IEA membership puts Nigeria on track to double energy investment

Nigeria could double investment in its energy sector within five years as its new associate membership of the International Energy Agency (IEA) gives the country greater access to global investors, technical expertise and a stronger voice in global energy policy.

Fatih Birol, executive director of the Paris-based agency, said on Thursday during a visit to Abuja that the IEA would use its global network of governments, energy companies and investors to help Nigeria unlock capital for oil, gas, power and solar projects.

“My goal is, in a very short period of time, in five years, at least doubling the energy investments Nigeria is receiving today,” Birol told BusinessDay.

He said the agency’s support would extend beyond its new relationship with Nigeria, with the IEA working directly with the government to identify investment opportunities, provide policy advice, build technical capacity and connect Nigeria with investors through its international network.

“We are working on a joint work program where we see in which areas we can support Nigeria,” Birol said.

Read also: Nigeria, IEA solidify partnership, sign pact on energy policy, security

Nigeria, Africa’s largest oil producer, has vast untapped resources but has struggled for years to attract sufficient capital to expand production, develop its gas resources and improve electricity supply. The government is targeting oil output of almost 3 million barrels a day by 2030 and is relying on reforms, infrastructure upgrades and improved security to revive investment and curb crude theft.

Birol said Nigeria’s admission into the IEA family could provide an additional signal to international investors that the country is becoming a more credible and reliable energy partner. The agency’s members, including the US, Germany, Italy and Japan, unanimously approved Nigeria’s associate membership in July.

A joint work programme between Nigeria and the IEA will cover natural gas, electrification, clean cooking, energy efficiency and energy data, while Nigerian officials will have opportunities for training and technical cooperation with the agency.

Better energy data could be particularly important for investment, as investors and market participants have long complained about gaps and inconsistencies in data on oil production, exports and domestic consumption. Improving the quality and transparency of that information would make it easier for investors to assess projects and risks.

According to Birol, the joint work programme which will also cover energy data development, will enable Nigeria work with the IEA to strengthen its energy data collection and reporting systems

Birol said geopolitical tensions and disruptions around major energy routes are also changing the way governments assess energy partnerships. The uncertainty around the Strait of Hormuz has encouraged countries to review their energy strategies and place greater value on suppliers that can be relied upon to deliver, he noted.

“Many countries around the world are reviewing their energy strategies, and when they review energy strategies, one of the most important criteria in terms of partnerships [is] whether or not this country is a reliable country, trustworthy country, and whether or not they will provide energy on time,” he said.

That shift could benefit Nigeria by reducing competition from some Middle Eastern producers facing difficulties moving their oil, Birol said. Nigeria’s ability to supply global markets, coupled with its large resource base, could make it an increasingly attractive partner for investors in Asia and Europe.

But Nigeria will still need to address domestic obstacles that have discouraged long-term capital. Birol said the country must maintain predictable policies, transparency and a stable investment framework if it wants companies to commit more money.

“I think we should continue to show the predictability of the Nigerian energy sector,” he said. “The more predictability, the more transparency is there, the better it is for the companies to come.”

He said President Bola Tinubu’s administration had made significant efforts on reforms and that Nigeria’s association with the IEA offered another advantage in demonstrating the country’s commitment to a more predictable energy sector.

Birol also pointed to the Dangote refinery as an example of how Nigeria and other African countries can capture more value by processing resources at home rather than exporting raw materials.

He said many African countries were exporting critical minerals in their raw form to countries where they were processed and sold at much higher values. Africa, he argued, should develop domestic processing industries and retain more of the economic benefits.

Dangote’s refinery, he said, demonstrated what was possible, as its jet-fuel exports have helped supply European markets during a difficult period, showing how domestic processing can turn Nigeria’s resources into higher-value products for global consumers.

“Instead of selling the raw material for 25,” Birol said, using the refinery as an example of the value African economies could capture through processing.

Beyond hydrocarbons, he identified solar power as another major opportunity. Nigeria is exploiting only a small fraction of its solar potential, he said, despite its ability to provide electricity to millions of people.

The country’s energy-access challenge remains significant. About 65% of Nigerians still lack access to clean cooking, while roughly 65 million people have access to electricity, according to figures Birol cited during the interview.

Clean cooking, electrification and energy efficiency will therefore be key measures of the IEA-Nigeria partnership over the next year. Birol said the agency would establish milestones with the government and assess whether agreed targets are being delivered.

For Africa, he urged governments to combine their natural-resource wealth with domestic processing, stronger energy systems and policies that can attract long-term investment.

Five years from now, Birol said he wants to see Nigeria’s energy investment doubled, major progress on clean cooking and electricity access, and Nigeria playing a stronger role in international energy discussions.

With more than 240 million people and major oil, gas and solar resources, Nigeria, he said, has the potential to become both a more important energy supplier and a stronger African voice at the global table.

Join BusinessDay whatsapp Channel, to stay up to date

Open In Whatsapp