‘Fixing energy deficit critical to Nigeria’s economic growth’

Former President of Chartered Institute of Bankers of Nigeria (CIBN) and professor of economics at Babcock University, Segun Ajibola has urged Nigeria to prioritize fixing its energy deficit.

Ajibola, in a chat with The Guardian noted that fixing the deficit is critical to the untapped economic benefits in Africa’s biggest nation.

“If Nigeria succeeds in fixing the energy deficit, the long run multiplier effects will be much more beneficial to the economy, compared with whatever cost is incurred in the short run to implement such an energy transition plan,” Ajibola said.

He said the country could resort to financing its energy challenges through debt but that structures, strategies and strict policies designed for such a move must be evolved to procure, expend and manage such funds for optimal results.

According to him, the world of energy is changing with a strategic shift from hydrocarbons to other energy sources, especially solar and gas powered options, Nigeria’s energy transition should therefore shift paradigms to favor the global trends.

“Even if the country is borrowing, it must be with a view to financing energy sources that will not lose their potency in a short while. Again, borrowing is not out of order, but such debts must be dedicated to purpose, prudently suspended, effectively managed and monitored and properly accounted for,” Ajibola said.

Senior Officer, Nigeria Programme, Natural Resource Governance Institute, Tengi George-Ikoli said as energy transition looms and continues to gather steam, Nigeria’s actions must align with its stated ambitions to attract investment.

“Nigeria’s expenditure on fossil fuel subsidies is in direct conflict with that ambition as well as earlier commitments made to lenders (World Bank etc) to deregulate its downstream petroleum sector and to eliminate subsidy payments,” she stated.

This could, according to George-Ikoli, mean that Nigeria’s sincerity of purpose is questionable, stating further that the huge investments being made in green frontier fields as fossil fuel investments diminish the likelihood of those green investments yielding expected returns to infrastructure lock-ins and stranded assets.

“Halting funding of petroleum consumption subsidies and diverting to production subsidies that unlock financing and access to cleaner energy resources to electrify the homes and businesses of 43 per cent of its un-electrified population would be more reflective of the ambitions stated in Nigeria’s energy transition plan.

“As a result, the cost of borrowing and interest for Nigeria will become even more stringent unless Nigeria creates an enabling environment that allows lenders to trust Nigeria’s commitments and that Nigeria’s actions will follow its ambitions and unlock/derisk financing. This does not currently appear to be the case,” George-Ikoli added.