Nigeria’s push to expand its Liquified Natural Gas (LNG) production could put the country in a precarious economic situation, prolonging its dependency on fossil fuels and leaving it with stranded assets as international demand for gas falls, according to new research by the International Institute for Sustainable Development (IISD).
With the IEA predicting international demand for natural gas will peak this decade amid global decarbonisation efforts, there is a “high likelihood” any scale-up of LNG production could leave Nigeria with unprofitable and abandoned assets, and reduce the available financing for clean energy sources, warns IISD’s brief A Balancing Act: Considerations for the expansion of liquified natural gas projects in Nigeria.
The paper also found that Nigerian LNG exports may struggle to compete in the global market after 2030, while replacing oil revenues with LNG may not generate the expected income.
Bathandwa Vazi, policy advisor at IISD, said: “Nigeria’s LNG dash is short-term thinking that could end up costing the country dearly. Economic diversification away from fossil fuels is critical in building a sustainable future for the country, not locking in further dependence on polluting commodities.
“Nigeria is already up against bigger players in the LNG market, and new LNG developments take 8–10 years to produce gas. As international demand for gas peaks, Nigeria must recognise that a fossil fuel-based economy cannot carry it far into the future.”
Facing declining oil revenues, economic turmoil following the COVID-19 pandemic, and inflated European demand for LNG following Russia’s invasion of Ukraine, Nigeria has moved to address its revenue shortfall by significantly scaling up LNG production.
Oil revenues have long underpinned the Nigerian Treasury, accounting for about two-thirds of government earnings and 90% of its foreign exchange income. However, as production has fallen due to lower levels of investment and regional unrest, there is renewed focus on LNG, which provides considerably smaller, albeit growing, revenues. In 2023, LNG revenues reached N74 billion ($51 million), accounting for around 7% of total government revenues.
As of 2022, Nigeria was already the sixth-largest LNG exporter worldwide, with a 6% market share. As oil contributes less to revenues, the government plans to build on its existing LNG developments, with ministers declaring 2021–2030 “the decade of gas”.
Currently, Nigeria has six operational LNG terminals; nine more are proposed, with LNG construction investment totalling N28.3 trillion ($18.5 billion).
But to replace Nigeria’s falling oil revenues, LNG exports would still have to increase “by an order of magnitude,” IISD experts say. Such a scenario would require sustained international demand and high prices for LNG.
Meanwhile, the assets planned would be operating far beyond the middle of this century. The eventual transition to a low-carbon world, expected to accelerate after 2030, could leave LNG assets stranded as demand dries up.
Underscoring this, the researchers note that Carbon Tracker projects a 69% reduction in Nigeria’s fossil fuel revenues over the next two decades if global energy trends shift toward a low-carbon pathway.
Instead of investing overzealously in the fossil fuel economy, Nigeria “must manage its gas ambitions realistically, align with transition plans, and prioritize community development in gas projects,” the paper’s authors write.
Electricity access challenges can be met by adding more sustainable and affordable energy sources into the energy mix, and LNG expansion “should not come at the expense of addressing inequality, energy access, and socio-economic challenges,” the paper says.
Nnimmo Bassey, Executive Director of Health of Mother Earth Foundation (HOMEF), said: “As governments around the world pursue climate targets, it will become increasingly prudent for countries heavily dependent on fossil fuel exports to reconfigure their economies with full recognition of this trend. While increasing LNG production may boost Nigeria’s revenues in the short term, it will only serve to position the country to end up with stranded assets, damaged communities and continued dependence on oil and gas exports.
“Nigeria’s drive for expanded LNG investment is happening at a time when several African countries are being pushed in the same direction basically to meet temporarily inflated European demand. Nigeria will delay the necessary move away from climate-altering fossil fuels and end up fighting for a share of the vanishing market.”
Babawale Obayanju, communications manager, ERA/FoEN, said: “LNG production in Nigeria has proven to serve European, and Asian markets over the people who are plundered and exploited. Exploring more gas would only mean more floods, drought, increased heat waves, and other climate change impacts rather than providing energy for the over 80 million Nigerians who still lack access to electricity. Rather than exploit more fossil fuels, the government must fund locally led, socially owned and people-centered renewable projects.”
Rep. Sam Onuigbo, sponsor of Nigeria’s Climate Change Act, and former Member of the Nigerian House of Representatives, said: “The idea of using gas as a transition fuel is critical to Nigeria’s net zero transition efforts. First, it will help reduce our GHG emissions and provide short-term revenue for a gradual and just phase-out of our dependence on fossil fuels. But we must be smart about this and keep a finger on the pulse of international movements towards net zero transitions and the impact on potential gas revenue.
“It is therefore important to have a proper plan which takes into account the global net zero scenario, the possibility of being left with stranded assets, and thus ensures that we limit investments into LNG and have a fixed date for moving away from it completely.”
Nnaemeka Oruh, Focal Point Administrator of GLOBE Legislators International & National Coordinator, GLOBE Nigeria, said: “While on the surface, it appears that Nigeria’s decision to use LNG as a bridge fuel to her transition, it simply does not appear logical and sustainable. This is primarily because of global clamour for the transition to clean energy sources and the phasing out of fossil fuels. With a great deal of the gas infrastructure still being built, it follows that by the time the country would want to explore this source, global demand for gas would have started plummeting. It is therefore certain that the country would be left with stranded assets if it continues on this path. It will simply lead to a cul-de-sac.”
The IISD is an independent think tank working to accelerate solutions for a stable climate, sustainable resource management, and fair economies.
