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Developing Nigeria’s gas industry for the domestic market

The natural gas industry is a cultured industry that drives innovation and touches nearly every field and aspect of life that we care about. From…

The natural gas industry is a cultured industry that drives innovation and touches nearly every field and aspect of life that we care about. From mobile phones to the makeup we wear, to medical devices, bank cards, and even the football we kick around with friends.

The industry is one of the building blocks of the things we need and love every day. Natural gas is used for transportation, cooking, electricity generation, and manufacturing. It is used as a raw material for making fertiliser, antifreeze, plastics, pharmaceuticals and fabrics. The steel and paper industries also use natural gas to generate process steam for industrial applications.

Existing data shows Africa’s largest economy, Nigeria, has the largest natural gas reserves on the continent. With oil, the industry accounts for about 70 per cent of its revenue, making the sector one of Nigeria’s best and most sought-after employment sectors. Most of Nigeria’s electricity generation is from natural gas, while crude oil is primarily used for power backup.

A forecast by the U.S. Energy Information Administration shows that natural gas will be the largest global electricity generation source. Natural gas brings with it several quality-of-life environmental benefits because it is a relatively clean-burning fuel. Globally, the sector is producing millions of jobs, with employment up 40 per cent since the Great Recession of 2008 in the U.S. alone. Thus, given its existing gas reserves, it will be surprising to see Nigeria not leading the continent’s gas industry.

On 29th March 2021, President Buhari launched the country’s Decade of Gas. The aim is to transform Nigeria into a gas-powered industrialised economy by 2030. Developing the gas industry will boost other industries through the provision of electricity and raw materials. Here, we will shed light on three points: some critical gas development policies, the potential benefits of developing the gas industry for the domestic market, and the employment opportunities in the gas industry.

Since the discovery of gas in Nigeria, there have been subsequent attempts to develop the industry. For example, the gas commercialisation and utilisation programmes contributed to reducing gas flaring and increased gas utilisation by about 300 per cent between 1995 and 2017. There were gas pipeline projects which concentrated on the western part of the country and the continent. The first Escravos to Lagos Pipeline System (ELPS) was commissioned in 1989 to supply Lagos and neighbouring South-west states. Following the success of the ELPS, the government agreed to supply Ghana, Benin, and Togo through the Western African Gas Pipeline, which was commissioned in 2006. However, these projects were not favourable to the country’s domestic market, given the persistent issues of power in the country.

Evidently, Nigeria’s power sector is challenged with poor electricity facilities, natural gas supply shortages, inefficient distribution network and inadequate transmission system. According to the International Energy Agency’s 2018 estimate, only 60 per cent of Nigeria’s population had access to electricity. Power shortage has limited the growth of the country’s total production across all sectors. It has caused many businesses to close or move to neighbouring countries completely. It was challenging for new start-ups and for attracting foreign investment. The lack of electricity has contributed to the high inflation rate – as businesses pay for an expensive alternative electricity source, their production cost increases, which increases the prices of goods and services.

To mitigate these issues, the Buhari administration commissioned gas infrastructure projects to promote gas use in the domestic market. The projects include the second Escravos to Lagos Pipeline System (ELPS-2), Obiafu – Obrikom – Oben (OB3) gas line and the Ajaokuta to Kaduna to Kano (AKK) gas line. The AKK gas line project will pass through Abuja from Ajaokuta. Then we will see another line from Abuja to Kaduna, then from Kaduna to Zaria, and from Zaria to Kano. With hindsight, these projects should have been done since the turn of the millennium.

Nonetheless, these are notable projects and should be appraised with optimism. The projects are expected to guarantee net investment return. The gas lines will provide gas to cement firms, other industrial concerns, and residential customers. The users of compressed natural gas like buses and trucks will be able to buy the product cheaper as its supply increases.

The government is also planning to build three new gas-fired power plants for power generation plants, located in Abuja, Kaduna, and Kano, to use the pipeline’s gas to generate 3,600 MW power. The power plant will provide electricity to households and many industries in the northern part of the country. The benefit of producing a decent amount of power and raw materials from gas will translate to a success story. For example, resuscitating the textile industry will mean reviving its largest manufacturing sub-sector, which accounted for 22 per cent of employment and 15 per cent of manufacturing value-added in 1984. In the long run, the tax revenue from the performing industries and employees will outweigh the cost of pipeline projects.

If government policies are successful, all other things being equal, the natural gas industry will be a major source of job opportunities for Nigeria’s rising labour force. The industry has a high concentration of contractors and sub-contractors, with different work split between specialists. The gas industry jobs are characterised as semi-skilled and skilled craft trades positions. The jobs in the sector are not restricted to petroleum engineers alone. Many roles do not need special education. The skills can be learned on the job, from attorneys to welders to architects, truck drivers, and accountants.  The industry also pays above minimum wage.

This means that the industry has an enormous opportunity to attract, retain, and develop lifelong careers for individuals as the industry expands. Finding jobs in the industry is similar to other sophisticated, high-tech industries. Employees should have a decent education, some certification as an industry specialist would be an advantage, training and a little experience could go a long way.

Therefore, as the government is laying out policies for the Decade of Gas, the opportunity for capacity development is opening. The education sector can explore the training curriculum for the industry and ways to attract industry experts who can contribute to capacity development.

In conclusion, The Decade of Gas is a desirable policy. It is an opportunity for Nigeria to develop its gas industry, even though it looks a bit too late for this adminitration. Thus, the next government and all the relevant stakeholders should consider this ingenuity to transform the country into a gas-powered industrialised economy.

Dr Nasir Aminu is the Programme Director, Economics, Cardiff School of Management, United Kingdom