In business strategy, competitive advantage is a commercial entity’s capacity to outperform rivals within its industry segment, by consistently delivering superior offerings, products, and return on investments to shareholders.
This implies, the ability to innovate, exploit first mover advantages in research and development including Artificial Intelligence; optimise value chains; gain market share; whilst ensuring the efficient and effective configuration of human, financial, operational, technological resources for commercial and strategic gains.
A similar rationality applies within the purview of sovereign states: country A, outperforms country B in the efficient, effective, production, and export, of product C, thus increasing its foreign exchange earnings and productivity. This hypothesis implies international trade and cooperation, ditto the concept of comparative advantage.
David Ricardo, in his tome, On the Principles of Political Economy and Taxation (1817), espoused comparative advantage as a nation’s ability to produce goods or services at a lower opportunity cost than other countries. Whilst the logic of comparative advantage from Ricardo’s days, still resonate in extant 21st Century macroeconomics, it nevertheless surfaces the illogicality of the depletion of a nation’s resources where comparative advantage is disproportionately exploited.
Put simply, the implication of national competitiveness or productivity is inescapable in this discourse. Why? Because beyond citizens’ welfare and national security, the overriding goal of any nation is to enhance citizens’ standard of living iteratively. The capacity to accomplish that objective is a function of a nation’s productivity, the efficient utilisation of labour and capital, in the creation of goods and services.
Yes! Then what? Productivity is a critical success factor of a country’s economic sustainability and standard of living. It underpins a country’s per capita income. In short, a nation’s long-term economic growth is inextricably brigaded with enhanced productivity.
In this context, the intelligent, intentional, interoperable development; and, cleaner, greener, sharper exploitation of Nigeria’s natural gas resources, as a pivotal source of competitive advantage is, quite simply, non-negotiable. Then again, this proposition is not oblivious of the prevailing socio-economic, geopolitical, domestic and international volatilities and complexities inherent in the effective utilisation of this resource for the advancement of the Nigerian people.
On the plus side, Nigeria was ranked the sixth largest global exporter of liquified natural gas in 2021 according to the Statistical Review of World Energy (June 2022). Nigeria has the largest proven gas reserves in Africa according to the United States Energy Information Administration’s March 2023 report. The country has 5.76 trillion cubic metres (tcm) of Proven Natural Gas Reserves, making it the 9th largest globally in 2023. That is behind Russia at 47.8 tcm; Iran at 33.9 tcm; Qatar 23.8 at tcm; USA at 13.1 tcm; Turkmenistan at 11 tcm; Saudi Arabia at 9.4 tcm; China 6.6 at tcm and UAE at 6.09 tcm.
The country’s gas serves the dual purpose of exportation, which yields necessary foreign exchange; whilst serving a vast local market given a population of approximately 226 million people for diverse uses notably compressed natural gas, liquified petroleum gas, feedstock for power generation, industrial manufacturing, mechanical propulsion in gas-dependent sectors.
In the quarter of a century since its inception, the Nigerian LNG Limited, has paid dividends worth over $19.6 billion to the Federal Government as its majority shareholder. Through January and September 2022, Nigeria earned N2.1 trillion ($4.8 billion) according to the National Bureau of Statistics (NBS), whilst in 2021, the country earned over $867 million from gas exports.
A pivotal initiative in this realm is the pioneering 678-kilometre-long West African Gas Pipeline (WAGP). It was constructed to transport gas from Nigeria to Ghana via Benin and Togo to enhance economic growth, productivity, regional development and integration: aspirations, which align with the overarching aims of the 15-bloc Economic Community of West African States (ECOWAS).
Linked to that, is the strategic opportunity advanced by the prospective Nigeria: Morocco Gas Pipeline project, an extension of WAGP, which would impact every coastal West African country, terminating at Tangiers, Morocco and Cadiz, Spain. The challenge here is that it is not envisaged to be active before 2046 at an estimated cost of $25 billion, which may rise given inflationary pressures and sociopolitical volatilities. Nevertheless, the commanding subtext is predicated upon energy security, regional economic development and geopolitical collaboration.
In a wider geostrategic context, the Russia/Ukraine war, which commenced on February 24, 2022, has imperilled gas exports from Russia to Europe especially; a phenomenon which has, prompted creative thinking on alternative energy sources and suppliers.
This reality affords Nigeria competitive opportunities to boost exports to existing, and new(er), European markets, servicing existing compacts in Asia and beyond, whilst safeguarding its own energy security. This, however, is subject to effective leadership, political will and enduringly viable international collaboration: a tough a balancing act too!
Countervailing that are major strategic challenges. First is, the de facto moratorium on the 4,128 kilometres-long Trans-Saharan gas pipeline envisaged to traverse Nigeria to Algeria via Niger. Ordinarily, this ought to be a straightforward commercial project with agreed memorandums of understanding between the various contracting parties and countries.
However, seamless linear progression in geopolitics is delusional. The Russian: Ukraine conundrum has compelled European countries to seek alternative long-term energy sources. The Trans-Saharan gas pipeline upon completion would have squared that circle, in part, and by extension, created thousands of direct and indirect employment opportunities in Nigeria, Niger and Algeria.
Compounding that dynamic however, was the Nigerien coup d’etat of July 26, 2023 advanced by the pro-Russian, General Abdourahame Tchiani; who ousted the democratically elected, pro-Western Mohammed Bazoum. Nigeria’s relationship with
its northern neighbour, Niger, is, put diplomatically, imperfect; largely because Nigeria initially mobilised ECOWAS support against Tchiani’s regime. To the extent of that imperfection, large doses of the finest realpolitik and tact, would be required to reactivate the seminal project whilst smoothening its geopolitical dimensions.
Yet again, the plot thickens! Russia has precious little to gain strategically from the success of the Trans-Saharan pipeline project so, the de facto moratorium may well linger for a while. The second important challenge of strategic consequence is that political inertia given Russian vs Western political reverberations on African soil, do not stifle the WAGP extension to Morocco. In short, how will Nigeria accomplish its strategic aims of profitably and sustainably monetising its gas reserves given real tensions on African soil between Western powers and Russia?
Other concerns pertain to criminality, pipeline vandalization and terrorism, ditto the financial costs and adverse environmental impacts of gas flaring in Nigeria. To illustrate the latter point, according to the Nigerian Oil Spill Detection and Response Agency (NOSDRA), in the decade to 2021, the country dissipated over $22 billion in gas flaring; which is approximately 4.2 billion standard cubic feet (scf) of gas within the same period.
Perversely, NOSDRA reports, that Nigeria lost circa N843 billion to gas flaring through January 2022 and August 2023. Furthermore, the Agency confirmed that between January and August 2023, energy companies flared 171.1 billion scf at a valuation of N453 billion ($599 million). These are vast sums which could be ploughed into defence, education, health, job creation, infrastructure and related social welfare initiatives.
Putting these figures into focus, the gas flared or wasted, through January to August 2023 alone, has the potential to generate 17,100 gigawatts/hour of electricity, while it emitted 9.1 million tons of carbon dioxide into the atmosphere. Plainly, these emissions are significant environmental hazards constituting a continuing risk to human health and linked ecosystems.
What then is the policy intervention to challenge these erring practices? How does this square with the necessity for productivity, which can enhance an economic renaissance and potentially reverse unemployment rates exceeding 37.7% (KPMG Global Economic Outlook Report H1, 2023)?
Incidentally, Nigeria is a signatory to the COP 28 UAE, 2023 Declaration on Climate and Health pursuing the objective of: “promoting steps to curb emissions and reduce waste in the health sector, such as by assessing the greenhouse gas emissions of health systems, and developing action plans, nationally determined decarbonization targets, and procurement standards for national health systems, including supply chains.”
More immediately therefore, how feasible, given these obdurate gas flaring statistics, are the aspirations for meeting the 2030 Sustainable Development Goals on tackling the adverse effects of climate change, environmental protection, affordable and clean energy et al? In fact, notwithstanding the findings of the World Bank’s Global Gas Flaring Tracker March 2023 report, which established a three per cent reduction in global gas flaring, Nigeria still flares the greatest quantity of gas on the African continent.
In the final analysis and evident from the foregoing, bolder strategies are required to transform Nigeria’s gas industry, upon which productivity is inextricably linked. The critical issues pertain to embedding effective and robust risk mitigation approaches to address the striking geopolitical, technical, environmental minefields lining the path to unleashing the transformative potential of the nation’s gas reserves.
It is in that vein that these policy recommendations, which presuppose the visionary leadership, political dynamism, governance-continuum, and a nuanced collaborative stance, could offer some pertinent strategic options for national leaders:
Develop and exploit innovative opportunities for monetising gas in domestic and international markets. By so doing, boost productivity, catalyse supply chains, and employment, whilst counterbalancing overreliance on forex earnings from crude oil exports worth $125 billion through 2016/2020, $45.6 billion in 2022 and $11billion in H1, 2023.
Set and apply measurable and realistic stretch environmental, social and governance (ESG) targets for corporations in the oil and gas industry to cut gas flaring. Incentivise, with tax holidays for example, those in full compliance; whilst imposing and enforcing stiff sanctions against violators.
Applying global best practice, conduct environmental and health impact assessments on communities across the Niger Delta, to assess the scale and scope of gas flaring and, the nexus, if any, between gas flaring and incidents of cancer and cardiovascular diseases. The findings should inform policy reforms because an unhealthy workforce cannot be productive.
The Federal Government should set itself a stretch target of zero gas flaring to align with the UN’s 2050 target not 2060!
Ojumu is the Principal Partner at Balliol Myers LP, a firm of Lagos-based legal practitioners and author of The Dynamic Intersections of Economics, Foreign Relations, Jurisprudence and National Development.
