Nigera’s Choice: Two Paths Unfold Ahead- A Future Blue & Brown or One Red & Green?
Nigeria in 2013 is a state in transition, a fast growing population and a booming economy blessed (or cursed for that matter) with massive reserves of energy resources both conventional and alternative. Its a nation of contrasts: lower middle income and deeply impoverished, a seat of ancient empire and a renewed regional power, looking west and looking east, a united federal republic and a state fractured by culture and religion.
In energy terms, Nigeria has often been used as the penultimate case of the resource curse. That is, a state which has found vast reserves of natural resources (typically fossil fuels) around which it may build an economy founded on extraction. So the logic goes, the state then becomes dependent upon exports for its economic (and social) well-being. This may especially be the case for states which lacked strong and transparent democratic governance before resource exploration. To say that Nigeria was among this group is not to condemn it to a deterministic pessimism. At the roots of the problem Nigeria may find solutions for it future.
To be more precise, two potential solutions- two different paths Nigeria may take as it continues to develop over the first half of the 21st century. On the one hand is a vision of international competitiveness driven by strong institutions and fossil fuel market liberalization. On the other, a more mixed approach using an oil and natural gas based sovereign wealth fund to forge a green social democracy.
Both apply a multitude of different assumptions grounded in different interpretations of contemporary Nigeria. Neither can be truly predictive, instead providing two useful and contrasting scenarios for a successful future around which the state may develop its long-term strategic planning. Much will be based on utilizing its fossil fuel reserves for export, the question is of the process involved and the where and how of spending the accumulating capital. Though an oversimplification, the people and the decision-makers of Nigeria face an evolving choice on the trajectory of this strategic policy; they must decide between neoliberal petrol-capitalism and fossil-funded green social democracy.
There are many challenges ahead for Nigera on either of the two paths but foremost among its hurdles is the question of its democratic institutions and effective governance. There’s a long road ahead. Unfortunately the modern Nigerian democracy wasn’t developed until 1999 when elections were held after decades of near complete military junta rule, and though progress has been made the democratic legitimacy of these elections continues to be questioned. In Transparency International’s 2012 Corruption Perception Index, Nigeria was ranked among the most corrupt and opaque governance systems- 139 out of 176 countries and territories.
Improvements in the rule of law and transparency in governance as well as inroads on social welfare, particularly education and health, will go far in rectifying this. The country has a deep source of natural capital on which to draw in making this happen. At the same time it had 158 million people in 2012, a massive and growing labor force into the future. Nigeria is rich in energy reserves, including in 2011 an estimated 37.2 billion barrels of proven oil reserves, it just desperately needs to develop the infrastructure to harness them (including for renewables). So then it need look no further than the two paths diverging ahead.
The first of these has largely been developed by international financial institutions such as the World Bank and IMF, and is a vision of healthy liberal democracy and privatization driven by a booming young labour market. In fact, Nigeria has been named one of the 11 Global Growth Generators (3Gs) which will drive future development of the global political economy. Not only is it estimated that Nigeria’s per capita GDP will grow by 6.9% p.a. from 2010-2050 but that by 2040 Nigeria will have entered the top ten largest economies in the world at number eight (usurping Germany). Essentially, global interstate GDP is expected to converge, with the rest of the world matching and then exceeding Western Europe, North America and Japan. This is based upon a number of expectations and assumptions, specifically that 3G nations “…start poor and young, open up, adopt a market economy, don’t be unlucky and don’t blow it”. With the right market and policymaking structure organizations such as Citigroup and PricewaterhouseCoopers argue that Nigeria can tap its vast source of cheap labor to climb the ladder of international competitiveness via energy production. Fundamentally this about using the oil wealth to develop and sustain long-term productivity growth in every major 2050 projection, particularly in fostering strong human capital and a secure power sector. Its a path colored blue and brown.
The second of these is as the heart of Nigeria’s burgeoning market for renewables and the example of Norway’s oil sovereign wealth fund (SWF). Nigeria has massive potential for renewable energy development, particularly with solar. Its decision makers fully intend to capitalize on that. Nigeria has set ambitious renewable electricity generation targets through its 2006 Renewable Energy Master Plan and 2010 admission to the International Renewable Energy Agency (IRENA). Specifically, by 2030 it intends to generate 20% of its electricity from renewable sources and 4GW of solar photovolatic capacity by 2025. In reshaping its society and economy, Nigeria can look to Norway for inspiration. Norway has built its modern political economy and in many ways its entire place on the global stage around its SWF. A key function of this $650 billion fund has been in its requirements that investments be made in areas such as clean energy, water management and environmental technology. In fact, Norway’s SWF mayexemplify a pathway forward for climate policy around the world, allowing countries dependent on SWFs and potentially trapped in the resource curse to use fossil fuel reserves to fund sustainable transitions. Nigeria could be foremost among them, using the capital provided by oil and gas exploitation to fund rural electrification and a low carbon micro-grid system. Its a path colored red and green.
In the road ahead Nigera faces a fork, the blue and brown of neoliberal petrocapitalism off to one side and the red and green of fossil-funded renewables social democracy to the other. The choice may come to define not only the future of Nigeria’s energy system, but the evolution of the global political economy itself.
– Miles Ten Brinke, MSc Energy Policy