Over the last 5 years, how has the energy mix changed, and what have been the key drivers?

In Nigeria currently, the renewable energy mix is about 70% thermal and 30% hydro. There has not been a significant change in terms over the last 5 years. However, there are plans to develop several new hydropower projects including the 3 GW Mambilla Hydro Project.

In addition to the above, there are several other renewable energy projects in the country mainly in the form of solar. Most of these are off-grid projects dedicated to individual customers. The Federal Government of Nigeria is determined to ensure that the country's power sector is more fully diversified and not dependent on any single energy source. To this end, the NBET, Federal Ministry of Power, Works and Housing and 14 project developers, in July 2016, signed power purchase agreements (PPAs) valued at USD1.76 billion to generate 1125 MW of solar power connected to the grid. The signing of the PPAs is a clear indication of the government's intention to tap into the renewable energy potential of the country.

There is presently very little attention paid to wind energy in Nigeria. However, a 10 MW wind power plant in Katsina State is expected to be commissioned in 2021 despite several years of delay in its completion. In addition, there are plans for the construction of a 100 MW wind power farm in Plateau State.

What is the outlook for the energy and natural resources sector in the next 5 years? In particular:

Key policy decisions

The Presidential Power Initiative (formerly known as the Nigeria Electrification Roadmap) is a comprehensive program for the development of the entire power value chain, including generation, transmission and distribution.

Nigeria currently has installed generating capacity of about 14 GW but less than 5 GW of operational capacity on the grid due to inadequate transmission and distribution infrastructure as well as gas constraints inhibiting thermal power plants. The Presidential Power Initiative is a strategic plan that aims to revamp and develop the electricity infrastructure to increase power generation to 25 GW by 2025. This is done in cooperation between the Governments of Nigeria and Germany. Siemens is to help facilitate the financing for the project through the German Export Credit Agency (Euler Hermes AG) and other ECAs.

For the purposes of this project, the Nigerian government signed an implementation agreement in 2019 with Siemens. Also, it has set up the FGN Power Company, through which the government intends to participate and execute the projects under the initiative. While the full scope and remit of the company is unclear, it is assumed that the government may provide funding under the initiative through this vehicle.

Main policy challenges

Some of the challenges include funding constraints, gas supply constraints for thermal power plants and other legacy issues such as losses from collections as well as insurgency/insecurity in certain areas of the country where generation, transmission and distribution assets are located.

The anticipated role that renewables and/or new technologies will play

As mentioned above, it is expected that renewables will play an important part in the future energy mix of Nigeria.

Also, there are proposed hydro and potential wind projects that are expected to make significant impact in the energy mix, as well as solar powered mini grids and off grid projects.

What are the key investment opportunities in the energy and natural resources sectors over the next 5 to 10 years?

It is expected that the passage of the proposed Petroleum Industry Bill will lead to significant changes in the oil and gas sector and could afford new opportunities for investments in gas (which provides feedstock for 70% of total power generation in Nigeria). Also, with the drive to reduce carbon emissions, there are vast opportunities for investment in solar. Presently, it appears the short to medium term opportunities may be in smaller off-grid projects, while in the long term, larger solar projects and possibly wind projects may also become commercially viable.

With particular focus on sustainability, and on reducing carbon emissions, how will the energy and natural resources landscape change over the next 5 to 10 years?

Nigeria will undoubtedly adopt greener sources of energy in its mix. It is expected to be mainly in the form of solar. Nigeria could generate over 50% of required power by deploying solar PV panels on just 1 percent of Nigeria's land mass (estimated at 923,970 km2). However, there will also be further development of thermal power plants in view of the abundant gas reserves in-country. Similarly, hydro power will take a higher percentage of the energy mix with several proposed hydro projects such as the 3 GW Mambilla hydro project mentioned above.