Statistical Bulletin 2013, PG 10.
80 OPEC, Member Countries’ Crude Oil Production Allocations.
50
81
Source: U.S. Energy Information Administration, International Energy Agency
Figure 11: Nigeria’s Export of Crude Oil and Condensate, by Region from 2010-2014
82
Source: U.S. Energy Information Administration, International Energy Agency
In 2014, Nigeria exported 2.05 million bbl/d of crude oil and condensate. The United States
was the largest importer of Nigerian oil until 2012, but the growth in U.S. light, sweet crude
oil production has resulted in a sizable decline in US imports of crude grades of similar
quality, such as Nigeria's crude oil. As supply to the US decreased, European imports
increased, and presently Europe is the largest-regional importer of Nigerian oil, importing
81 U.S. Energy Information Administration (EIA) International Energy Agency Country Analysis: Nigeria, page 9.
Retrieved from http://www.eia.gov/countries/analysisbriefs/Nigeria/nigeria.pdf
82 U.S. Energy Information Administration (EIA) International Energy Agency Country Analysis: Nigeria, page 11.
Retrieved from http://www.eia.gov/countries/analysisbriefs/Nigeria/nigeria.pdf
51
slightly more than 900,000 bbl/d or 45% of the exports in 2014. This increase was also
helped by the European embargo on Iranian crude imports, and supply disruptions in Libya.
Presently, the IOCs have various deep-water oil projects that have the potentials to bring
online about 1.2 million bbl/d. The projects are listed below.
Table 1. Planned liquid fuels projects in Nigeria
Plateau
liquids
Final
production
investment
Project name
Operator
Type
(000 bbl/d)
decision?
Est. start
Dibi Long-Term Project
Chevron
onshore oil
70
yes
2016
Sonam Field Development
Chevron
natural gas
30
yes
2016
project
Gbaran-Ubie Phase Two
Shell
natural gas
20
yes
2017
Project
project
Erha North Phase 2
ExxonMobil
deepwater oil
60
yes
2018+
Egina
Total
deepwater oil
200
yes
2019+
Bonga Southwest and
Shell
deepwater oil
225
no
2020+
Aparo
Bonga North
Shell
deepwater oil
100
no
2020+
Zabazaba-Etan
Eni
deepwater oil
120
no
2020+
Bosi
ExxonMobil
deepwater oil
140
no
2020+
Satellite Field Development
ExxonMobil
deepwater oil
80
no
2020+
Phase 2
Uge
ExxonMobil
deepwater oil
110
no
2020+
Nsiko
Chevron
deepwater oil
100
no
2020+
Source: U.S. Energy Information Administration, International Energy Agency83
Domestically, Nigeria consumed 305,000 bbl/d of petroleum in 2014. The country has four
oil refineries with a combined capacity of 445,000 bbl/d, located at Port Harcourt (PH1 -
60,000bpsd, and PH2 - 150,000bpsd), Warri (125,000bpsd), and Kaduna(110,000bpsd).84
Even though the nameplate capacity of the refineries exceed domestic demand, the refineries
operate below capacity. The local refineries received a total of 36,193,237 barrels (4,917,613
83 U.S. Energy Information Administration (EIA) International Energy Agency Country Analysis: Nigeria, page 6.
Retrieved from http://www.eia.gov/countries/analysisbriefs/Nigeria/nigeria.pdf
84 NNPC website. Retrieved from
http://www.nnpcgroup.com/NNPCBusiness/MidstreamVentures/RefineriesPetrochemicals.aspx
52
mt) of (dry) crude oil, condensate and slops and processed 35,233,126 barrels (4,761,496 mt)
into various petroleum products. The total production output by the refineries was 5,067,501
metric tons of various petroleum products, putting the combined average refining capacity
utilisation for year 2013 at 22% as against 21% in the 2012.85 In order to meet the domestic
demand, the country had to import 164,000bbl/d of petroleum products.86
Figure 12: Downstream Oil Industry Pipeline network in Nigeria
87
Source: OandO
An indigenous company, Dangote Group, plans to construct the largest refinery in Africa at
Lagos, with a capacity of 500,000 bbl/d refinery, and at the cost of $11billion (it also includes
petrochemical and fertilizer plants). The project is expected to come online between late 2017
and mid 2018, it will help Nigeria cut its reliance on international markets for petroleum
products. The draft PIB also proposes the privatization of the refining sector and
liberalisation of domestic fuel prices by removing subsidies.
Figure 13: Average Refining Capacity Utilisation from 2001-2013, Nigeria
85 Nigerian National Petroleum Corporation, Annual Statistics Bulletin, (2013). Retrieved from
http://www.nnpcgroup.com/Portals/0/Monthly%20Performance/2013%20ASB%201st%20edition.pdf
86 Secretariat of the Organization of the Petroleum Exporting Countries, OPEC Annual Statistical Bulletin 2014,
page 59. Retrieved from
http://www.opec.org/opec_web/static_files_project/media/downloads/publications/ASB2014.pdf
87 OandO, Industry Review. Retrieved from http://www.oandoplc.com/oando-refining/industry-overview/
53
Source: NNPC88
Figure 14: Petroleum products Demand in Nigeria
Source: OandO89
5.2.2. Natural Gas
Natural gas is one of Earth’s cleanest and most abundant energy sources. Nigeria is ranked as
the ninth-largest natural gas reserve holder in the world and largest in Africa with an
88 Nigerian National Petroleum Corporation, Annual Statistics Bulletin, (2013). Retrieved from
http://www.nnpcgroup.com/Portals/0/Monthly%20Performance/2013%20ASB%201st%20edition.pdf
89 OandO, Industry Review. Retrieved from http://www.oandoplc.com/oando-refining/industry-overview/
54
estimated 180 trillion cubic feet (Tcf) of proved natural gas reserves as of January 2015.90
Despite these proved natural gas reserves, mostly located in the Niger Delta, significant
amount of Nigeria's gross natural gas production is flared (burned off) due to a lack of
infrastructure needed to capture the natural gas produced with oil, known as associated gas.
According to the OPEC, Nigeria only produced 1.35 Tcf of dry natural gas in 2013,
consumed 36% of its gross production (490 billion cubic feet (Bcf)), flared 15% (428 Bcf)
(203Bcf), and exported the rest.91
Table 2. Planned natural gas projects in Nigeria
Plateau
natural
gas production
Final investment
Project name
Operator
(MMcf/d)*
decision?
Est. start
Sonam Field Development
Chevron
215
yes
2016
Forcados Yokri Integrated Project**
Shell
65
yes
2017
Southern Swamp Associated Gas**
Shell
45
yes
2017
Gbaran-Ubie Phase Two Project
Shell
800
yes
2017
Bonga Southwest and Aparo
Shell
15
no
2020+
Bonga North
Shell
60
no
2020+
Bosi
ExxonMobil
260
no
2020+
Uge
ExxonMobil
20
no
2020+
*MMcf/d is million cubic feet per day.
**Units are in barrels of oil equivalent per day (boe/d).
Source: U.S. Energy Information Administration, International Energy Agency92
When crude oil is produced from wells, raw natural gas associated with the oil is produced to
the surface as well, and in countries lacking gas transportation infrastructure, vast amounts of
such associated gas are commonly flared as waste or unusable gas. According to the U.S.
National Oceanic and Atmospheric Administration (NOAA), natural gas flared in Nigeria
accounted for 16.3% of the total amount flared globally in 2007, but has since dropped to
90 Oil & Gas Journal, Worldwide Look at Reserves and Production, (January 1, 2015). Retrieved from
http://www.ogj.com/articles/print/volume-112/issue-1/drilling-production/worldwide-look-at-reserves-and-
production.html
91 Secretariat of the Organization of the Petroleum Exporting Countries, OPEC Annual Statistical Bulletin
2014, page 31. Retrieved from
http://www.opec.org/opec_web/static_files_project/media/downloads/publications/ASB2014.pdf
92 U.S. Energy Information Administration (EIA) International Energy Agency Country Analysis: Nigeria, page 14.
Retrieved from http://www.eia.gov/countries/analysisbriefs/Nigeria/nigeria.pdf
55
14.6% in 2013. The figures also show that the amount of gas flared in Nigeria has actually
decreased in recent years, from 540 Bcf in 2010 to 428 Bcf in 2013.
Figure 15: Gas Flaring Volume in 2011
Source: Resilience.org93
There is no clear sign that the Nigerian government plans to end gas flaring in the country
anytime soon, as the IOCs have severally defied penalties on this issue, and new deadlines
are repeatedly postponed by the government. Gas flaring has been estimated to cost Nigeria
over $2 billion (about N320 billion) annually in revenue that would have accrued had the gas
been captured, refined and sold. This is in addition to the danger it poses to the citizens,
animals plants, and the environment. In addition, Nigeria lost N12.38bn from non-imposition
of penalties on IOCs for gas flaring from January to October of 2012, i.e., Chevron would
have paid N4.61bn, Shell N2.55bn, Mobil N1.22bn, Agip N1.02bn, Total N785.56m, and
Texaco N45.28m, based on the new penalty rate of N558.25 per scf.94
As part of Nigeria's resolve to become a major international player in the international gas
market, as well as to lay a solid framework for gas infrastructure expansion within the
domestic market, the Nigerian Gas Master Plan was approved on February 13 2008. The
Master Plan was developed to promote investment in pipeline infrastructure and new gas-
fired power plants. This will help reduce gas flaring and also provide gas to fuel much-
needed electricity generation in the country. The Master-Plan is a guide for the commercial
exploitation and management of Nigeria’s gas sector. It aims to stimulate the multiplier effect
93 Resilience.org, Gas Flaring: The Burning Issue by by Zoheir Ebrahim and Jörg Friedrichs. Retrieved from
http://www.resilience.org/stories/2013-09-03/gas-flaring-the-burning-issue
94 NNPC, OPEC, and BusinessDay, Nigeria Gas flared and Cost Implications, July 30, 2014. Retrieved from
http://businessdayonline.com/2014/07/nigeria-gas-flared-and-cost-implication/#
56
of gas in the domestic economy; position Nigeria competitively in high value export markets;
and guarantee the long-term energy security of Nigeria.
5.2.2.1. Gas-To-Liquids (GTL)
Gas-to-liquids (GTL) is a technology that enables the production of clean-burning diesel fuel,
liquid petroleum gas and naphtha from natural gas. The GTL process enables natural gas to
be transformed into superclean diesel fuel. With the expected rise in demand for diesel, GTL
technology provides an option to make a fuel with qualities that can enable significant
reductions in emissions. A Chevron-operated Escravos GTL project is currently underway,
with Chevron (75%) and NNPC (25%) jointly developing the $10 billion facility. When
completed, the plant will be able to convert 325 MMcf/d of natural gas per day into 33,000
barrels of liquids, i.e., clean-burning and low-sulfur diesel fuel for cars and trucks. The
project started small-scale production in mid-2014, but full production is expected to start in
mid-2015.95
5.2.2.2. Liquefied Natural Gas (LNG)
Majority of the natural gas produced in Nigeria is exported in the form of Liquefied Natural
Gas (LNG). Nigeria LNG Limited (NLNG) was incorporated on May 17, 1989, to harness
Nigeria's vast natural gas resources and produce Liquefied Natural Gas (LNG) and Natural
Gas Liquids (NGLs) for export. It is jointly owned by the NNPC (49%), Shell Gas
B.V. (25.6%), Total LNG Nigeria Ltd (15%), and Eni International (10.4%).96 Six
liquefaction units (LNG trains) producing 22 million metric tonnes of LNG per year (mmtpa)
are operated by the company, amounting to around 10% of the world's LNG consumption.
The LNG facility on Bonny Island is Nigeria's only operating LNG plant. The company has 2
wholly–owned subsidiaries, Bonny Gas Transport (BGT) Limited which provides shipping
services for NLNG, and Nigeria LNG Ship Manning Limited (NSML), which manages the
personnel for its maritime business.97
95 Chevron, Nigeria Portfolio, Exploration and Production, (May 2014) and Chevron 2014 Annual Report
Supplement, page 25. Retrieved from
http://www.chevron.com/documents/pdf/chevron2014annualreportsupplement.pdf
96 NLNG website, Shareholders. Retrieved from http://www.nigerialng.com/PageEngine.aspx?&id=43.
97 NLNG website, Background. Retrieved from http://www.nigerialng.com/PageEngine.aspx?&id=35.
57
The base projects, Trains 1 and 2, were financed by the shareholders at the cost
US$3.6 billion, while Train 3 which was funded by the shareholders and revenue from the
base project cost US$1.8 billion. Subsequently, Trains 4 & 5 cost US$2.1 billion and was
funded by a combination of internally generated revenue and third-party loans; and Train 6,
funded solely by the shareholders, cost US$1.748 billion.98 With the six trains operational,
the facility is capable of producing 22 Metric Tonnes Per Annum (MTPA) of LNG and 5
Metric Tonnes Per Annum (MTPA) of NGLs (LPG and Condensates) from 3.5 Billion
(Standard) Cubic Feet Per Day (bcf/d) natural gas intake. Plans for building Train 7 that will
lift the total production capacity to 30 mtpa of LNG are currently progressing with some
preliminary early site preparation work initiated. Further work will await a Final Investment
Decision by the shareholders.99
Nigeria exported about 800 Bcf of LNG in 2013, ranking Nigeria among the world's top five
LNG exporters, along with
Qatar, Malaysia, Australia, and
Indonesia.100 According to the
OPEC Annual Statistical Bulletin, Nigeria’s exports are estimated at 866 Bcf in 2013, and
accounted for about 7% of globally traded LNG.
Japan is the largest importer, and imported
23% of the total in 2013, followed by
South Korea (17%) and Spain (14%). Japan's imports
in 2013 were six times the 2010 level, and this is a result of the Fukushima nuclear incident
in March 2011. Exports to Europe have decreased significantly from 67% in 2010, to 31% in
2013. Also, U.S. LNG imports from Nigeria have declined substantially due to the growing
U.S. natural gas production. U.S. imports peaked at 57 Bcf in 2006 and then dropped to no
importation in 2012, and then shot back up to 2.5Bcf in 2013.101
NLNG commenced the supply of LPG to the Nigerian domestic market in 2007. This
initiative started as part of NLNG’s commitment to contribute significantly to the stimulation
of the domestic LPG sector, and to help overcome gross shortage of the product in Nigeria at
that point. The scheme commenced with the dedication of 150,000 Metric Tonnes Per
98 NLNG website, Financing the Plant. Retrieved from http://www.nigerialng.com/PageEngine.aspx?&id=114.
99 NLNG website, Commercial Capacity. Retrieved from http://www.nlng.com/PageEngine.aspx?&id=37.
100 BP, Statistical Review of World Energy, Excel workbook of historical data, 2014. Retrieved from
http://www.bp.com/en/global/corporate/about-bp/energy-economics/statistical-review-of-world-
energy/statistical-review-downloads.html.
101 BP, Statistical Review of World Energy, Excel workbook of historical data, 2014. Retrieved from
http://www.bp.com/en/global/corporate/about-bp/energy-economics/statistical-review-of-world-
energy/statistical-review-downloads.html.
58
Annum (mtpa) to the local market which was delivered to the Apapa jetty in December 2007.
Since then, the NLNG domestic LPG scheme has enjoyed outstanding success with NLNG’s
intervention leading to a significant reduction in the end user price of LPG in Nigeria, as well
as guaranteeing supply to the market to meet the high demand. This success has also led to
the increase of the dedicated volume for the domestic market to 250,000 mtpa in 2013.102
Figure 16: Nigerian LNG Exports, by Destination 2010.
103
Source: U.S. Energy Information Administration, International Energy Agency
Brass LNG Limited, a consortium made up of NNPC (49%), Total(17%), ConocoPhillips
(17%), and ENI(17%), is developing the Brass LNG Liquefaction Complex. The LNG
facility project is expected to have two liquefaction trains with a total capacity of 10 million
metric tons of LNG per year (Mt/y), and is in the early engineering phase. Total is committed
to purchasing about 20% of the plant’s output for twenty years. About 70% of this offtake
will be targeted at markets in Western Europe, while 30% goes to Asia.104
5.2.3. Coal Energy
102 NLNG website, FAQs. Retrieved from http://www.nigerialng.com/PageEngine.aspx?&id=121
103 U.S. Energy Information Administration (EIA) International Energy Agency Country Analysis: Nigeria, page
15. Retrieved from http://www.eia.gov/countries/analysisbriefs/Nigeria/nigeria.pdf
104 Total, The Brass LNG Project (Nigeria). Retrieved from http://www.total.com/en/energies-expertise/oil-
gas/exploration-production/projects-achievements/liquefied-natural-gas-projects/brass-lng-project-
nigeria?%FFbw=kludge1%FF
59
Coal is a major source of energy, and has played this important role for centuries – not only
providing electricity, but also as an essential fuel for steel and cement production, and other
industrial activities. It is the most widely available and abundant fossil fuel resource in the
world, and this provides energy security to many countries since its supply will last longer
than gas or oil. Coal can be found in several parts of Nigeria. The largest and most
economically viable coal deposits is in the Anambra Basin, which covers an area of
approximately 1.5million hectares. The Basin is subdivided into the following Kogi, Benue,
Enugu, Inyi, Afikpo, Lafia Obi, Gombe, and Asaba lignite Districts.105
Figure 16: Nigeria’s Coal Fields
106
Source: Global Methane
Coal was discovered in Enugu in 1909, and the Ogbete drift mine opened six years later. Its
operations and others in the country were merged into the Nigerian Coal Corporation (NCC)
in 1950.107 The NCC was then tasked with exploiting coal resources, and held a monopoly on
coal and coke mining, production, and sales. The development of the industry suffered once
oil was discovered, as the Nigerian Railway Corporation (NRC) and the Electricity
Corporation of Nigeria (ECN) switched to diesel-powered engines for their trains and power
105 MMSD 2010, Coal: Exploration and Power Generation Opportunities in Nigeria.
106 Global Methane, Nigeria: Summary of Coal Industry. Retrieved from
https://www.globalmethane.org/documents/toolsres_coal_overview_ch24.pdf
107 MMSD 2010, Coal: Exploration and Power Generation Opportunities in Nigeria.
60
plants, and furthermore, the Civil War caused many mines to be abandoned. Following the
war, production never completely recovered, and attempts at mechanizing production ended
badly.
Nigeria still holds large coal reserves, estimated to be at least 2 billion metric tonnes. The
discovery of bituminous coal suitable for use in coke production for the iron and steel
industries also opened up new domestic markets. With the loss of its largest domestic
consumers, the NCC began exporting coal to Italy and the United Kingdom, as its low
sulphur content was desirable. In 1999, the government starting allowing private companies
to operate coal fields in joint ventures with the NCC. The intention of the Nigerian
government was to retain 40% of the assets, and sell 40% to private investors and 20% to the
Nigerian public, while retaining 40%. In 2002, work stopped at NCC-operated mines and in
2003, the Nigerian government announced plans to create a technical advisory committee that
would be tasked with reviving the industry. The Nigerian Bureau of Public Enterprises (BPE)
still lists the NCC as an asset for sale, but no news reports to date provide any information
about the supposed sale.
Table 3: Nigerian Coal Mines
Estimated
Proven
Mining Methods
Reserves
Reserves
Depth of
Mine
Coal Type
(Surface or
(million
(million
Coal (m)
Underground)
tonnes)
tonnes)
Okpara
Sub-bituminous
100
24
180
Underground
Onyeama
Sub-bituminous
150
40
Underground
Ihioma
Lignite
40
N/A
20–80
Surface
Surface and
Ogboyoga
Sub-bituminous
427
107
20–100
Underground
Ogwashi
Surface and
Lignite
250
63
15–100
Azagba/Obomkpa
Underground
Surface and
Ezimo
Sub-bituminous
156
56
30–45
Underground
Surface and
Inyi
Sub-bituminous
50
20
25–78
Underground
Bituminous
Lafia/Obi
156
21.42
80
Underground
(cokable)
Oba/Nnewi
Lignite
30
N/A
18–38
Underground
Afikpo/Okigwe
Sub-bituminous
50
N/A
20–100
Underground
Amasiodo
Bituminous
1,000
N/A
563
Underground
Surface and
Okaba
Sub-bituminous
250
73
20–100
Underground
Surface and
Owukpa
Sub-bituminous
75
57
20–100
Underground
61
Ogugu/Awgu
Sub-bituminous
N/A
N/A
N/A
Underground
Afuji
Sub-bituminous
N/A
N/A
N/A
Underground
Ute
Sub-bituminous
N/A
N/A
N/A
Underground
Duho
Sub-bituminous
N/A
N/A
N/A
Underground
Kurumu
Sub-bituminous
N/A
N/A
N/A
Underground
Lamja
Sub-bituminous
N/A
N/A
N/A
Underground
Garin Maigunga
Sub-bituminous
N/A
N/A
N/A
Underground
Gindi Akwati
Sub-bituminous
N/A
N/A
N/A
Underground
Janata Koji
Sub-bituminous
N/A
N/A
N/A
Underground
108
Source: Global Methane
The Nigerian government has recognized the need to revitalize the country's coal mining
industry to provide fuel for power generation and domestic use. Steam coal, also known as
thermal coal, is used to generate electricity, and with clean coal technologies, we can use the
huge coal deposit yet to be tapped in Nigeria to boost the electricity sector. Using coal as an
alternative source of power generation will enable Nigeria to reach and surpass its targets for
the power sector as entrenched in the National Energy Policy. It is expected that coal from
the Districts can support coal-fired power plants with total capacity of between 15,000MW-
20,000MW.
Figure 17: Electricity Production from Coal in Nigeria (kWh)
108 Global Methane, Nigeria: Summary of Coal Industry. Retrieved from
https://www.globalmethane.org/documents/toolsres_coal_overview_ch24.pdf
62
109
Source: Index Mundi
In 2012, Astra Resources Plc concluded an initial geological investigation and feasibility
study in Nigeria to determine the coal potential and viability of two coal sites within the
Ogboyoga coal field of the Kogi District. The results indicated the existence of a total coal
tonnage of 31.35million tonnes in the 16.2 square kilometre area. The coal was found to be
low in sulphur and ash, and high in calorific value making it ideal for power generation, as
well as for exportation into the international market. Astra has stated that in addition to the
potentials of the venture, the incentives available to foreign investors in Nigeria makes the
“opportunity a perfect fit with Astra’s low risk business model.”110
5.2.4. Electricity
5.2.4.1. General Overview
Electricity is essential for economic growth, national development, and improved standard of
living for citizens of every country, and all the forms of energy already discussed can be
transformed to electricity. Despite the abundance of energy resources in Nigeria, electricity
generation is mainly from large hydro, natural gas, LPFO and diesel, and the supply is far
short of demand.
109 Index Mundi, Nigeria: Electricity production from coal sources. Retrieved from
http://www.indexmundi.com/facts/nigeria/electricity-production-from-coal-sources
110 Proactiveinvestors. Retrieved from http://www.proactiveinvestors.com.au/companies/news/25509/-astra-
resources-uncovers-new-growth-opportunity-in-nigerian-coal--25509.html
63
In Nigeria, electricity generation started from few kilowatts that were used in Lagos by the
colonial masters when the first generating plant was installed in 1898. By the Act of
Parliament in 1951, the Electricity Corporation of Nigeria (ECN) was established. In 1962,
the Niger Dams Authority was set up to develop hydroelectricity, and it was later merged
with ECN in 1972 to form the National Electric Power Authority (NEPA). NEPA operated a
monopolized market until 2001, when the National Electric Power Policy (NEPP) was
introduced to kick-off the power sector reform and several other reforms.
Figure 18: Generation capacity in Nigeria, 2014.
111
Source: Federal Ministry of Power
In 2012, Nigeria's installed generation capacity was 6,090 megawatts (MW) in 2012 (pre-
privatization), of which 3,960MW (65%) was from fossil fuel sources, 2,040 MW (33%) was
from hydro sources, 88MW from biomass and waste (1%), and 2 MW (<1%) from wind. The
local demand is estimated at 15GW, while total installed generation capacity is 8GW. Peak
generation is presently at an average of 4GW/day, generation for international commitments
stand at 300MW, and the maximum capacity of the national grid is 5GW thereby leaving
about 2GW stranded. This may also attributed to inadequate gas supply, bad water
management, and inefficient distribution network.
Figure 19: Data for Electricity Sector
111 FMoP. Retrieved from http://image.slidesharecdn.com/ministryofpower-130723082504-
phpapp01/95/ministry-of-power-55-638.jpg?cb=1374585942
64
Sources: NERC
Nigeria's power sector suffers from poor maintenance of electricity facilities, unavailability
of natural gas supply, bad water management, high technical losses from concentration of
power plants in the south, non-diversification of sources, high commercial losses due to poor
collection mechanisms, and an obsolete/inadequate transmission and distribution networks.
Due to these factors, stranded power is presently estimated to be about 2GW daily.
Nigeria has one of the lowest rates of net electricity generation per capita in the world. Only
about 41% of the population have access to grid electricity. The 18% with access are located
in the rural areas, where about 70% of the population reside.112 Those with access to
electricity (private, commercial and industrial) have to regularly experience load shedding,
and blackouts, which cause them to rely heavily on private generators as back-ups. Most have
even disconnected themselves from the grid in order to operate their own isolated system.
Figure 20: Nigeria’s Installed and Available Capacity
112 African Development Fund, "Project Appraisal Report: Partial Risk Guarantee in Support of the Power Sector
Privatizations," (December 2013), pages 1-8.
65
113
Source: Doing Business
On November 1, 2013, the reform and privatization efforts of the government achieved a
milestone as the government-owned utilities were officially handed over to the successful
preferred bidders, part of the objectives of the Act. The private companies took physical
ownership of the generation and distribution infrastructure and the responsibility of
improving/repairing the system. The federal government retained 40% of the distribution
companies, 100% of the transmission company (being managed by Manitoba Hydro
International), and 100% of the three (3) hydropower plants (given to private companies
under concession). The federal government is in the process of privatizing the power plants
constructed under the National Integrated Power Projects (NIPP). The project includes 10
generation plants, 110 transmission infrastructure, and 250 distribution projects, as well as
gas projects at nine of the power plants.114 The privatization process for the ten power plants
started last year, and will be concluded soon, and hand-over thereafter to the preferred
bidders. Nigeria has set ambitious goals to increase generation capacity to more than 20,000
MW by 2020.
Figure 21: Structure of the Electricity Sector
113 Doing Business in. Retrieved from http://www.doingbusinessin.fr/wp-
content/uploads/2013/09/power42.png
114 NDPHC. Retrieved from http://ndphc.net/?page_id=2900 & http://ndphc.net/?page_id=3429
66
115
Source: FMoP
The power sector in Nigeria is divided into three major parts, the Generation, Transmission,
and Distribution subsectors.
5.2.4.2. Generation
The splitting of the power sector led to the formation of Nigerian Electricity Supply Industry
(NESI). The generation segments of the Nigerian power sector are divided into the six (6)
successor generation companies (6) created from NEPA and recently privatized by the FG,
Independent Power Producers (IPPs) constructed, owned and managed by the private sector,
and ten (10) plants under the National Integrated Power Projects (NIPP). All the above
mentioned plants have been issued with the appropriate Licences by NERC pursuant to
Section 62 of the EPSR Act.
Figure 22 Nigerian Power Generation Report
115 FMoP. Retrieved from http://image.slidesharecdn.com/ministryofpower-130723082504-
phpapp01/95/ministry-of-power-8-638.jpg?cb=1374585942
67
116
Source: PTFP & Electric Power Forum
A priority for the Nigerian authorities presently is to balance out the production palette,
which currently relies solely on hydroelectric and thermal sources. First signs of
diversification are appearing as the Commission has issued several licences to companies
intending to generate power with coal. Nuclear energy is also being considered, despite
doubts given the enormity of financial resources, required skills, and the availability of the
technology locally. Solar energy’s commercial deployment remains limited for the short to
medium term. According to the government’s master plan, it is projected to account for about
8.3% of generating capacity by 2030. Nigeria remains very richly endowed with renewable
energy resources that remain hugely untapped. Biomass, wind, solar, geothermal and ocean
energies are available but still not explored or limited to pilot and demonstration projects.
Figure 23: Existing Power Plants connected to the National Grid (2014)
116 Electric Power forum. State of Power Generation in Nigeria. Retrieved from
http://electricpowerforum.com.ng/?p=210
68
117
Source: FMoP
Figure 24: Newly Completed/Ongoing Generation Projects (2014)
118
Source: FMoP
5.2.4.3. Transmission
117 FMoP. Retrieved from http://image.slidesharecdn.com/power-141124035719-conversion-
gate01/95/ministerial-press-briefing-2014-presentation-by-the-minister-of-power-prof-nebo-20-
638.jpg?cb=1416823291
118 FMoP. Retrieved from http://image.slidesharecdn.com/power-141124035719-conversion-
gate01/95/ministerial-press-briefing-2014-presentation-by-the-minister-of-power-prof-nebo-21-
638.jpg?cb=1416823291
69
The transmission subsector remains a monopoly still owned by the FG, under the company
known as the Transmission Company of Nigeria (TCN). The TCN is also a successor
company of the defunct NEPA and PHCN, and performs the role of the Transmission Service
Provider (TSP), System Operator (SO), and Market Operator (MO). As a TSP, it holds a
Transmission Licence which empowers it to build and maintain the transmission system to
supply power to all parts of the country.
Figure 25: Nigeria’s Grid System
119
Source: Global Energy Network Institute
TCN also holds a System Operations Licence which empowers it to be the SO and the MO.
The SO is responsible for operating the transmission system in a safe and reliable manner in
terms of planning, dispatch, operation and control. The SO is also responsible for the overall
security and reliability of the grid system. The transmission networks spreads to all parts of
the country and across the border, and is made up of a National Control Centre (NCC) in
Oshogbo, three (3) Regional Control Centers (RCC) at Shiroro, Ikeja and Benin, eight (8)
Regional Operations Coordinating units (ROCs) at Benin, Enugu, Port Harcourt, Bauchi,
119 Global Energy Network Institute, Nigerian national Electricity Grid. Retrieved from
http://www.geni.org/globalenergy/library/national_energy_grid/nigeria/nigeriannationalelectricitygrid.shtml
70
Kaduna, Shiroro, Oshogbo, and Lagos, and several Area Control Centres. Proposed RCCs are
planned for Kano, Alaoji, and Gombe.120 The MO, on the other hand, is responsible for
implementing and administering the Market Rules and Procedures, including administration
of the Commercial Metering System, Market Settlement System and Payment System, as
well as the commercial arrangement of the energy market.
The EPSR Act though, contemplates that when the electricity market is fully developed, the
System Operations Licence and operations may be transferred to an Independent System
Operator (ISO) separate from TCN. It is also envisaged that the MO may also become
autonomous and separate from the TCN as the market develops. TCN is currently being
managed by a Management Contractor, Manitoba Hydro International (Canada) responsible
for revamping it to achieve technical and financial adequacy in addition to providing stable
transmission of power without system failure.
Figure 26: Future Transmission Expansion in Nigeria
*Blue lines – Present network
**Red lines – Future expansion
121
Source: Ministry of Power
Figure 27: Transmission Wheeling Capacity of TCN, 2014
120 The Nigerian Electricity System Operator. Retrieved from http://www.nsong.org/AboutUs/History.aspx
121 Federal Ministry of Power. Retrieved from http://image.slidesharecdn.com/ministryofpower-
130723082504-phpapp01/95/ministry-of-power-66-638.jpg?cb=1374585942
71
122
Source: Federal Ministry of Power
5.2.4.4. Distribution
The third sub-sector is distribution which comprises of eleven (11) electricity distribution
companies (DISCOS), namely Abuja Distribution Company, Benin Distribution Company,
Eko Distribution Company, Enugu Distribution Company, Ibadan Distribution Company,
Ikeja Distribution Company, Jos Distribution Company, Kaduna Distribution Company,
Kano Distribution Company, Port Harcourt Distribution Company, and Yola Distribution
Company.
Figure 28: The Distribution Zones in Nigeria
*Ekiti State is serviced by Ibadan and Benin Distribution Company
123
Source: KPMG
122 FMoP. Retrieved from http://image.slidesharecdn.com/ministryofpower-130723082504-
phpapp01/95/ministry-of-power-57-638.jpg?cb=1374585942
123 KPMG. Retrieved from http://www.kpmg.com/Africa/en/IssuesAndInsights/Articles-
Publications/Documents/Guide%20to%20the%20Nigerian%20Power%20Sector.pdf
72
5.2.4.5. The Energy Sector in Similar Countries
By comparison, South Africa, with a population of just 50 million, has an installed electricity
generation capacity of over 52,000 MW. On a per capita consumption basis, Nigeria is
ranked a distant 178th with 106.21 KWh per head – well behind Gabon (900.00); Ghana
(283.65); Cameroon (176.01); and Kenya (124.68).124
South Africa with a population of about 50million people, less than a third of the Nigerian
population, but generates over 45,000 MW of electricity. Current rating of top 100 electricity
producers in the world shows Nigeria 4th in Africa, and 70th in the world.125 In Africa, South
Africa has 238.3billion kWh, Egypt has 123.9, Algeria 40.11, Libya 26.95, and Nigeria has
20.13.126 From the history of the countries in the top 5, it took them 30years of consistent and
articulated planning and investments to reach that peak.
Figure 29: Benchmarking of Nigeria v. South Africa, 2009.
127
Source: Doing Business
Figure 30: Comparing Generation Capacity of Nigeria and BRICS & MINTS
124 Vanguard Newspaper. Retrieved from http://www.vanguardngr.com/2013/02/the-challenges-of-the-
nigerian-electric-power-sector-reform-1/#sthash.WJzorP71.dpuf
125 Farabale, Electricity Generation, January 4, 2015. Retrieved from http://farabale.co/2015/01/04/electricity-
generation-nigeria-4th-in-africa-70th-in-the-world/
126 Farabale, Electricity Generation, January 4, 2015. Retrieved from http://farabale.co/2015/01/04/electricity-
generation-nigeria-4th-in-africa-70th-in-the-world/
127 Doing Business in. Retrieved from http://www.doingbusinessin.fr/wp-
content/uploads/2013/09/power32.png
73
Source: Huffington Post128
5.2.5. Nuclear energy
Nigeria is interested in nuclear power as a source of stable electricity. The country has
explored the possibility of developing a nuclear energy program since the 1970s and has
recently made attempts to commission its first nuclear power plant. A roadmap developed by
the Nigerian Atomic Energy Commission (NAEC) calls for 1 4,000 MW by 2027. There has
been progress in some areas, including the ratification of international treaties, development
of regulatory infrastructure, and signing of bilateral technical cooperation agreements. The
challenges that remain include a substandard grid, underdeveloped electricity market, and
lack of technical capacity.
In 2012, Nigeria initially signed an agreement with Rosatom to cooperate on the design,
construction, operation and decommissioning of one nuclear facility. Now, negotiations are
ongoing for the construction of as many as four nuclear power plants with a capacity of
1,200MW each at a cost of about $80 billion. The project will be financed by Rosatom, who
will build, own, operate and transfer the plants to the Nigerian government pursuant to the
128 Huffington Post. Why Nigeria Generates so little power, by Timi Soleye. Retrieved from
http://www.huffingtonpost.com/timi-soleye/why-nigeria-generates-so-_b_5695091.html
74
Power Purchase Agreement. It is expected that Rosatom will hold a majority (controlling)
stake in the nuclear facilities, while a minority stake will be owned by Nigeria. The first plant
is expected to be operational in 2025.129 This will be a landmark project when commissioned
as the only nuclear power station in the entire African continent is Koeberg which in South
Africa, and is operated by state-owned Eskom Holdings SOC Ltd.
6. Sustainable energy
129 Bloomberg Business. Nigeria in Rosatom Talks for Up to $80 Billion Nuclear Power by Joseph Burite.
Retrieved from http://www.bloomberg.com/news/articles/2015-04-14/nigeria-signs-rosatom-deal-for-up-to-
80-billion-nuclear-power
75
6.1. Sustainable energy as a universal principle
The 2015 International Energy Charter recognises the importance of renewable energy
sources and energy efficiency. Signatories to the International Energy Charter acknowledge
the importance of efficient systems in the production, conversion, transport, distribution and
use of energy for energy security, poverty alleviation, sustainable development and for the
protection of the environment. They also agree to promote a more sustainable energy mix to
minimise the negative environment consequences in a cost-effective manner by sharing best
practices on clean energy development and investment.
6.2.1 Renewable energy sources
Nigeria has abundant indigenous energy resources aside from oil and gas, including hydro,
coal, solar, geothermal, wind, nuclear and biomass, much of which is untapped. Social and
economic development of the country will be accelerated through effective exploitation and
utilisation of these resources. Based on that, the Nigerian government has put policies in
place to encourage private sector participation in the development of these energy resources,
especially for power generation to bridge the wide gap between demand and supply in the
country, as well as regionally.
6.2.1.1 Hydropower
Nigeria is endowed with large and small rivers, streams, and some few natural falls, which
exist within the present split of the country into eleven river basin authorities. Studies have
shown that the country possesses potential hydro-energy resources along her waterways
consisting of a total of 70 micro dams, 126 mini dams and 86 small sites.130 According to the
ECN, the total exploitable potential of the country’s large hydropower is estimated at about
11,250 MW, and that of the small hydropower at 3500 MW. These rivers, waterfalls and
streams with high hydropower potential, if properly harnessed will lead to decentralized use
and can provide electricity to the grid, or be the most affordable and accessible option to off-
grid electricity service especially to the rural communities.
Figure 31: Waterways in Nigeria
130 Akpu, I.V. Renewable Energy Potentials in Nigeria. International Association for Impact Assessment.
76
131
Source: Logistics Capacity Assessment
Hydropower generation is an important option which can help to meet the growing demand
for energy worldwide, especially Nigeria. It was first harnessed in 1962 by the Niger Dams
Authority, but its total power contribution has declined in recent years. Presently, there are
three (3) large hydroelectric power plants located at Kainji (completed in 1968 with an
installed capacity of 760MW), Jebba (completed in 1984 with an installed capacity of
570MW), and Shiroro (completed in 1990 with an installed capacity of 600MW), and all
constructed by the Federal Government. In addition, NESCO operates various small hydro
plants in Jos, Plateau State with a total capacity of 30 MW. There are also some hydro
projects in progress or almost completed. Electricity production from hydroelectric sources in
Nigeria was last measured at 22.90 in 2009, with thermal (gas) at 64% and thermal (oil) at
13%.
Figure 32: Electricity Production from Hydro (% of total) in 2009
131 Logistics Capacity Assessment, Nigeria Waterway Assessment. Retrieved from
http://dlca.logcluster.org/display/public/DLCA/2.5+Nigeria+Waterways+Assessment;jsessionid=D1B5B222AC0
91772C76197CFFA8CD883
77
132
Source: U.S. Energy Information Administration, International Energy Agency
Nigeria plans to increase hydroelectricity generation capacity to 5,690 MW by 2020, almost
tripling the capacity from the 2012 level. Nigeria has large undeveloped hydro power
potentials, some of which have been shown to be technically and economically viable. Some
of these sites, indicated in Figure 33 below include Mambilla (3100MW), Ikom (730MW),
Lokoja (1050MW), Zungeru (700MW), Makurdi (1062MW), Onitsha (1050MW), Gurara I
(30MW), Gurara II (360MW), Itisi (40MW), Kashambilla (40MW), and Dadinkowa
(39MW).133 The Mambilla Power Station project will be one of Africa's and Nigeria's biggest
dam and hydro power plant project, and will be connected to three dams across the Donga
River in Taraba State. Conceived in 1982, the Dam has a potential of generating 3,960MW.
Thus on November 7, 2012 Nigeria signed an MoU with China's Sinohydro Corp. to build the
Mambilla Power Station. Once completed, it will multiply Nigeria's generating capacity
considerably. It is one of several hydro projects that are part of Nigeria’s Renewable Energy
Master Plan (REMP), proposed in 2006, which seeks to increase the supply of renewable
electricity – including wind, solar, biomass and small hydro – from 13% of total electricity
generation in 2015 to 23% in 2025 and 36% by 2030. Furthermore, in late 2013, the Nigerian
government announced a $1.3 billion deal with China to build the 700MW Zungeru
hydropower project. The Export-Import Bank of China will cover 75% of the cost, and the
Nigerian government will finance the remaining amount. The project was initially scheduled
132 The Encyclopedia of Earth, The Energy Profile of Nigeria. Retrieved from
http://www.eoearth.org/view/article/152513/
133 Federal Ministry of Power. Retrieved from http://image.slidesharecdn.com/ministryofpower-
130723082504-phpapp01/95/ministry-of-power-16-638.jpg?cb=1374585942
78
to be completed in 2017, but that date has been pushed back because of legal challenges that
have delayed construction work.134
In addition, the river basins in the country have potentials for small-scale hydropower, e.g.,
Chad Basin (Biu, Janga Dole, and Majeekin Dams), Upper Benue River Basins (Jada,
Monkin, Kiri, Waya, and Dandinkowa Dams), Anambra–Imo River Basin (Igwu, Imo, and
Ivo Rivers), Owena Benin River Basin (Owena, Ele, and Okhuanwan Rivers), and Ogun-
Oshun River Basin (Oyan, Ikere Gorge, Lekan Are, Oke-Odan, Eniosa, Ofiki I, Ofiki II,
Sepeteri I, Sepeteri II, Okuku, and Igbojaiye Dams).
Figure 33: Map showing the River Basins and locations of Hydropower Projects
Source: Federal Ministry of Power135
The Federal Ministry of Power has also concluded bankable feasibility studies at the
following dams: Oyan (10MW) in Ogun State, Ikere George (6MW) in Oyo State, Bakolori
(3MW) in Zamfara State, Challawa (7.5MW) and Tiga (10MW) in Kano State, Kampe
(3MW) in Kogi State, Owena (1MW) in Ondo State, Doma (1MW) in Nasarawa State, Zobe
(1MW) in Katsina State, and Jibia (4MW) in Katsina State.136
The Hydroelectric Power Producing Areas Development Commission Act 2010 establishes a
Commission vested with powers to formulate policies and guidelines for the development of
134 HydroWorld.com, "Nigeria's US$1.3 billion 700-MW Zungeru hydroelectric project deals with challenges,"
(December 12, 2014). Retrieved from http://www.hydroworld.com/articles/2014/12/nigeria-s-us-1-3-billion-
700-mw-zungeru-hydroelectric-project-deals-with-challenges.html
135 Federal Ministry of Power. Retrieved from http://image.slidesharecdn.com/ministryofpower-
130723082504-phpapp01/95/ministry-of-power-21-638.jpg?cb=1374585942
136 Federal Ministry of Power. Retrieved from http://image.slidesharecdn.com/ministryofpower-
130723082504-phpapp01/95/ministry-of-power-17-638.jpg?cb=1374585942
79
the hydroelectric power producing areas.137 The Act which was subsequently amended was
conceived to address the challenges faced by host communities of hydropower stations.
HYPPADEC is expected to efficiently manage the ecological damage caused by the
country’s hydro-electric dams on the affected States.138 The expenses of the Commission
funded by a Fund made up of contributions by operators (10% of the total revenue generated
from a hydroelectric dam), member states (25% of money due to the States from the
Ecological Funds), the Commission (money raised through several means and proceeds from
all other assets that may accrue to the Commission), and the Federal Government
(appropriations from the National Assembly which shall be at least 50% of their annual
budget).
6.2.1.2. Solar Energy
Among all the renewable energy resources available, solar is the most promising and
dependable due to its apparent limitless potentials. Nigeria is located favourably within a high
sunshine belt, and solar radiation is well distributed within the country. The intensity of solar
radiation exhibits remarkable variation from the northern region to the southern region but is
higher in the northern region. The daily solar radiation varies from 7.2kW/m2/day in the north
to 4kW/m2/day in the south, and an average of 9hrs of daily sunshine hours in the north to 4
hours in the south. With an average radiation level of about 19.8 MJ/m2/day, solar energy
may be harnessed in the form of solar photovoltaic electricity or in the form of thermal
energy.139
137 Hydroelectric Power Producing Areas Development Commission (Establishment, ETC,) Act No 87 of 2010.
Retrieved from http://faolex.fao.org/docs/pdf/nig120404.pdf
138 Section 14 of the HYPPADEC Act 2010.
139 Sambo, A.S. (2009) Strategic Developments in Renewable Energy in Nigeria. International Association for
Energy Economics, 16.
80
Figure 34: Yearly Average Radiation in Nigeria (Wh/m2)
140
Source: Federal Ministry of Power
Figure 35: Horizontal Radiation in Nigeria
141
Source: SolarGIS
The Energy Commission of Nigeria (ECN) has made some effort to harness the solar energy
within Nigeria through the direct coordination of research and development activities
undertaken by the Sokoto Energy Research Centre (SERC) and the National Centre for
140 FMoP. Retrieved from
141 SolarGIS, Global Horizontal Radiation: Nigeria. Retrieved from
http://solargis.info/doc/_pics/freemaps/1000px/ghi/SolarGIS-Solar-map-Nigeria-en.png
81
Energy Research and Development (NCERD).142 It has been reported that Nigeria has the
potentials of generating 2,783,723,951MWh/year of solar-generated electricity,143 which may
be evacuated into the national grid, or used for power supply to locations not connected to the
national grid, or for water pumping, rural electrification, and traffic lighting.
6.2.1.3. Wind Energy
Wind energy potential varies with wind speed and is available in Nigeria at annual average
speeds of about 2.0 m2 at the coastal region and 4.0 m2 at the northern region of the
country.144 With this amount of wind energy potential, small scale wind turbine could be
installed to boost electricity supply and also be integrated into the national grid.
Figure 36: Locations with Wind Energy potentials in Nigeria, by States
145
Source: New Era Energy
The technologies for harnessing this energy have, over the years been tried in the northern
parts of the country, mainly for water pumping from open wells, and milling of grains.
Despite Nigeria’s exploitable wind energy resources, the present share of wind energy in the
142 ECN, Draft Renewable Energy masterPlan, November 2014. Retrieved from
http://www.energy.gov.ng/index.php?option=com_docman&task=doc_download&gid=102&Itemid=49
143 Open Energy Information. Retrieved from http://en.openei.org/wiki/Nigeria
144 Sambo, A.S. (2009) Strategic Developments in Renewable Energy in Nigeria. International Association for
Energy Economics, 16.
145 New Era Energy, Nigeria Wind Energy. Retrieved from http://www.neenigeria.com/Nigeria_wind_NEW.png
82
national energy consumption has been low with no available commercial wind farms, but
only small standalone wind power plants for pumping water in some northern states.
Nigeria’s first wind farm, the Katsina Wind Farm, is presently under construction in Rimi
Village, Katsina State.146 The project, which will have a total output of 10.175MW, consists
of 37 GEV MP with rated power of 275kW each, is being funded by Japan International
Cooperation Agency (JICA) at a cost of 18,500,000 Euros.147 It was first envisioned by the
Katsina State government, and gained full support from the Federal Government in 2007. The
need to diversify Nigeria's energy mix, boost electricity generation, and utilise the vast wind
resources in the north of the country, were the main drivers for governmental support for this
pioneer project in Nigeria.
6.2.1.4. Biomass Energy
Biomass is resources generated from plant material that can be degraded, i.e., can be
converted. Biomass energy can be generated in Nigeria given the range of biomass and waste
feedstock that are available for utilisation. A general categorization of sources comprises of
energy crops (biomass fuels grown specifically for use as fuels, e.g., trees, grasses, and oil
plants); forestry residues (wood fuels produced from lumbering and forestry such as wood
chips, forestry trimmings, sawdust and bark); agricultural wastes (produced by farming
practices for food production such as straw, bagasse and poultry litter); municipal waste
(generated from household, industrial and commercial sources); and specialized industrial
wastes (waste materials generated by industry, e.g., tyres, meat processing wastes and waste
derived products).
6.2.1.5 Energy from Liquid Biofuels
Biofuels include alcohol fuels, such as ethanol, and “biodiesel,” a fuel made from grain oils
and animal fats. Biodiesel has potential for off grid power supply as well as peak load
management at reduced emission consequence. Nigeria’s biofuel programme is focused on
146 Vergnet Group, Katsina Wind farm. Retrieved from http://www.vergnet.com/pdf/fiches/en/nigeria-
katsina.pdf
147 ECOWAS Observatory for Renewable Energy and Energy Efficiency, Katsina Wind Farm. Retrieved from
http://www.ecowrex.org/project/katsina-wind-farm-project
83
producing ethanol from cassava and sugarcane. The use of biodiesel in diesel engines for
power generation in remote locations is currently being promoted by relevant government
agencies in line with the National Energy Policy. Jatropha and other oil seeds are currently
being promoted for small power generation, while some communication firms have already
initiated projects to power their repeater stations from biodiesel.
84
7. Regional and International Frameworks
7.1. Regional integration as universal principle
The 2015 International Energy Charter firmly supports its signatories enhancing regional
cooperation in order to meet common energy challenges, acknowledging that enhanced
energy trade is a powerful catalyst for strengthening regional cooperation for energy
security. Members of the International Energy Charter agree to develop cooperation with
regional organisations for sharing experience and specific examples from national practice
in the area of sustainable development, access to modern energy services, energy poverty
reduction, clean energy, energy efficiency, as well as the development and broader use of
new clean technologies. Under the International Energy Charter, the freedom of movement of
energy products, and the development of an efficient regional energy infrastructure, is
essential to facilitate the development of stable and transparent trade in energy.
7.2. Nigeria regional leader and committed partner
7.2.1. Regional integration
The most important regional energy integration policy document is the ECOWAS Energy
Protocol which establishes a legal framework to promote long-term co-operation in the
energy field with a view to achieving increased investment in the energy sector, and
increased energy trade in West Africa. It establishes, as a general principle, the use of energy
to support development and economic growth, alleviate poverty and to improve the level and
quality of life throughout the region. It also provides the use of energy to promote collective
self-reliance and creating an atmosphere that provides for the private sector to participate
fully in the development of energy in the region. It is important to note that the Protocol
which was signed by ECOWAS Member State in Senegal in 2003 is modelled on the Energy
Charter Treaty, thus agreeing to the International Energy Charter will not be a move in a
different direction for ECOWAS Member States, which Nigeria is party to.
The combination of the wide availability of energy resources of the country, and the size of
the regional market provides opportunities for greater attractiveness for projects and revenue
generation, while improving the balance of payments. Thus Nigeria is involved in various
projects with its neighbouring countries in West Africa, as well as North Africa.
85
7.2.2. Joint Development with Sao Tome and Principe
The Treaty between Nigeria and the Democratic Republic of Sao Tome and Principe on the
Joint Development of Petroleum and other Resources, in respect of Areas of the Exclusive
Economic Zone of the Two States is an agreement between the two countries creating a Joint
Development Authority to explore and produce oil in the waters between Sao Tome and
Nigeria. This was necessary because neither country can explore the 14billion barrels of oil
estimated to be in the Joint Development Zone (JDZ) without interfering with the maritime
territory of the other country.
Figure 37: Map showing the Joint Development Zone
148
Source: ERHC Energy
148 ERHC Energy. Retrieved from http://erhc.com/map-of-gulf-of-guinea/
86
Figure 37: Joint Development Zone Prospects
149
Source: EHRC Energy
7.2.3. West African Gas Pipeline (WAGP)
Under a Treaty signed by the Heads of States of the four countries, the West African Gas
Pipeline Authority (WAGPA) was created as a single regional entity with regulatory
authority over the constructions and operations of WAGP.150 The Treaty is supported by
domestic legislations in all the member states, with Nigeria enacting the West African Gas
Pipeline Project Act 2005.151
A small amount of the natural gas produced in Nigeria is exported to nearby West African
countries via the West African Gas Pipeline (WAGP), which began commercial operations in
2011. The WAGP is owned and operated by the West African Gas Pipeline Company
Limited (WAPCo), a joint venture between public and private sector companies from
Nigeria, Benin, Togo and Ghana. The owners are Chevron West African Gas Pipeline
Limited (36.9%), NNPC (24.9%), Shell Overseas Holdings Limited (17.9%), Takoradi Power
Company Limited (16.3%), Societe Togolaise de Gaz (2%), and Societe BenGaz S.A. (2%).
149 ERHC Energy. Retrieved from http://erhc.com/joint-development-zone-prospects/
150 WAPG website. Retrieved from http://wagpa.org/wagpa.html
151 WAPG. Retrieved from http://www.wagpa.org/Nigeria_WAGP_Act.pdf
87
The company has its headquarters in Accra, Ghana, with an office in Badagry, Nigeria, and
field offices in Cotonou - Benin, Lome - Togo, Tema and Takoradi, both in Ghana.
The company's main mandate is to transport natural gas from Nigeria to customers in Benin,
Togo and Ghana in a safe, responsible and reliable manner, at prices competitive with other
fuel alternatives.152 As a source of lower-cost sustainable fuel for power generation and direct
use for industrial and commercial customers, the pipeline fosters an enabling environment for
economic development and job creation in the sub-region, promotes economic integration
among the countries, helps to achieve the goal of long-term energy security in the region,
replaces liquid fuels in electricity generation, and contributes to the emission of greenhouse
gas in the region. The WAPCo Pipeline serves as a pioneering model of a multi-country
private/public sector partnership for sub-regional economic growth, and is evidence that
through creative cooperation among States in the region in providing a predictable and stable
business environment, significant private direct investment can be attracted. The Pipeline will
provide a long-term supply of energy that will help stimulate private investment into the sub-
region and the countries which will create jobs and wealth. Reduced cost of electricity for
consumers since main source of generation will be natural gas, which is also the cleanest of
all fossil fuels. The pipeline's extension to other sub-regional markets appear likely in future.
This will bring additional economic benefits that are yet to be estimated.153
Presently, the pipeline is 678km, and links into the existing Escravos-Lagos pipeline at the
Itoki Natural Gas Export Terminal owned by the Nigerian Gas Company, and then proceeds
to a beachhead in Lagos. From there it moves offshore to Takoradi, in Ghana, with gas
delivery laterals extending to Cotonou (Benin), Lome (Togo) and Tema (Ghana). The
Escravos-Lagos pipeline system has a capacity of 800 MMscfd, and the WAPCo system will
has the nameplate capacity to export 170MMscfd and peak over time at a capacity of
460MMscfd. The main offshore pipeline runs East to West at an average water depth of 35
metres though Ghana, Lome, and the Benin – Nigerian frontier ranges between 50 to 70
meters, with its range from the coast as varied as the depth. The main pipeline is 20 inches in
diameter. Cotonou and Lome laterals are 8 inches respectively while the Tema lateral is 18
inches.
152 WAGP, Company Profile. Retrieved from
http://www.wagpco.com/index.php?option=com_content&view=article&id=46&Itemid=78&lang=en.
153 WAGP, Benefits of the Pipeline. Retrieved from
http://www.wagpco.com/index.php?option=com_content&view=article&id=114&Itemid=105&lang=en.
88
Figure 38: The West African Gas Pipeline
154
Source: West African Gas Pipeline
WAGP transports purified natural gas free of heavy hydrocarbons, liquids and water, ideally
suited as fuel for power plants and industrial applications. Eighty-five per cent of the gas is
for power generation and the remaining for industrial use. The Volta River Authority’s
Takoradi Thermal Power Plant in Ghana, CEB of Benin and Togo are WAPCo’s foundation
customers. Exports via the pipeline fell from 29 Bcf in 2011 to 14 Bcf in 2012 after the
pipeline was shut down for repairs from August 2012 to July 2013, and then it rose again to
21 Bcf in 2013.155
The Treaty establishing the project provides for possible extension to other countries. Thus,
several States within the West African Sub region have expressed the wish to extend the
West African gas pipeline network to Dakar via Abidjan, Monrovia, Freetown, Conakry,
Bissau and Banjul. Ivory Coast has even applied to become a state signatory of the protocol
governing the WAGP. The ambition of the Ivorian authorities would be to extend the pipeline
to the coastal town of Assini, in south-eastern Côte d'Ivoire. WAGP can be connected to a
pipeline project awarded to Saipem, which is planned to link Assini to Abidjan. The pipeline
project worth 32 billion CFA francs (50 million euros) is expected to transport gas from
154 WAGP, About the Pipeline. Retrieved from
http://www.wagpco.com/index.php?option=com_content&view=article&id=122&Itemid=84&lang=en
155 Cedigaz, Statistical Database, 2013. Retrieved from http://www.cedigaz.org/products/natural-gas-
database.aspx.
89
Ivorian oil blocks operated by Vanco and CNR to Abidjan for use by power plants. The
junction with the WAGP would also help carry gas from Nigeria to Abidjan.156
Figure 39: Proposed extension of the WAGP by the Government of Ivory Coast
157
Source: Juene Afrique
7.2.4. The Proposed Trans-Saharan Gas Pipeline (NIGAL Project)
Nigeria and Algeria have proposed plans to construct the Trans-Saharan Gas Pipeline
(TSGP), also know as the NIGAL Project. The pipeline would carry natural gas from Nigeria
to Algeria for onward delivery to the European market.158 The project estimated to cost about
$12billion is one of the three major projects of the New African Partnership Development
(NEPAD), with the Lagos-Algiers highway, and the fiber optic along the gas pipeline.159 In
2009, NNPC signed an MoU with Sonatrach, the Algerian national oil company, to proceed
with the project. The pipeline which will be 4,300km or 4,180km in length, if it terminates at
El Kala or Beni Saf, will run through Nigeria (1050km), Niger (750km), and Algeria
(2500km). The pipeline system will be 48 or 56 inches in diameter, and will be capable of
supplying the European market with 20 to 30 billion m3 of natural gas per year. Within the
European Union, gas consumption is shrinking but gas production is declining even faster
(30% of the gas needs are supplied by Russia, compared to 14% provided by Algeria). Large
156 Juene Afrique, November 4, 2013. Retrieved from http://economie.jeuneafrique.com/regions/afrique-
subsaharienne/20450-cote-divoire--la-production-de-gaz-naturel-a-double-en-un-an.html.
157 Juene Afrique, November 4, 2013. Retrieved from http://economie.jeuneafrique.com/regions/afrique-
subsaharienne/20450-cote-divoire--la-production-de-gaz-naturel-a-double-en-un-an.html
158 NNPC, Investment Opportunities, Nigerian Gas. Retrieved from
http://www.nnpcgroup.com/NNPCBusiness/BusinessInformation/InvestmentOpportunities/NigeriaGas.aspx
159 NNPC, News and Updates. Retrieved from
http://www.nnpcgroup.com/PublicRelations/NNPCinthenews/tabid/92/articleType/ArticleView/articleId/172/
TRANS-SAHARA-GAS-PIPELINE-PROJECT-viable--GMD.aspx
90
natural gas consumers like Germany, France, the United Kingdom and Spain now prefer to
purchase liquefied natural gas that can be exported by ship.
Figure 40: The Proposed Trans-Saharan Gas Pipeline
160
Source: Financial Times
The benefits of the project to the region include providing transportation infrastructure to
help reduce gas flaring in Nigeria, help preserve the environment by eliminating gas flaring,
developing the regions through which the pipeline will pass, creating jobs for locals during
the construction and operation of the pipeline, synergy with other proposed projects under
NEPAD, increase regional cooperation, cause export diversification of Nigerian gas versus
the more expensive LNG, and diversification and increased security of access and supply of
natural gas to Europe.161
7.2.5. The West African Power Pool
160 Financial Times, Europe Plays catch-up in race for gas by Matthew Breen and William Wallis
September 17, 2008. Retrieved from http://www.ft.com/cms/s/0/630c6f4e-841f-11dd-bf00-
000077b07658.html#axzz3UwYHhk3G
161 Ministère de L’énergie Algérie, Project NIGAL. Retrieved at http://www.mem-
algeria.org/francais/index.php?page=presentation_nigal
91
The West African Power Pool (WAPP) is a specialized institution established by Decision
A/DEC.5/12/99 of the 22nd Summit of the Authority of ECOWAS Heads of State and
Government. It covers 14 of the 15 countries of the regional economic community (Benin,
Côte d'Ivoire, Burkina Faso, Ghana, Gambia, Guinea, Guinea Bissau, Liberia, Mali, Niger,
Nigeria, Senegal, Sierra Leone, Togo). Its aim is to integrate the operations of the power
systems of the states into a unified regional electricity market, and assure the citizens of
ECOWAS Member States stable and reliable electricity supply. WAPP is made up of 26
member companies, both public and private utility companies in West Africa, and is also
expected to ensure the promotion and development of power generation and transmission
facilities, as well as the coordination of power trade between the States.
Figure 41: The West African Power Grid (Existing and Proposed Lines)
162
Source: Stratfor Global Intelligence
162
Stratfor Global Intelligence. Powering Africa's Economies: Prospects for Growth in Electricity Markets.
Retrieved from https://www.stratfor.com/analysis/powering-africas-economies-prospects-growth-electricity-
markets
92
7.3. International cooperation as universal principle
Having regard to the principles of the UN Charter and to the outcome documents of various
energy-related regional and international conferences, the 2015 International Energy
Charter signatories are aware of the obligations under major relevant multilateral
agreements, of the wide range of international energy cooperation and of the extensive
activities by existing international organisations in the energy field. Its signatories agree to
enhance development of trade in energy consistent with major relevant multilateral
agreements, such as the WTO Agreement and its related instruments, and to also ensure that
the international rules on the promotion and protection of industrial, commercial and
intellectual property rights are assigned. The International Energy Charter also affirms the
importance of full access to adequate dispute settlement mechanisms, including national
mechanisms and international arbitration in accordance with national laws and regulations
and all relevant bilateral and multilateral treaties and international agreements.
7.4 Nigerian international commitments
7.4.1. Investment Agreements & Related Instruments
Nigeria is a signatory to various Bilateral International Treaties (BITs), Multilateral
International Treaties (MITs), and Related instruments to facilitate cross-border trade,
investment promotion and investment protection.
The Bilateral Investment Treaties on trade and investments with Finland (20 March 2007),
France (19 August 1991), Germany (20 September 2007), Italy (22 August 2005), Republic
of Korea (1 February 1999), the Netherlands (1 February 1994), Romania (3 June 2005),
Serbia (7 February 2003), Spain (19 January 2006), Sweden (1 December 2006), Switzerland
(1 April 2003), Taiwan (7 April 1994), and the United Kingdom (11 December 1990) are in
force. Those signed with Algeria, Bulgaria, China, Egypt, Ethiopia, Jamaica, Russia, Turkey,
and Uganda have been signed and awaiting ratification.163 Some BITs contain no specific
provision on energy, but they do cover general provisions on trade and investment.
Nigeria has also signed other Investment Agreements, including ECOWAS – USA TIFA
(signed 05 August, 2014), ECOWAS Energy Protocol (signed 31 January, 2003), Cotonou
Agreement with the EU (01 April, 2003), Nigeria – USA TIFA (16 February, 2000), AU
Treaty (12 May, 1989), ECOWAS Protocol of Community Enterprises (12 May 1989),
163 UNCTAD. Retrieved from http://investmentpolicyhub.unctad.org/IIA/CountryBits/153
93
Organization of Islamic Conference (OIC) Investment Agreement (23 September 1986), and
ECOWAS Protocol on Movement of Persons and Establishment (08 April 1980), and
ECOWAS Treaty (20 June, 1975).164
Furthermore, Nigeria is part of various multilateral Investment Related Instruments (IRI).
The Intergovernmental Agreements include the OPEC Fund Model Agreement (2001), WTO
Fourth and Fifth Protocols to GATS (1997), WTO Trade-Related Aspects of Intellectual
Property Rights (1994), WTO Trade-Related Investment measures (1994), WTO General
Arrangements on Trade and Services (1994), OIC Islamic Corporation for the Insurance of
Investment Credit (1992), Multilateral Investment Guarantee Agency Convention (1985),
International Centre for Settlement of Investment Disputes Convention (1965), UN New
York Convention (1958), and UN Code of Conduct on Transnational Corporations (1983).165
The Guidelines, Principles, and Resolutions are the UN Guiding Principles on Business and
Human Rights (2011), ILO Tripartite Declaration on Multinational Enterprises (1977, 2000
and 2006), WTO Doha Declaration (2001), WTO Singapore Ministerial Declaration (1996),
World Bank Investment Guidelines (1992), New International Economic Order UN
Resolution (1974), UN Charter of Economic Rights and Duties of States (1974), and
Permanent Sovereignty UN Resolution (1962).166
Nigeria has been a member of the World Trade Organization (WTO) since 1 January 1995
and a member of GATT since 18 November 1960, and has ratified all Principles and Rules
under the organization. Since the general principles that guide the International Energy
Charter are based on the rules of WTO, this aspect becomes important to put the country in a
strategic position to join the International Energy Charter.
7.4.2. International Initiatives for Investments in the Power Sector
7.4.2.1. Power Africa
164 UNCTAD. Retrieved from http://investmentpolicyhub.unctad.org/IIA/CountryOtherIias/153#iiaInnerMenu
165 UNCTAD. Retrieved from http://investmentpolicyhub.unctad.org/IIA/CountryIris/153#iiaInnerMenu
166 UNCTAD. Retrieved from http://investmentpolicyhub.unctad.org/IIA/CountryIris/153#iiaInnerMenu
94
On June 30, 2013, President Barack Obama announced Power Africa — a five-year initiative
to increase the number of people with access to power in sub-Saharan Africa by adding more
than 30GW of generation capacity, and making electricity accessible to 60 million new
homes and businesses.167 It began in six focus countries with ambitious strategies for energy
sector development – Nigeria, Ethiopia, Kenya, Tanzania, Liberia, and Ghana. Additionally,
in Uganda and Mozambique, Power Africa promotes responsible and transparent resource
management.
This initiative by the US government is intended to mobilize affordable and long term
financing for expansion of networks or increase in generation capacities, as well as to help
promote U.S. technological solutions. The Power Africa agencies have also provided support
for trade missions and engaged in outreach efforts for American companies interested in
investment opportunities in Nigeria, provide political risk insurance for project loans, and
engage in risk mitigation efforts in coordination with the Nigerian Government. Their
partners in Nigeria include Heirs Holding, UBA Capital, General Electric, Africa Finance
Corporation, Africa Development Bank, Standard Chartered Bank, Symbion, Africa
Infrastructure Investment Managers, Nigeria Solar Capital Partners, America Capital Energy
and Infrastructure, and the World Bank.168
Through the Initiative, the USAID has participated in the evaluation of technical bids, review
of industry agreements signed by the investors during the privatization of the PHCN
successor companies, provision of credit enhancement facility to commercial banks for short-
term capital expenditure, provision of credit enhancement to unlock long-term capital through
pension and insurance for the successor distribution companies, and assistance during trade
missions for equipment sourcing. Also, the initiative has assisted NBET, the bulk trader of
electricity in Nigeria, through the provision of technical support during negotiations of Power
Purchase Agreement (PPAs) and Put Call Options Agreement (PCOA), and in the drafting of
the PPA for a wind project.169
167 USAID. Retrieved from http://www.usaid.gov/powerafrica/about-power-africa
168 USAID. Retrieved from http://www.usaid.gov/powerafrica/partners/private-sector
169 USAID. Retrieved from http://www.usaid.gov/powerafrica/partners/african-governments/nigeria
95
7.4.2.2. African Development Fund (ADF) Partial Risk Guarantee (PRG) Program
In December of 2013, the Board of the African Development Bank Group (AfDB) approved
an African Development Fund (ADF) Partial Risk Guarantee (PRG)170 program of US $184.2
million which will help increase Nigeria’s electricity generation by catalysing private sector
investment and commercial financing in the power sector. The PRG will mitigate the risk of
the Nigeria Bulk Electricity Trading Plc (NBET) not fulfilling its contractual obligations
under its PPAs with eligible IPPs. This is expected to increase the comfort level of private
sector financiers and commercial lenders investing in the Nigerian power sector, and over the
long term, lead to increased productivity, economic activity and growth, and reduced poverty.
The PRG is a political risk mitigation instrument that covers private lenders and investors
against the risk of the government or government-owned entity failing to meet its contractual
obligations to a project. To date, NBET has nominated four competitively awarded IPPs to be
supported under the proposed Program, namely two Greenfield gas fired IPPs (Century
Power at Okija - 495 MW and Ikot Abasi - 250 MW), and two recently privatized brownfield
IPPs (Transcorp Ughelli power plant - 972MW, and Shiroro Hydroelectric station -
600MW).171
Furthermore, the African Development Bank (AfDB) recently announced its commitment of
a $200 million Partial Risk Guarantee (PRG) to support coal-to-power investments to help in
Nigeria’s attempt to diversify her sources of electricity generation with the addition of
various coal-to-power projects.172
7.4.2.3. IBRD Partial Risk Guarantees Project by World Bank
170 African Development Bank. Retrieved from
http://www.afdb.org/fileadmin/uploads/afdb/Documents/Project-and-Operations/Nigeria_-
_Power_Sector_Privatization_Program_-_Appraisal_Report.pdf
171 AFDB. Retrieved from http://www.afdb.org/en/news-and-events/article/adf-partial-risk-guarantee-
program-to-stimulate-private-investment-in-the-nigerian-power-sector-12708/
172 Thisday Newspaper. Retrieved from http://www.thisdaylive.com/articles/afdb-provides-200m-guarantee-
for-nigeria-s-coal-to-power-projects/204604/
96
The World Bank in 2009,173 approved International Development Association credit worth
USD1.02 billion for four major projects in Nigeria, including USD600 million for power and
gas projects. Of the USD600 million, USD200 million was for improving electricity supply
through network investments and technical assistance and the remaining USD400 million
will be extended through partial risk guarantees (PRGs) in support of domestic gas market
development.174 The Nigeria Electricity and Gas Improvement Project (NEGIP) is one of the
beneficiaries of the credit and is expected to provide PRGs in support of Gas Supply
Agreements to boost gas supply for power projects in the country. The project will also
rehabilitate existing power transmission and distribution infrastructure to facilitate supply of
power from power stations to consumers. The project aims to improve the quality of gas
supply by instilling commercial discipline in the gas sector through commercial contracts, to
reduce power losses from the electrical grid and to improve power quality and reliability.
Recently, the World Bank Group, on May 1, 2014, approved partial risk guarantees to help
power sector operators in the country to borrow up to $1.19bn to execute various projects.
The Board of Executive Directors of the three arms of the World Bank (World Bank,
International Finance Corporation and Multilateral Investment Guarantee Agency) approved
the package of loans and guarantees supporting a series of energy projects that would boost
independent power generation and ease crippling energy shortages in Nigeria. The approved
partial risk guarantees include up to $245m for the 459-megawatt Azura-Edo Power Plant
near Benin City, Edo State; and up to $150m for the 533-MW Qua Iboe plant in Ibeno, Akwa
Ibom State.175 The boards of the IFC and MIGA approved loans and hedging instruments of
up to $135m and guarantees of up to $659m for the Azura-Edo project.176
7.4.3. International Assistance for the Reform Programme
173 World Bank. Retrieved from http://www.worldbank.org/projects/P120207/nigeria-power-sector-
guarantees-project?lang=en
174 World bank. Retrieved from http://www.worldbank.org/projects/P106172/nigeria-electricity-gas-
improvement-project-negip?lang=en
175 World Bank. Retrieved from http://www-
wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2014/05/06/000333037_20140506111203
/Rendered/PDF/878780BS0P1202000Box385206B00OUO090.pdf
176 World Bank. Retrieved from http://www.worldbank.org/en/news/press-release/2014/05/06/world-bank-
group-project-series-local-power-output-nigeria
97
As the ongoing reform of the power sector progresses, several international financial
institutions, countries, regional institutions, and donor agencies have been actively involved,
including:
(i)
United Nations (UN) - The UN is involved in small scale renewable energy (solar
home systems and clean cookstoves) and energy efficiency projects through its
various agencies like UNICEF, UNIDO, and UNDP. UNIDO is strongly involved in
small hydropower development with the establishment of the Regional Centre for
Small Hydro Power177 and the support to the development of several small
hydropower projects.
(ii)
International financial institutions – The WB, IBRD, IFC, and the AfDB are
actively involved in the ongoing reform as discussed earlier, as well as providing
support for the construction of new infrastructure. In addition, the IFC recently
launched Lighting Africa in Nigeria178 to help Nigerians gain access to modern, clean
and affordable lighting products by 2017.
(iii)
European Community - The EU-backed Energising Access to Sustainable Energy
(EASE),179 supports renewable energy, energy efficiency and rural electrification
through the Nigerian Energy Support Programme (NESP), which is also funded
by Germany and implemented by GIZ.180 The UK, through its Department for
International Development,181 established the Nigerian Infrastructure Advisory
Facility (NIAF)182 and Solar Nigeria being implemented by Adam Smith
International.183 France is involved in the sector through the
Agence Française de
Développement (AFD) and PROPARCO184 that work on access to finance for
renewable energies, training for the power sector staff, and provide support to TCN.
177 UNIDO. Retrieved from http://www.unido.org/en/what-we-do/environment/energy-access-for-productive-
uses/renewable-energy/focus-areas/small-hydro-power.html
178 IFC. Retrieved from
http://ifcext.ifc.org/IFCExt/pressroom/IFCPressRoom.nsf/0/D3C00B7394A8D59E85257E0400319C58?OpenDo
cument
179 European Commission. Retrieved from
http://ec.europa.eu/europeaid/documents/aap/2013/af_aap_2013_nga.pdf
180 GIZ. Retrieved from http://www.giz.de/en/worldwide/26374.html
181 DFID. Retrieved from http://devtracker.dfid.gov.uk/countries/NG/projects/
182 NIAF. Retrieved from http://niafng.org/sectors-2/power/
183 Adam Smith International. Retrieved from http://www.adamsmithinternational.com/explore-our-
work/west-africa/nigeria
184 AFD. Retrieved from http://www.afd.fr/lang/en/home/pays/afrique/geo-afr/nigeria/nigeria-projets
98
Also, Sweden and Norway, even though not members of the European Economic and
Monetary Union have also been active in the power sector reform.
(iv)
United States of America – The US through the USAID currently has several
projects in Nigeria covering various aspects such as renewable energy, and
conventional energy sources through for example the Power Africa Initiative185 and
the Nigeria Energy and Climate Change (NECC). They also cover finance for the
private sector and skills development through the Renewable Energy And Energy
Efficiency Project (REEEP)186 implemented by Winrock International.
(v)
Japanese International Cooperation Agency (JICA) – The Agency
has played an
important role in the development of solar energy and hydrological master plans,
including the identification of possible hydropower sites. It has also supported the
development of renewable energy infrastructure in the country.187
185 USAID. Retrieved from http://www.usaid.gov/powerafrica/partners/african-governments/nigeria
186 REEEP. Retrieved from http://www.reeep.org/projects/development-international-energy-management-
standards-integration-iso-9000
187 JICA. Retrieved from http://www.jica.go.jp/nigeria/english/activities/activity01.html
99
8. Investment protection
8.1 Investment protection as universal principle
In recognising the importance of energy security for energy producing, transit and
consuming countries (regardless of their state of development), the 2015 International
Energy Charter encourages cooperation to promote closer and mutually beneficial
commercial relations and investments in the energy sector. Signatories agree to create a
climate favourable to the operation of enterprises and to the flow of investments and
technologies. In order to promote the flow of investment, signatories agree to make every
effort to remove all barriers to investment in the energy sector and provide, at national level,
for a stable and transparent legal framework for foreign investment in accordance with
relevant international laws and rules on investment and trade.
8.2 Nigerian experience and commitment on investment protection
Nigeria encourages the private sector participation and this has been increasingly remarkable
over the last ten years due to the government commitment to increase private sector
participation in the energy sector. With consistent and strong growth in GDP witnessed over
the past decade, Nigeria has attracted considerable interest from investors from different parts
of the world. The government actively seeks foreign investment and was the largest recipient
in 2012, with over $7 billion in Foreign Direct Investment (FDI). Promotion of investments
in Nigeria is the responsibility of the Nigerian Investment Promotion Commission (NIPC).188
Various opportunities exist for investments in Nigeria. These opportunities are also supported
by government policies that do not hinder repatriation of funds, protection of investment
against expropriation and nationalization, high returns on investment, abundant and growing
untapped resources, deregulation in almost all the sectors (the reform of the oil and gas sector
is expected to be completed next year), the deregulated sectors promote private sector
participations, and competitive incentives.
Nigeria has the following investment climate features that make it appealable to investors:
1. Abundant Resources: Nigeria has enormous mineral, agricultural and human resources
which are yet to be fully exploited.
188 International Center for Nigerian Law. Retrieved from http://www.nigeria-
law.org/Nigerian%20Investment%20Promotion%20Commission%20Act.htm
100
2. Market Size: Nigeria offers a market of about 180 million people, and potentially
stretches into the growing West African sub-region.
3. Political Stability: There exist a stable political environment as the country has been
under democratic rule since May 1999.
4. Free Market Economy: A favourable climate for businesses has been created,
administrative and bureaucratic procedures streamlined, and various reform programs
being implemented.
5. Robust Private Sector: The country has a dynamic private sector, which has assumed
greater responsibilities under the new economic environment.
6. Free Flow of Investment: Exchange control regulations have been liberalised to ensure
free flow of international finance, ensuring unrestricted movement of investment capital.
7. Attractive Incentives: A comprehensive package of incentives has been put in place to
attract investment from the private sector, both domestic and international.
8. Fast Growing Financial Sector: There is a well-developed banking and financial sector,
and the investor has access to working capital and other credit facilities.
9. Skilled and Low Cost Labour: There is an abundance of skilled labour at an economic
cost, resulting in production costs which are among the lowest in Africa.
10. Infrastructure: Rapid development of physical and industrial infrastructure, in terms of
transportation, communications, electricity and water supply.189
8.3. Incentives for Investors in Nigeria
The Nigerian Government has put in place a number of investment incentives to stimulate
private sector investment in the country, especially direct foreign investments. Some
incentives cover all sectors, while others are limited to some specific sectors or location of
the industry. Below is a list of available incentives for investors in Nigeria.190
A.
General Incentives for all Sectors – Such incentives available to investors in all
sectors include the following:
(i) The Companies Income Tax Act Cap C21 L.F.N. 1990191 has been amended in order to
encourage potential and existing investors and entrepreneurs.
189 “Why invest in Nigeria” by NIPC. Retrieved from http://nipc.gov.ng/?page_id=33
190 “Investment Incentives” by NIPC. Retrieved from http://nipc.gov.ng/?page_id=56
191 Federal Inland Revenue Services. Retrieved from http://www.firs.gov.ng/Tax-
Management/Tax%20Legislations/CITA.pdf
101
(ii) Pioneer Status is granted to certain industries to enable them make a reasonable level of
profit within its formative years, and the profit is be ploughed back into the business.
(iii) Tax Relief is granted to industries that spend on R&D for the improvement of their
processes and products.
(iv) Capital Allowances is enjoyed by companies, depending on whether it is a qualifying
expenditure.
(v) Incentives are in place for industries that set up in – plant training facilities.
(vi) Industries that invest in infrastructure, i.e., provide facilities that ordinarily should have
been provided by government, can get tax deductions.
(vii) Pioneer industries sited in economically disadvantaged Local Government Area are
entitled to tax holiday and an additional capital depreciation allowance.
(viii) Industries with high labour/capital ratio are entitled to tax concessions.
(ix) Tax concession is granted for industries that use finished imported products as inputs for
local fabrication.
(x) Re-investment allowance is granted for qualifying capital expenditure used for approved
expansion of capacity, modernization of facilities, and diversification into related products.
(xi) Tax credit is granted to industries that attain the minimum level of local raw material
sourcing and utilisation.
B.
Incentives for Specific Sectors - There are specific incentives for companies
involved in various sectors, including Solid minerals, Petroleum, Gas, and Electricity Sectors.
C.
Incentives for Exportation - Export incentives exist to encourage and assist
exporters to increase and diversify the total value and volume of non-oil exports from
Nigeria.
D.
Establishment of Oil & Gas Free Zones - The Oil and Gas Export Free Zone Act
No. 8 of 1996192 established an Authority to manage, control and co-ordinate all the activities
within the three oil and gas service centres around the ports of Onne (near PH), Calabar and
Warri. These zones also have approved several incentives and fiscal measures to attract
investments to the zones.
E.
Establishment of Export Processing Zones - The enacted of the Nigeria Export
Processing Zones Act No 63 of 1992193 has led to the establishment of about 25 Free Trade
192 LawNigeria.com. Retrieved from http://lawnigeria.com/LawsoftheFederation/OIL-AND-GAS-EXPORT-FREE-
ZONE-ACT.html
193 Nigeria Export Processing Zones Authority. Retrieved from
http://www.nepza.gov.ng/downloads/NEPZA631992.pdf
102
Zones supervised by the NEPZ Authority, with approved incentives and fiscal measures
which encourage investments in the zones.
F.
Incentives for Special Investments - For the purpose of promoting identified
strategic or major investment, the Commission can negotiate specific incentive packages for
the promotion of special investments.
G.
Double Taxation Agreements with other Countries - In the last few years, double
taxation agreements have been entered into by Nigeria with a number of countries. These
agreements afford relief from double taxation in relation to taxes imposed on profit taxable in
Nigeria, and any taxes of similar character imposed by the law of the other country. Nigeria
has DTAs with UK, France, Netherlands, Belgium, Pakistan, Canada, Czech Republic,
Philippines, and Romania. Negotiations are ongoing with Turkey, Russia, India, and Korea.
H.
Investment Promotion and Protection Agreements - As part of additional effort to
foster foreign investors’ confidence in the Nigeria economy, Government continues to enter
into bilateral IPPAs with countries that do business with Nigeria. These agreements help to
guarantee the safety of the investment of the contracting parties in the event of war,
revolution, expropriation or nationalization, and guarantees investors the transfer of interests,
dividends, profits and other incomes as well as compensation for dispossession or loss.
Nigeria has signed IPPAs with France, United Kingdom, Netherlands, Romania, Switzerland,
Spain, and South Africa. Negotiations with USA, Belgium, Sweden and Russian are ongoing.
I.
Liberalisation of Ownership Structure - The government in repealing the Nigerian
Enterprises Promotion Act of 1972, and promulgating the NIPC Act has liberalised the
ownerships structure of business in Nigeria thereby allowing foreigners to own 100% shares
in any company.
J.
Repatriation of Profit - Under the provisions of the Foreign Exchange (Monitoring
& Miscellaneous Provision) Act No. 17 of 1995 (now Cap F34 LFN 2004),194 foreign
investors are free to repatriate profits and dividends net of taxes through an authorized dealer.
K.
Guarantees Against Expropriation - The NIPC Act guarantees that no enterprise
shall be nationalized or expropriated by any government in Nigeria.
194 International Center for Nigerian Law. Retrieved from http://www.nigeria-
law.org/Foreign%20Exchange%20%28Monitoring%20and%20Miscellaneous%20Provisions%29%20Act.htm
103
9. Added Value of Acceding to the International Energy Charter and
Energy Charter Treaty
9.1. At political level
9.1.1. Political signal of the country to international community
By signing the International Energy Charter, a country sends a political signal to the
international community that it shares a number of international energy principles on trade,
investment, transit and energy efficiency in such an important sector as the energy sector.
Since investment protection is the cornerstone of the Energy Charter, it would be a good
chance for governments to send a message to the investor community of their endorsement of
transparency and good governance. This would most of all benefit countries in unstable
political situations and the ones, which seek to enhance their ties with some key countries
from the Energy Charter constituency.
9.1.2 Effects of modernization of the Energy Charter Process
The world's energy interdependence has dramatically intensified over the last decade.
Improved energy security with multiple economic, technological and environmental benefits
could be derived from international cooperation in the energy sector. At the same time
potential interruptions to the global energy supplies due to conflicts, volatile energy prices,
lack of investments and other challenges have resulted in a more fragile global energy
architecture. Such challenges require both national and international responses. Where the
problems cannot be adequately addressed by a country acting alone, acting cooperatively at
the international level becomes essential for a country to protect its own interests.
The International Energy Charter is going to play a major role in establishing common
principles to promote long-term cooperation in the energy sector based on mutual benefits.
The institutional benefits of signing the International Energy Charter include, but not limited
to, the following:
The International Energy Charter is going to be a benchmark document to be signed by
numerous countries worldwide.
The International Energy Charter provides inspiration and motivation to pursue energy
security for all including producers, transit and consumer countries, as well as universal
energy access.
104
Signing the International Energy Charter means to join an established international
framework of long-term cooperation in the energy sector.
The International Energy Charter is a policy but not a legally binding framework that
allows a country to strengthen energy security, promote access to energy resources and
new markets, facilitate access to finance, benefit from experience exchange and
multilateral cooperation on sustainable development of the energy sector.
9.2. At strategic level
9.2.1. Promotion of energy investments and trade
A country, by signalling its willingness to engage seriously in a dynamic political process
resulting from the International Energy Charter as well as its ability to agree on a strategic,
forward-looking document, demonstrates that it considers the Energy Charter Process and its
tools as instruments of choice. Thus, signature of the International Energy Charter would
demonstrate to international investors that a country commits to the principles of secure
investments. In this way, a country becomes a more attractive destination for international
investments, while, at the same time, being able to use the International Energy Charter as a
reference tool for its own energy investment and trade initiatives.
9.2.2. Engagement in multilateral cooperation and good governance
It is difficult for countries to find isolated solutions to the complex and interlinked energy
challenges, which know no borders. International cooperation is imperative to find effective,
lasting and mutually beneficial solutions. The Energy Charter has a broad membership,
involving developed and developing, energy exporting, importing and transiting countries.
Signing the International Energy Charter will allow the signatory’s representatives to
assemble under the Energy Charter Ministerial Conference and Working Groups, which
could serve as a platform for building relationships, and sharing of information related to the
challenges faced in the energy sector. The challenges concerning security of supply,
competitiveness and climate action should be solved through a common approach, to which
the International Energy Charter will play an important role. Signatories to the International
105
Energy Charter will acknowledge this common approach publicly, without any legal
commitments.
9.2.3. Influential and confident position within the Energy Charter Process
Engagement to the International Energy Charter is an open and inclusive process. More than
80 countries from all over the world agreed on the text of the International Energy Charter.
The text reflects today’s global energy challenges and international policy objectives. The
openness of the International Energy Charter to new countries enhances the confidence and
ownership of those countries in the Energy Charter process.
9.3. At practical level
9.3.1 Observer status with the Energy Charter Conference
Signing the International Energy Charter automatically grants an observer status, which will
make it possible for new countries to attend the meetings of the Energy Charter Conference,
without a right to vote.195 Furthermore, observer countries will have the possibility to attend
official meetings of subsidiary bodies on political and expert level in the capacity of
observers with a right to speak.
If the necessary funding is provided, observers may benefit from activities of the Energy
Charter Secretariat like forums, executive training programmes, energy efficiency reviews or
reports on investment climate and market structure. Observers may be invited to send
seconded experts and trainees to the Secretariat in Brussels in view of deepening their
engagement in the process of applying the principles of the International Energy Charter and
consider the adoption of the Energy Charter Treaty.
9.3.2. Getting familiar with the Energy Charter Treaty
195 Observer status is not defined in the Energy Charter Treaty. For this purpose, a Working Group on
Procedural Issues was established at the 24th Meeting of the Energy Charter Conference in Astana.
106
The Energy Charter Treaty is unique in so far as it provides a legally binding framework for
energy cooperation for a large and diverse membership.196 However, it is apparent that
accession by new countries to the Treaty is not something that can be achieved over night.
For new members sharing the principles of the International Energy Charter, it is imperative
to thoroughly analyse the provisions of the Energy Charter Treaty before committing to
further steps. Signing the International Energy Charter can only be a beginning that does not
pre-empt in any way the decision of a state to accede to the Energy Charter Treaty. As
observers to the Energy Charter Conference, non-members will however have the opportunity
to learn more about the Treaty, its benefits and obligations, and will cooperate closely with
the members to that end. This will enable them to make an informed decision about possible
further steps.197
9.3.3. Possibility to initiate the Early Warning Mechanism
Countries signing the International Energy Charter are automatically granted a right to initiate
the Early Warning Mechanism (EWM). Its aim is to provide a non-binding framework for
preventing and overcoming emergency situations in the energy sector related to the transit
and supply of electricity, natural gas, oil and oil products through cross-border grids and
pipelines.198 Parties can refer to it, voluntarily, on a case-by-case basis. It will be
complementary to other mechanisms for early warning and dispute resolution agreed
bilaterally between individual parties. The EWM would help to resolve energy conflicts and
thereby enhancing the energy security for energy producing, consuming and transit countries.
196 The Energy Charter Treaty was signed in December 1994 and entered into force in April 1998. To date the
Treaty has been signed or acceded to by 54 contracting parties, including the European Union.
197 A state or regional Economic Integration Organisation that wishes to accede to the Energy Charter Treaty is
required to be a signatory of the 1991 European Energy Charter, the original political declaration that is
expected to be adopted together with the Energy Charter Treaty.
198 Article 2.1 of the Model Energy Charter Early Warning Mechanism, CC 501, 5 November 2014.
107
10. Conclusions and recommendations
10.1. Challenges
The main challenges of the energy sector in Nigeria are:
(i)
Inadequate infrastructure in the entire energy sector due to insufficient funding by the
federal government;
(ii) Insufficient energy supply to consumers due to low generation capacity and low
maximum transmission wheeling capacity;
(iii) Insufficient gas supply to power plants due to lack of infrastructure for storage and the
transportation of gas to power plants;
(iv) High technical losses due to obsolete transmission and distribution lines, and the
transportation of electricity over long distances;
(v)
High commercial losses due to poor billing systems, electricity theft, and vandalization
of equipment;
(vi) Insufficient, investments in the exploration and utilisation of other available sources of
energy, especially abundant renewable sources to diversify the energy mix;
(vii) Frequent power outages and low quality of supply due to unmaintained transmission
and distribution networks;
(viii) Pollution of the environment from gas flaring storage facilities for gas, especially
associated gas from exploration of crude oil;
(ix) Wastage of energy due to non-implementation of energy conservation policies, and
non-promotion of energy efficient products;
(x)
Lack of modern communication and monitoring technologies, and inadequate logistics
facilities for provision of customer services; and
(xi) Poor customer relations/services due to the attitudes of the staff of the utilities, as well
as lack of training/ capacity building and inadequate facilities.
108
10.2. Open issues
Many programs and actions are being considered by the Federal Government to make the
energy sector more attractive and dynamic for investment, thereby contributing to a more
sustainable socio-economic growth for the country.
Presently, the ECN is reviewing the Draft National Energy Masterplan (NEMP), Draft
National Renewable Energy & Energy Efficiency Policy (NREEEP), the Draft National
Energy Policy, and Draft Renewable Energy Masterplan. The NEMP is being reviewed and
validated to “guarantee adequate, reliable and sustainable supply of energy at appropriate cost
in and environmentally friendly manner, to the various sectors of the economy. The revised
draft…seeks to achieve the goals of the revised National Energy Policy (NEP) by converting
its strategies to actionable programmes and activities with timelines in the short, medium and
long terms.”
The renewable energy market in Nigeria is still underdeveloped. The NERC is considering
the introduction of a feed-in-tariff system in order to encourage further investment. The
Commission has already begun the analysis for a draft regulation for the introduction of a
feed-in-tariff in collaboration with various other agencies and international organizations,
which will be guaranteed by the NBET, the sole bulk electricity buyer for the distribution
companies in the country.
The government is also in the process of enacting the Petroleum Industry Bill for the oil and
gas sector.
The Bill seeks to give the country’s oil and gas industry a comprehensive legal
framework, and provides the basis for the unbundling of the Nigerian National Petroleum
Corporation (NNPC) into five independent commercial entities, as well as promote
transparency and accountability in the operations of the industry.
10.3. Recommendations
Nigeria’s policies and strategies for energy sector development are in line with the principles
of International Energy Charter. Considering that Nigeria has a huge and diversified untapped
energy potential, and that substantial FDI is required for its development, Nigeria is in a
109
strong position to begin the process of accession to the International Energy Charter. Further
support for this is based on Nigeria’s continued work towards creating favourable conditions
for liberalisation of the energy market, which provides various incentives for investors
(including tax benefits and expatriation of profits, just to name a few).
The national constitution provides for non-discrimination, and as a member of the WTO,
Nigeria already follows the main principles of the International Energy Charter. As a result,
Nigeria meets the basic conditions to adopt the International Energy Charter and become an
observer of the Energy Charter.
Observership is a “light” form of participation in the Energy Charter process.199 It offers
interested non-members the possibility to become more familiar with the Energy Charter
Treaty to establish formal contacts with member countries and other observers and participate
in the international forum for energy dialogue established by the Energy Charter. Observers
do not have any legal obligations under the Energy Charter Treaty. In particular, they do not
have to contribute to the budget of the Organization. Observership may be –although not
necessarily – a transitional phase towards full membership.
As an observer member, Nigeria would be subject only to a political commitment, pledging
to move in the same direction with the principles of International Energy Charter and all of its
sector policies, including legal reform.
As a signatory of the International Energy Charter, Nigeria will have the opportunity to
extend their participation in the international platform for cooperation on energy and benefit
from a wide range of opportunities, including:
i. Cooperation on technological development and innovation activities in the fields of
production, conversion, transmission, distribution and the efficient and clean use of
energy, taking into account their obligations and nuclear non-proliferation
commitments.
ii. Programs and activities in the research domain and technological development;
dissemination and exchange of relevant information and transfer of know-how on
technologies, with particular emphasis on energy efficiency and renewable energy field,
199 The Energy Charter Treaty: A Reader’s Guide (Energy Charter Secretariat; Brussels).
110
where its relevance to Nigeria has been higher in recent years due to the survey of the
country’s renewable energy potential and the importance it has on rural electrification
in remote areas of the country.
iii.
Institutional training programs for staff linked to the energy sector in the various policy
areas, which may extend to academic institutions (that is, vocational, technical and/or
higher education institutions) in Nigeria.
Besides that, the International Energy Charter respects the sovereignty of each state over its
energy resources, as well as the right to regulate the transmission and the transport of energy
in their territories, respecting all relevant international obligations. In the spirit of political
and economic cooperation, the International Energy Charter promotes the development of
efficient, stable and transparent energy markets, regional and global energy cooperation
based on the principle of non-discrimination and commercial-based pricing, taking into
account environmental concerns and the role of energy in national development of each
country.
As a signatory of the International Energy Charter, Nigeria will be engaged in the
implementation of the general principles of the International Energy Charter, which will
culminate in the development of two annual reports prepared by officials seconded to the
Energy Charter Secretariat, sent by the Government of Nigeria, covering the following
themes:
i.
Market Structure and Investment Climate Report; and
ii.
In-Depth Report on Energy Efficiency in Nigeria.
Expansion of the International Energy Charter to more countries in the region is an important
step that needs to be implemented. Nigeria is already an integrated country within the
ECOWAS region and it would be advantageous that membership to the International Energy
Charter include all the member countries in the ECOWAS region. This would facilitate
further convergence of the energy policies in the light of the basic principles of the
International Energy Charter on an international level.
111
10.4. Procedure to adopt the International Energy Charter
The previous section pointed out the added value of signing the International Energy Charter.
All that is required to adopt it as an international political declaration on energy cooperation
is to formally express such desire to the Energy Charter Secretariat in writing, requesting an
invitation to formal signing of the International Energy Charter in The Hague in May, 2015.
The International Energy Charter can also be signed after that date, following the same
procedure.
112
Bibliography
Reports and Journals:
African Development Fund. Project Appraisal Report: Partial Risk Guarantee in
Support of the Power Sector Privatizations. December, 2013.
African Development Bank. Partial Risk Garantee in Support of the Power Sector
Privatization.
2013. http://www.afdb.org/fileadmin/uploads/afdb/Documents/Project-
and-Operations/Nigeria_-_Power_Sector_Privatization_Program_-
_Appraisal_Report.pdf
Aina Blankson LP. Marginal Fields in Nigeria: An overview of the Enabling
provisions and Fiscal Regime. Newsletter, 2011.
http://documents.mx/documents/marginal-fields.html
Akpu, I.V. Renewable Energy Potentials in Nigeria. International Association for
Impact Assessment. 2012.
ECOWAS Observatory for Renewable Energy and Energy Efficiency. Katsina Wind
Farm.
http://www.ecowrex.org/project/katsina-wind-farm-project
Energising Access to Sustainable Energy. European Commission Project in Nigeria.
http://ec.europa.eu/europeaid/documents/aap/2013/af_aap_2013_nga.pdf
B, Joseph Sunday. A, Rufus Temidayo. Surface Temperature Anomalies in the River
Niger Basin Development Authority Areas, Nigeria. Atmospheric and Climate
Sciences. Vol.3, No.4, 2013.
http://file.scirp.org/Html/14-4700203_37125.htm
British Petroleum. Statistical Review of World Energy. Excel workbook of historical
data, 2014.
http://www.bp.com/en/global/corporate/about-bp/energy-
economics/statistical-review-of-world-energy/statistical-review-downloads.html
Chevron 2014 Annual Report Supplement.
http://www.chevron.com/documents/pdf/chevron2014annualreportsupplement.pdf
Global Methane, Nigeria: Summary of Coal Industry.
https://www.globalmethane.org/documents/toolsres_coal_overview_ch24.pdf
Gas to Power – Status and Outlook. Presentation by the Gas Aggregation Company
Nigeria Limite
d http://www.nigeriaelectricityprivatisation.com/wp-
content/uploads/downloads/2011/02/Gas_Aggregation_Company_of_Nigeria_Investo
r_Forum_Presentation.pdf
113
International Monetary Fund,
Nigeria, IMF Country Report No. 14/103, (April 2014),
page 10 and 25.
J, Ikeme. Assessing the Future of Nigeria's Economy: Ignored threats from the global
climate change debacle. African Economic Analysis, De Montfort University,
Leicester, UK, 2008.
KPMG. A Guide to Nigerian Power Sector. December, 2013.
http://www.kpmg.com/Africa/en/IssuesAndInsights/Articles-
Publications/Documents/Guide%20to%20the%20Nigerian%20Power%20Sector.pdf
Logistics Capacity Assessment, Nigeria Waterway Assessment.
http://dlca.logcluster.org/display/public/DLCA/2.5+Nigeria+Waterways+Assessment;
jsessionid=D1B5B222AC091772C76197CFFA8CD883
National Bureau of Statistics. Nigerian GDP Report, Quarter Four, 2014, Issue 04.
http://www.nigerianstat.gov.ng/pages/download/272
National Bureau of Statistics. Nigeria in 2014: Economic Review and 2015-2017
outl
ook. www.nigerianstat.gov.ng/pages/download/263
National Bureau of Statistics. Foreign Trade Statistics, Fourth Quarter, 2014,
02/23/2015, ISSN0734-3954, No 513.
http://www.nigerianstat.gov.ng/pages/download/274
National Bureau of Statistics. Capital importation Summary Report 2007-2014.
www.nigerianstat.gov.ng/pages/download/211
Presidential Task Force on Power. Roadmap for Power Sector Reform.
http://www.nigeriapowerreform.org/content/Roadmap%20for%20Power%20Sector%
20Reform%20-%20Revision%201.pdf
U.S. Energy Information Administration (EIA) International Energy Agency Country
Analysis: Nigeria.
http://www.eia.gov/countries/analysisbriefs/Nigeria/nigeria.pdf
OPEC, Member Countries’ Crude Oil Production Allocations,
www.opec.org/opec_web/static_files_project/media/downloads/data_graphs/Producti
onLevels.pdf
Secretariat of the Organization of the Petroleum Exporting Countries, Annual
Statistical Bulletin 2013.
http://www.nnpcgroup.com/Portals/0/Monthly%20Performance/2013%20ASB%201st
%20edition.pdf
114
Secretariat of the Organization of the Petroleum Exporting Countries, Annual
Statistical Bulletin 2014.
http://www.opec.org/opec_web/static_files_project/media/downloads/publications/AS
B2014.pdf
Secretariat of the Organization of the Petroleum Exporting Countries, Nigeria facts
and figures.
http://www.opec.org/opec_web/en/about_us/167.htm
Sambo, A.S. Strategic Developments in Renewable Energy in Nigeria. International
Association for Energy Economics. 2009.
The Encyclopedia of Earth, The Energy Profile of Nigeria.
http://www.eoearth.org/view/article/152513/
Vergnet Group. Katsina Wind fa
rm. http://www.vergnet.com/pdf/fiches/en/nigeria-
katsina.pdf
The Energy Charter Treaty: A Reader’s Guide (Energy Charter Secretariat; Brussels).
World Bank Global Economic Prospects for Sub-Saharan Africa.
http://www.worldbank.org/content/dam/Worldbank/GEP/GEP2014b/GEP2014b_SSA
.pdf
Worldwide Look at Reserves and Production. Oil & Gas Journal. (January 1, 2015).
Press:
African Development Bank. ADF partial risk guarantee program to stimulate private
investment in the Nigerian power sector. December18, 2013.
http://www.afdb.org/en/news-and-events/article/adf-partial-risk-guarantee-program-
to-stimulate-private-investment-in-the-nigerian-power-sector-12708/
BBC. Nigeria: How noisy generators became a way of life. 22 November 2013.
http://www.bbc.com/news/world-africa-25056721
Bloomberg Business. Nigeria in Rosatom Talks for Up to $80 Billion Nuclear Power.
http://www.bloomberg.com/news/articles/2015-04-14/nigeria-signs-rosatom-deal-for-
up-to-80-billion-nuclear-power
CEIC News Alert, Nigeria Becomes Largest Economy in Africa after GDP Rebase.
April
30, 2014. http://www.ceicdata.com/en/blog/ceic-newslert-nigeria-becomes-
largest-economy-africa-after-gdp-rebase
115
Deutsche Welle. Nigerians turn to renewable energy as solution to power crisis.
http://www.dw.de/nigerians-turn-to-renewable-energy-as-solution-to-power-crisis/a-
18216818
Financial Times. Europe Plays catch-up in race for gas. September 17, 2008.
http://www.ft.com/cms/s/0/630c6f4e-841f-11dd-bf00-
000077b07658.html#axzz3UwYHhk3G
Gas Flaring: The Burning Issue. Resilience.org.
http://www.resilience.org/stories/2013-09-03/gas-flaring-the-burning-issue
International Finance Corporation. World Bank Group Launches the Lighting Africa
Program for Nigeria. March 10, 2015.
http://ifcext.ifc.org/IFCExt/pressroom/IFCPressRoom.nsf/0/D3C00B7394A8D59E85
257E0400319C58?OpenDocument
The Guardian, Court bars states on issuance of EIA approval certificate. February 22,
2015.
http://www.ngrguardiannews.com/2015/02/court-bars-states-on-issuance-of-
eia-approval-certificate/
The Guardian. The light is getting brighter in Nigeria.
http://www.theguardian.com/global-development-professionals-network/adam-smith-
international-partner-zone/nigeria-power-electricity-africa
Nigeria Gas flared and Cost Implications. BusinessDay. July 30, 2014.
http://businessdayonline.com/2014/07/nigeria-gas-flared-and-cost-implication/#
Proactive investors. Astra Resources uncovers new growth opportunity in Nigerian
Coal. February 20, 2012.
http://www.proactiveinvestors.com.au/companies/news/25509/-astra-resources-
uncovers-new-growth-opportunity-in-nigerian-coal--25509.html
Huffington Post. Why Nigeria Generates so little power.
http://www.huffingtonpost.com/timi-soleye/why-nigeria-generates-so-
_b_5695091.html
Nigeria's US$1.3 billion 700-MW Zungeru hydroelectric project deals with
challenges. December 12, 2014. HydroWorld.com.
http://www.hydroworld.com/articles/2014/12/nigeria-s-us-1-3-billion-700-mw-
zungeru-hydroelectric-project-deals-with-challenges.html
Juene Afrique. Côte d’Ivoire : la production de gaz naturel a doublé en un an.
November 4, 2013.
http://economie.jeuneafrique.com/regions/afrique-
116
subsaharienne/20450-cote-divoire--la-production-de-gaz-naturel-a-double-en-un-
an.html.
Stratfor Global Intelligence. Powering Africa's Economies: Prospects for Growth in
Electricity Markets. August 18, 2014.
https://www.stratfor.com/analysis/powering-
africas-economies-prospects-growth-electricity-markets
Thisday. AfDB Provides $200m Guarantee for Nigeria’s Coal-to-Power Projects. Mar
20, 2015. http://www.thisdaylive.com/articles/afdb-provides-200m-guarantee-for-
nigeria-s-coal-to-power-projects/204604/
Vanguard. The Challenges of the Nigerian electric power sector reform. February 26,
2013.
http://www.vanguardngr.com/2013/02/the-challenges-of-the-nigerian-electric-
power-sector-reform-1/#sthash.WJzorP71.dpuf
Vanguard. Nigeria spends N3.5trn annually on power generators. 16 January, 2013.
http://www.vanguardngr.com/2013/01/nigeria-spends-n3-5trn-annually-on-power-
generators/
Legal sources:
Constitution of the Federal Republic of Nigeria
Petroleum Act
Electric Power Sector Reform Act
Nigerian Minerals and Mining Act
National Environmental Standards And Regulations Enforcement Agency Act
River Basins Development Authorities Act
Hydroelectric Power Producing Areas Development Commission
Deep Offshore and Inland Basins Production Sharing Contracts Act
Companies Income Tax Act
Nigerian Atomic Energy Commission Act
Public enterprises Privatisation and Commercialisation Act
Oil Pipelines Act
Environmental Impact Assessment Decree No 86 of 1992
Water Resources Act
Oil and Gas Export Free Zone Act
Nigerian Export Promotion Council Act
117
Export (Incentives and Miscellaneous Provisions) Act
Nigerian Investment Promotion Commission Act
National Inland Waterways Act
Public Procurement Act
Renewable Energy Master Plan
Websites:
Action Nigeria
. http://www.actionnigeria.com/
Adam Smith Internationa
l. http://www.adamsmithinternational.com/explore-our-
work/west-africa/nigeria
Cedigaz, Statistical Database, 2013.
http://www.cedigaz.org/products/natural-gas-
database.aspx
CIA Factbook on Nigeria
. https://www.cia.gov/library/publications/the-world-
factbook/geos/ni.html.
Department of Petroleum Resource
s. https://dpr.gov.ng Development Tracker.
http://devtracker.dfid.gov.uk/countries/NG/projects/
Doing Business i
n. http://www.doingbusinessin.fr
Federal Republic of Nigeria National Assembly. http://www.nassnig.org
French Agency of Devel
opment. http://www.afd.fr/lang/en/home/pays/afrique/geo-
afr/nigeria/nigeria-projets
GIZ. Nigerian Energy Support Programme.
http://www.giz.de/en/worldwide/26374.html
Global Energy Network Instit
ute. http://www.geni.org
International Centre for Nigerian La
w. http://www.nigeria-law.org Law Nigeria
. http://lawnigeria.com/
Ministère de L’énergie Algérie, Project NIGAL.
http://www.mem-
algeria.org/francais/index.php?page=presentation_nigal
National Energy Council.
http://energycouncil.gov.ng/default.aspx Nigerian National Petroleum Corporation. http://www.nnpcgroup.com
Nigerian Nuclear Regulatory Authority.
http://www.nnra.gov.ng/page-about_us Nigerian Investment Program Commission.
http://nipc.gov.ng/
118
National Environmental Standards And Regulations Enforcement Agency.
http://www.nesrea.org/about.php
Nigeria Export Processing Zones Authority.
http://www.nepza.gov.ng/downloads/NEPZA631992.pdf
Nigeria LNG.
http://www.nigerialng.com/
Nigerian Electricity System Operator.
http://www.nsong.org/
Nigerian Infrastructure Advisory Facility.
http://niafng.org/sectors-2/power/
Nigeria Export Processing Zones Authority
. http://www.nepza.gov.ng Nigeria Electricity Regulatory Commissio
n. http://www.nercng.org/ Niger Delta Power Holding Company. http://ndphc.net/?page_id=2900 &
http://ndphc.net/?page_id=3429
OandO PLC.
http://www.oandoplc.com/
Open Energy Informati
on. http://en.openei.org/wiki/Nigeria Presidential Task Force on Powe
r. http://www.nigeriapowerreform.org P
latts. http://www.platts.com REEEP.
http://www.reeep.org/projects/development-international-energy-
management-standards-integration-iso-9000
Japan International Cooperation Agency.
http://www.jica.go.jp/nigeria/english/activities/activity01.html
USAI
D. http://www.usaid.gov/powerafrica/
United Nations Conference on Trade and Development, Investment policy hub.
http://investmentpolicyhub.unctad.org/IIA/CountryBits/153
United Nations Industrial Development Organisati
on. http://www.unido.org
West African Gas Pipeline Authority
. http://wagpa.org/wagpa.html
West African Gas Pipeline Company
. http://www.wagpco.com
World bank database
. http://data.worldbank.org/
119