Nigeria’s LNG expansion could lead to stranded assets, prolong fossil fuel dependence

By Abubakar Yunusa

A new report by the International Institute for Sustainable Development (IISD) says expanding the production of liquified natural gas (LNG) could put Nigeria in a “precarious economic situation”.
The report added that this could prolong the country’s dependence on fossil fuels and leave it with “stranded assets” as international demand for gas falls.
The report titled ‘A Balancing Act: Considerations for the expansion of liquified natural gas projects in Nigeria’ was released on Thursday.
It warned of a high likelihood that any scale-up of LNG production could leave Nigeria with “unprofitable assets”, as well as reduced financing for clean energy sources.
The report said Nigerian LNG exports may struggle to compete in the global market after 2030, adding that replacing oil revenues with LNG may not generate the expected income.
It said LNG expansion should not come at the expense of addressing inequality, energy access, and socio-economic challenges.
The report concluded that Nigeria must “realistically manage” its gas ambitions, align with transition plans, and prioritise community development in gas projects.
“Facing declining oil revenues, economic turmoil following the COVID-19 pandemic, and European demand for LNG, Nigeria has moved to address its revenue shortfall by significantly scaling up LNG production,” the report stated.
“Oil revenues have long underpinned the Nigerian Treasury, accounting for about two-thirds of government earnings and 90% of its foreign exchange income.
“However, as production has fallen due to lower levels of investment and regional unrest, there is renewed focus on LNG, which provides considerably smaller, albeit growing, revenues.
“In 2023, LNG revenues reached N74 billion, accounting for around 7% of total government revenues. As of 2022, Nigeria was already the sixth-largest LNG exporter worldwide, with a 6% market share.
“As oil contributes less to revenues, the government plans to build on its existing LNG developments, with ministers declaring 2021 to 2030 the decade of gas.
“Currently, Nigeria has six operational LNG terminals; nine more are proposed, with LNG construction investment totalling N28.3 trillion.
“But to replace Nigeria’s falling oil revenues, LNG exports would still have to increase by an order of magnitude. Such a scenario would require sustained international demand and high prices for LNG.”