A Balancing Act

Nigeria’s economy remains heavily dependent on oil exports, but output has fallen in recent years. There is increasing focus on LNG in Nigeria, which is already the world’s sixth largest LNG exporter, with a 6% market share in 2022 and an annual production capacity of 22.5 million tonnes. In fact, the government has described 2021–2030 as the “decade of gas,” signalling its intent to focus on this resource. However, LNG production has been marked by conflicts, theft, and risks around the transport of gas, fuelling concerns about the industry's impact on local communities. In addition, environmental issues include gas flaring, greenhouse gas emissions, and health issues associated with emissions.

Despite increased demand for LNG in Europe due to Russia's supply reduction, long-term demand for LNG is not certain. Attempts to substitute declining oil revenues with LNG exports may not be successful due to uncertain future demands for LNG in the global marketplace—and more investments will be required to get the LNG ready for export over 5 to 10 years before any revenue can be realized. Efforts to expand LNG may see producer fossil fuel subsidies rise, stifling efforts for true economic diversification. Moreover, a major effort to expand Nigeria’s LNG exports presents a risk of stranded assets as European demand for gas declines in line with climate targets.

Global trends favoring clean energy may clash with increased LNG investment. The shift to a low-carbon world could leave Nigeria with another fossil-based income source determined by external global price fluctuations. Increasing investments in LNG increases the potential impact of asset stranding and may undermine the broader development interests for Nigeria.