Our Outlook for the Energy Sector

Powering Progress: The Immediate Impact and Future Trajectory of Nigeria’s Electricity Act

On the 8th of June, 2023, the Electricity Bill, now referred to as the Electricity Act 2023, was enacted. This remarkable development marked the conclusion of a meticulous assessment of Nigeria's electricity and power sector, to address and resolve inherent difficulties. Now, stakeholders are eagerly looking forward to the comprehensive solutions that this Act is expected to provide for the longstanding issues plaguing the nation's energy and power landscape.

The Electricity Act of 2023 is poised to exert an immediate and substantial impact on the efficiency and effectiveness of Nigeria's energy system in 2024. Foremost among its provisions is the commitment to accurate tariff implementation, signalling a dedication to financial sustainability for electricity providers. This commitment has the potential to attract increased investment, fostering growth and stability within the sector and a more competitive market within the next year.

The Act's consolidation of laws related to the power sector is anticipated to yield immediate benefits by streamlining operations and reducing bureaucratic complexities. In 2024, this harmonization is expected to result in a more coherent and efficient regulatory framework. The establishment of the National Power Training Institute reflects a proactive approach to addressing the skills gap in the short term, ensuring a workforce adequately trained to meet the evolving needs of the sector.

Moreover, the creation of state electricity markets in 2024 holds promise for improving energy access, particularly in underserved and rural areas. The decentralization of decision-making and increased autonomy for states can lead to quicker responses to local needs. Although state-level electricity markets may drive innovation and competition, effective implementation hinges on building institutional capacity, ensuring regulatory consistency and managing the integration of local grids with the national grid. The Act's mandate for electricity-generating enterprises to invest in renewable energy projects aligns with global sustainability goals.

In 2024, this provision is expected to encourage companies to adopt cleaner energy sources, contributing to a more sustainable and diversified energy mix. Challenges exist, including high initial investment costs, grid integration issues, and technical expertise requirements, which must be effectively addressed for the success of renewable energy initiatives. In the short term, the clear division of regulatory powers between the Federal Government and the Federating States provides a structured approach to governance, mitigating the risk of a clash of powers. This ensures distinct roles for both levels of government, fostering efficiency and accountability. This collaboration is anticipated to prevent fragmentation, ensuring a unified approach to regulation across the country in 2024, and contributing to a more stable and reliable energy system.

The Act's mandate for electricity-generating enterprises to invest in renewable energy projects aligns with global sustainability goals.

In 2024, this provision is expected to encourage companies to adopt cleaner energy sources, contributing to a more sustainable and diversified energy mix. Challenges exist, including high initial investment costs, grid integration issues, and technical expertise requirements, which must be effectively addressed for the success of renewable energy initiatives.

In the short term, the clear division of regulatory powers between the Federal Government and the Federating States provides a structured approach to governance, mitigating the risk of a clash of powers. This ensures distinct roles for both levels of government, fostering efficiency and accountability. This collaboration is anticipated to prevent fragmentation, ensure a unified approach to regulation across the country in 2024, and contribute to a more stable and reliable energy system.

NCDMB: The Road Plan So Far

Launched in 2017 by the Board with 96 initiatives, the roadmap aimed at enhancing Nigerian Content in the oil and gas sector to 70 per cent by 2027 has revealed the successful execution of 83 per cent of the 10-year Strategic Roadmap.

The Nigerian Content level in 2023 reached 54 per cent, surpassing the targeted 47 per cent for the year. Top-performing sectors such as Shipping, Surveying/Positioning services, and Inspection/Testing and Certification achieved a commendable 100 per cent Nigerian Content level. However, concerns have been raised about stagnation in overall progress, prompting contemplation on the future trajectory of Nigerian Content in the industry. Additionally, at the 12th Practical Nigerian Content Forum (PNC) 2023 with the theme "Deepening Nigerian Content Amidst Divestments, Domestication, and Decarbonisation," the Board provided updates on ongoing projects. These include the imminent commissioning of the Nigerian Oil and Gas Park Scheme (NOGaPS) at Emeyal-1, Bayelsa State, and another in Odukpani, Cross River State, in early 2024. These projects underscore the government's commitment to sustainable practices within the energy sector.

Looking ahead to 2024, the forum serves as a platform for industry stakeholders to deliberate on the evolving landscape and collectively shape the future of Nigerian Content in the oil and gas sector.

Local Content Development: Introducing the Nigerian Oil and Gas Parks Scheme (NOGaPS)

In recent times, the drive for local content in Nigeria, led by Government parastatals like the NCDMB, has gained momentum through robust collaborations, giving birth to the Nigerian Oil and Gas Parks Scheme (NOGaPS). This groundbreaking initiative came to fruition during the official tour of the Emeyal-1 project in Bayelsa on October 10, 2023, where the Minister of State for Petroleum Resources of Nigeria lauded the expansive industrial park for its strategic role in fostering the local manufacturing of oil and gas components and ancillary products.

Set to kick off operations in early 2024, the NOGaPS projects in Cross River and Bayelsa states mark a significant leap forward, with parallel initiatives in Akwa Ibom, Delta, Edo, Imo, and Ondo states progressing at varying stages of development. NOGaPS, aptly described as the NCDMB Gas Hub at Polaku in Yenagoa Local Government Area of Bayelsa State, emerges as a game-changer in Nigeria's pursuit of enhancing in-country capacities and capabilities. These initiatives are poised to break the chains of dependence on imported operational tools and machinery, representing a vital stride toward achieving self-sufficiency in the sector.

In ensuring the triumph of the oil and gas parks, the NCDMB has introduced the $50 million NOGaPS Manufacturing Fund. As a component of the Nigerian Content Intervention Fund's suite of financial products, this fund aims to offer flexible and affordable financing options for qualified Nigerian oil and gas businesses. Addressing historical funding challenges that have constrained their growth, the NOGaPS Manufacturing Fund promises a substantial uplift to the energy sector in 2024. It stands as a beacon of support and merits careful consideration as a catalyst for sustainable growth and development in Nigeria's oil and gas industry.