With the global push for clean and renewable energy transition, investors worldwide are divesting their investments from fossil fuel projects into renewable energy projects, causing a funding conundrum. This movement, though needed, is telling hard on developing countries like Nigeria, whose major energy source is dependent on fossil fuels.
The 61st power dialogue organised by the Electricity Hub sought to highlight the challenges in financing fossil fuel projects in Nigeria’s power sector and address how these challenges can be resolved.
At the dialogue, Chigoziri Egerouh, Energy Specialist, African Development Bank, explained that the challenges of funding fossil fuel projects in Nigeria are tied around the viability and bankability of such projects. In addition to these, policies have a strong role in determining the nature of funds that go into an economy.
Due to the divestment of funds into clean energy projects, developing countries are challenged with a limited funding option. As a result, they become reliant on the few countries still willing to fund gas to power projects leading to increased cost and reduced profitability.
Furthermore, Oga Adeojo-Ogiri, principal consultant, Vappax Advisory, opined that given the huge gap in energy access in Nigeria, it would be difficult to migrate completely into clean energy projects. Also, given the capital intensive nature and long recovery timelines of fossil fuel projects, the country still requires a lot of funding from foreign investors to meet their developmental goals.
In resolving these challenges, Oga noted that there needs to be concentrated efforts by the government to pull local sources of funds to drive fossil fuel projects while deliberately making efforts to divest into clean sources of energy.
Also, the federal government has a renewed focus on gas development in Nigeria because it has about 40 per cent fewer emissions than coal as a fuel source. An example is the gas expansion project with the Central Bank of Nigeria (CBN), which will increase the use of gas, thereby making it a suitable alternative to coal fuel use.
In summary, notwithstanding the challenges facing fossil fuel projects, a lot more needs to be done by the government, regulators and energy developers on sustainable ways to improve energy access in the country while sustaining the environment.