Nigeria, often referred to as the “Giant of Africa”, is not only Africa’s most populous country, but also one of the continent’s leading oil producers. One of the sessions at last week’s Africa Oil Week in Cape Town focused on “Nigeria – A Renewed Hope for a High Energy Future”. Dr Tominiyi Owolabi, Managing Partner of Olaniwun Ajayi, was at the event and shared his thoughts on some of the recent legislative changes and ways the sector can advance.
“On 16 August 2021, the Nigerian government signed the Petroleum Industry Act (PIA) 2021 into law, marking a significant milestone in the restructuring and modernisation of the country’s oil and gas sector,” he explained. “With the enactment of the PIA, the sector now benefits from a more robust and contemporary framework designed to propel growth and development in the energy sector. A notable advantage of the PIA in relation to energy transition is its emphasis on gas as a pivotal transition fuel for the nation.”
Owolabi says although this is a big step in the right direction, Nigeria still has work to do in terms of providing the essential infrastructure, refining the regulatory framework, and mobilising the requisite investments to facilitate a successful energy transition.
The Electricity Act 2023, signed into law on 8 June 2023, has also ushered in a new era of opportunities for investments across Nigeria’s electricity value chain. “This comprehensive legislation consolidates the regulations governing the nation’s power sector and introduces several key changes aimed at stimulating policy measures to attract investment and foster a competitive electricity market in Nigeria,” Owolabi explained. “For example, the Act grants states within Nigeria the authority to establish independent electricity markets within their jurisdictions. This decentralisation will potentially reduce reliance on the national grid, improve energy access, and attract investments for the development of state-specific electricity solutions.”
The Electricity Act places a significant emphasis on stimulating the development and utilisation of renewable energy sources. It also provides for the exclusive generation and distribution of electricity to designated geographical areas by awarding licences for mini-grid concessions to renewable energy companies. Additionally, the Act calls for the introduction of tax incentives to promote the generation and consumption of electricity from renewable energy sources.
Owolabi says to maintain its competitive edge in the global energy market, Nigeria needs to take strategic steps to attract more investments and developments in the oil exploration sector.
“One of the questions that must be asked is: are we competitive, relative to other opportunities globally? By incentivising the upstream oil and gas sector, the government can stimulate economic growth, attract foreign investments, and ensure a stable energy supply within the country,” he commented.
“Overall, if the government can address and mitigate factors such as the impact of inflation and issues of insecurity, unemployment, and ease of doing business, then operational risks will be reduced.”
Owolabi says independent oil and gas companies in Nigeria also play a crucial role in developing the country’s energy and gas infrastructure.
“For these independent players to achieve their goals and access capital for expansion, the following strategies must be considered: equity or debt financing, project financing and alternative financing mechanisms, energy diversification, strategic partnerships and local content participation. In essence, accessing capital for energy and gas infrastructure projects requires a combination of financial acumen, industry expertise, and a commitment to sustainable business practices,” he shared.
Decarbonisation and ESG strategies are now high priorities for every sector, but there’s no one-size fits all solution. “While there is a need for an energy transition plan in Africa, African nations should not be held to the same standards as the Western world,” Owolabi said. “Africa, being a relatively lower contributor to greenhouse emissions, should have a unique approach to harnessing its abundant fossil fuel resources for accelerated development of the sector. A clear and comprehensive energy transition plan that aligns with the African approach and addresses the specific needs of Nigeria and other developing economies is required. This tailored plan will pave the way for an energy revival strategy. Nigeria should diversify its energy mix by allocating resources towards renewable energy alternatives while considering other energy sources in the broader context.”
He says collaboration with the right international partners, governments, and technology providers is also essential to drive growth in the energy sector. “This will facilitate access to funding and the expertise required for the sustainability of energy projects.”
Owolabi also emphasised that the importance of cultivating positive relationships with local communities must be reinforced, and effective as well as robust monitoring and reporting mechanisms should be implemented for emissions.
He believes these strategies can help improve Nigeria’s reputation as an environmentally responsible country and further attract foreign investments in the energy industry.
To join Africa Legal's mailing list please click here