COP 27 is underway and many countries and stakeholders are in Egypt to discuss, collaborate and implement solutions to the impacts of climate change. Climate finance, loss and damage, adaptation and energy transition are some of the issues that will be discussed at COP 27.
Nairametrics spoke to Fola FagbuleDeputy Director and Head of Financial Advisory at the African Finance Corporation (AFC)on Nigeria’s focus areas at COP 27 and the country’s natural gas and mining sectors.
Enjoy the conversation.
NAIRAMETRICS: What should be Nigeria’s central message at COP 27?
Fola Fagbule: AFC has taken the lead in articulating this central message, not just for Nigeria but for all of Africa. We have published a white paper for this purpose. We believe that while emission reductions are necessary for the richer, more developed and polluting countries, there is a more limited universal impact to be gained from reducing sub-Saharan Africa’s already much lower emissions.
The most important area where Africa can make changes to reverse global warming is to offset unnecessary travel across our oceans. Africa is the world’s biggest storehouse of minerals and commodities – everything from copper and iron ore to cotton, cocoa and coffee. Most of these commodities and minerals are shipped halfway around the world to Asia to be manufactured and processed there before reaching the consumer market.
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This is one of the main reasons why maritime transport is the biggest emitter of CO2 after China, the United States, India, Russia and Japan, with 3.1% of global gas emissions. greenhouse gas emissions, roughly equivalent to all African countries combined. Africa needs to reduce shipping waste by building local circular economies.
At the AFC white paperNigeria and other African countries are urged to do the following:
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Locate: Africa must also tap into its abundant reserves of natural gas as an essential transitional energy source to support industrialization – a position supported by the European Commission’s recent decision to classify natural gas as a form of green energy and a vital transition fuel on the road to decarburization. Industrial development using natural gas can be achieved without a substantial contribution to global carbon emissions. With the resulting job creation and economic growth, African nations can invest more in renewable sources to make the final transition.
Rebuild: Africa is the region most exposed to the ravages of global warming, largely because its infrastructure – from roads, bridges and seaports to buildings and power grids – is ill-equipped to withstand climate shocks. Everything must be built with stronger and more durable structures and materials. Without intervention, the cost of structural damage caused by natural disasters in Africa will rise to $415 billion a year by 2030, from $250-300 billion currently, according to the UN Office for Disaster Risk Reduction . These costs come on top of an infrastructure deficit currently estimated at $130 billion to $170 billion a year.
Finnover: Africa-based institutions must have access to critical climate funds through financial innovation, hence the need to “finnovate”. Resilient building ultimately saves on infrastructure repair and replacement costs, but greatly inflates upfront expenses. Investments are needed to increase large-scale manufacturing and processing capacity to avoid having to ship raw materials to Asia. Proven financial innovations include public-private partnerships, blended finance, B-loans, green bonds, first-loss equity, insurance and guarantees.
NAIRAMETRICS: During the Africa Investment Forum (AIF 2022), you mentioned that other African countries can develop gas policies just like Nigeria. Were you referring to the National Gas Expansion Program (NGEP)?
Fola Fagbule: I was referring to the various efforts made by Nigerian governments over the years to promote natural gas exports, gas-to-power projects and gas-based industrialization, which are now culminating in additional policy efforts like the NGEP to expand domestic use of LPG as clean cooking gas and CNG for distributed power generation.
There is still a lot to do. But Nigeria has had a lot of success with landmark projects such as the Nigeria Liquefied Natural Gas (for exports), Compressed Natural Gas (CNG) and Liquefied Petroleum Gas (LPG) plants for industrial and domestic use, multiple gas pipelines for regional export and domestic consumption (West). Africa Gas Pipeline and the Abuja-Kaduna-Kano pipeline), ammonia and petrochemical projects like Dangote and Indorama, to name a few. Taken together with the NGEP, all of these projects aim to improve Nigeria’s utilization of its domestic gas resources for both export and domestic consumption.
NAIRAMETRICS: Given the challenges facing Nigeria – an inflation rate of 20.77%, a declining value of the Naira and a high level of insecurity – how can we still attract foreign investors to the sector natural gas in Nigeria?
Fola Fagbule: The best way to attract investors is to create favorable tax regimes and policy environments for project developers already working in Nigeria. In addition to better fiscal terms and more favorable licensing regimes, developers will benefit from rapid approvals of their various permits and licenses, and government support to make more gas resources available for privately developed projects.
The government, through the Nigerian National Petroleum Company (NNPC) Limited’s interest in various oil and gas leases, is today the major owner of gas reserves in Nigeria. All developers working on gas projects must have access to these gas reserves through gas sale and purchase agreements (GSPAs) for the various projects. The government can work harder and in a targeted manner to provide bankable GSPAs to credible developers across the country who are working on multiple gas projects.
NAIRAMETRICS: Based on your level of exposure and experience, what do you see as the opportunities that currently exist in the energy sector in Nigeria?
Fola Fagbule: AFC is already working on several gas utilization and monetization projects in Nigeria, including in the areas of petrochemicals, ammonia, liquefied natural gas, gas processing, storage and gas-power plants . There are many opportunities in the energy sector in Nigeria, given our significant natural gas resources and strong global and domestic demand for value-added products using gas as a feedstock.
NAIRAMETRICS: Do you think Nigeria’s energy transition plan is capable of meeting Nigeria’s energy challenges in the long term (until 2060), taking into account local realities such as a change of government, etc.? ?
Fola Fagbule: Nigeria must implement a strategy that addresses our domestic energy access deficit while maximizing the international energy export opportunities that exist in the world today. ETP will require targeted implementation at multiple levels within the ecosystem, not limited to elected government officials, but also private sector actors, regulators, international development partners, financiers and finance partners global.
NAIRAMETRICS: Nigeria is primarily into artisanal mining, how do you move from that to large-scale mining, and even processing of critical minerals, to play a bigger role in the global energy transition?
Fola Fagbule: AFC is the leading investor in industrial-scale mining investments in Nigeria. The Segilola Gold Mine in Osun State, southwestern Nigeria, about 120 km northeast of Lagos, is Nigeria’s first large-scale gold mine. The mine is currently in commercial production and is expected to produce 80,000 to 100,000 ounces (oz) of gold in 2022.
AFC has committed to invest $86 million in the construction and production of the Segilola gold mine through a combination of senior secured debt, equity and funding streams. The investment has opened up the Nigerian mining sector (a top priority for the Federal Government) to Foreign Direct Investment (FDI), thus reviving the relevance of the Nigerian mining sector and encouraging the diversification of the economy.