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ASSESSING THE FUTURE OF NIGERIA’S ECONOMY: IGNORED THREATS FROM THE GLOBAL CLIMATE CHANGE DEBACLE

Jekwu Ikeme

jekwu@yahoo.com

Developing World Built Environment Research Unit

De Montfort University

Leicester UK

Policies adopted globally to mitigate climate change (global warming) will have negative implications for specific sectors, such as the coal, oil and gas industries. Nations relying exclusively on any of these sectors will thus be gravely affected by the climate change abatement process. Few countries stand more threatened by this development than the oil-producing Nigeria. Nigeria's economy today remains monocultural and heavily dependent on the oil sector, which accounts for around 80% of government revenues, 90-95% of export revenues, and over 90% of foreign exchange earnings. The extent of this heavy dependence in monetary terms is signified by the fact that the country earned in excess of US$200 billion from oil exports between 1970 and 1990 (Adenikinju, 1998). Currently, the Nigerian government is in the process of lessening this unhealthy dependence on crude oil through its development of the natural gas industry. Nigeria is believed to have an estimated 124 trillion cubic feet (Tcf) of proven natural gas reserves - 9^th largest in the world (EIA, 2001). Due to a lack of gas utilization infrastructure, Nigeria currently flares 75% of the gas it produces and re-injects 12% to enhance oil recovery. But the development of the natural gas sector is intended to stem this wastage as well as further expand the government’s revenue base. The recent agreement between the government and the oil companies puts the end of all gas flaring in Nigeria at 2004. Despite this diversification attempt, however, Nigeria’s economy stands to remain dependent on fossil fuels. This is particularly worrying because fossil fuels are the chief culprit implicated in the environmental issue of climate change phenomenon commonly referred to as global warming. Our analysis will benefit from a review of the connection between fossil fuels and climate change.

Human economic activities has, in the last 100 years, contributed to an increase in the concentration of ‘greenhouse gases’ in the atmosphere leading to the ‘enhanced’ greenhouse effect (IPCC, 1996, 1998) which in turn is expected to result in climate change, arguably the most important and dangerous, and certainly the most complex, global environmental issue to date (Holdren, 1992; Kandlikar and Sagar, 1999; Hamilton, 1999). It is estimated that extraction and burning of fossil fuels is the source of about 70-90% of anthropogenic carbon dioxide emissions (Strong, 1992; Edge and Tovey, 1996), the most important greenhouse gas. Greenhouse effect is a natural phenomenon. A natural mix of certain greenhouse gases reside in the atmosphere. They allow the short-wave radiation from the sun to penetrate the atmosphere, but absorb the lower wavelength energy which is re-radiated from the Earth's surface (Clayton, 1996; Houghton, 1998). Because these greenhouse gases are good absorbers of heat radiation coming from the Earth's surface, they act like a blanket over the Earth's surface, keeping it warmer than it otherwise would be. Enhanced greenhouse effect, on the other hand, is not natural. It refers to the changes in the earth's radiation balance due to the anthropogenic accumulation in the atmosphere of radiatively active greenhouse gases. In addition to carbon dioxide, other greenhouse gases include, methane, nitrous oxides, tropospheric ozone and chlorofluorocarbons. Their effect is to accelerate the warming effect beyond acceptable levels. Models project that, if current trends in anthropogenic GHG emissions continue through 2030, the earth will experience an average rise in temperature ranging from 34.7o to 40.1o F (1.5o to 4.5o C) (Porter and Brown, 1991). Even higher warming is considered possible because of feedback process (Lashof, 1989). The projected impact of this on environmental stability and life on earth is better imagined than experienced. They include changes in the global climate and the consequent disruption in the temporal and spatial distribution of temperature, precipitation, evapo-transpiration, clouds and air currents as well as the consequent shift in the vegetational belts; melting of the polar ice-caps; rise in sea level which could adversely effect low-lying areas, and the synergy among these discrete effects. Some or all of the above have implications for fresh water resources, agriculture and food supply, natural ecosystems, biodiversity and human health (Ayres and Walter, 1991; IPCC, 1996). Many scientific uncertainties, however, remain concerning the timing and degree of the enhanced greenhouse-effect. Despite these uncertainties, the balance of opinion suggests that climate change is real and favours early action in tune with the precautionary principle. This has spawn into various abatement measures by the international community.

Currently action to stem the emission of greenhouse gases as encapsulated in the Kyoto protocol is restricted to the developed countries or Annex 1 countries. This requires the so-called Annex 1 countries to cut their greenhouse gas emissions by 5% compared to 1990 levels by the period between 2008-2012. Nigeria which belongs to the non-Annex 1 countries is thus not required to take any abatement action now, rather the impact of global warming on Nigeria for which we are concerned in this paper stems from the threat to Nigeria’s economy posed by the response measures being adopted by the international community. Nigeria stand to suffer income losses when the global community begins to substitute renewable energy alternatives for fossil fuels. Given the exclusive reliance on fossil fuels for foreign exchange and the predominant focus on further expansion of this sector of the economy by the Nigerian government, the impact of the global shift away from fossil fuels is bound to cripple the Nigerian economy. As it stands, the Kyoto Protocol, if fully implemented, would lead to a dramatic loss of revenue for oil-exporting countries, as a result of a heavy reduction in demand for petroleum. Independent studies estimate the loss at tens of billions of US dollars per year for OPEC's members of which Nigeria is one, and up to 25% reduction in the OPEC’s revenues by 2010. Such a heavy decline in income would strike at the very heart of Nigeria’s economic and social infrastructures, causing a radical scaling down of development plans and entailing huge cutbacks in such vital services as education and health care. It would also affect its ability to invest in future production capacity.

Already developed countries are channeling huge resources into research and development of alternative and renewable energy sources that would enable the transition away from fossil fuels, signaling their resolve to transit away from the fossil fuel economy. Likewise, government policies and regulations are providing incentives to the private sector to expedite this shift. For instance, Denmark put in place an energy tax levies aimed at restructuring the power markets by raising a levy on conventional energy supplies, and refunding it to renewable energy power producers in the private sector (EWEA, 1991). Street and Miles (1996) also reports that prior to 1989, private developers in Denamrk received a capital subsidy of up to 30% for each wind turbine erected in place of the conventional fossil fuel-based power generation facility. Likewise in Netherlands, under the subsidized market introduction programme (IPW) introduced in 1986, investment costs for wind power were subsidized by up to 40% and this translated into an increase in capacity to 120 MW of installed wind power in 1996 (Street and Miles, 1996). In the UK, the non-fossil fuel obligation (NFFO) requires regional electricity companies in England and Wales to secure specified amounts of electricity from renewable energy sources (Street and Miles, 1996). This demonstrates that actions are already being taken to curb the use of fossil fuels in developed countries.

Despite this huge implication of climate change response measures for Nigeria’s economy, it is appalling that there is no visible demonstration of the preparedness of the government to tackle this issue. The greatest cause for concern is that the blueprint for Nigeria’s development Vision 2010 fails to give a mere acknowledgement of the importance of climate change to Nigeria’s economy, let alone stipulate the development strategy with which to tackle it. But the observations above show that the danger signals are clear: Nigeria should either prepare for the issues raised by climate change today or pay a higher price in the future. If one thing alone, the above scenario highlights the importance of evolving a development strategy geared towards “sowing the income from fossil fuels”, in order to achieve sustainable long-term economic development. This should include diversifying the industrial base away from oil dependence, revitalizing the agricultural sectors and developing the infrastructure to accommodate this, in such areas as roads, railways, telecommunications and power-generation. These measures should be supported by investment in human capital — in education, health and social services. Emphasizing on manufacturing and service sector is a development strategy that is long overdue. The contribution of manufacturing to the GDP, which has been declining over the years reaching a level of only about 6 per cent in 1996, has always trailed that from the oil sector. In fact the manufacturing sector is generally underdeveloped and poorly connected to other sectors of the economy. Even the Vision 2010 document recognizes that the sector's utilization of local raw materials is poor at only about 55 per cent of total industrial input and that linkages between manufacturing and other sectors remain weak with the manufacturing sector contributing only about 0.5 per cent of Nigerian's export earrings. This situation must change for Nigeria to be able to diversify its economy away from dependence on fossil fuel extraction.

It is commonly argued that the climate change issue Africa should be paid only minor attention in Africa for three main reasons: (i) Present greenhouse gas emissions from Africa are negligible on a global scale; (ii) climate change is a problem that is largely caused by emissions from industrial countries, and hence, these countries should bear the main responsibility and the major costs of reducing emissions. While the low contribution of Nigeria to climate change might seduce one into advocating for indifference on the part of Nigeria and for the buck to be passed to the developed countries who are the chief culprits historically. A more sober appraisal of the climate change impacts on Nigeria will suggest otherwise. This is because (in addition to the already discussed impact of the global mitigation measures on the Nigerian economy) climate change in itself stands to affect Nigeria adversely suggesting that its mitigation in Nigeria’s interest. Potential impacts of climate change on Nigeria runs the entire sector of the country’s economic, social and environmental landscape. On the economic front the projected impact of climate change on electricity generation and hydroelectric dams stands to cause severe disruptions to economic activity. This threat arises because climate change is expected to bring about a shift in climatic belts resulting in greater aridity in the tropics with huge impacts on energy production and supply. This threat is made more important by the fact that Nigeria relies heavily on hydroelectricity which accounts for over 36% share of its electricity energy sources. The resulting interruptions in power supply due to limitations in available generation capacity in the hydro stations would not only result in waste of national resources, it would also have a significant effect on the industrial/manufacturing sector of the economy as well as the commercial and social activities of the nation.

The social implication of climate change for Nigeria is multidimensional. In the first instance, projections suggest that Nigeria will experience massive “environmental refugee” migration. For a 1-m rise, more than 3 million people are at risk, based on the present population. The estimated number of people that would be displaced ranges from 740,000 for a 0.2-m rise to 3.7 million for a 1-m rise and 10 million for a 2-m rise (Awosika et al., 1992). The most vulnerable is the coastal region of the country. A large percentage of Nigeria’s urban population live in coastal cities. Estimates put the total population living along the coastal zone to about 20 million people which translates into 22.6% of the national population. Similarly, most of the economic activities that form the backbone of the national economies are located within the coastal zone. Coastal areas also form the food basket of the region. Offshore and inshore areas, as well as estuaries and lagoons, support industrial fisheries accounting for more than 75% of fishery landings in the region. This naturally dovetails into the second social implication of climate change which is that of its effect on food security. As populations are displaced and climatic and vegetational belts migrate away from the traditional geographical location, a general disruption in food production is expected to be the outcome.

Environmentally, Nigeria’s climatic regime stands to be severely disrupted leaving its forests and water resources at risk.. Studies show that biological productivity in Nigeria will decrease in the event of global warming (Adesina and Adejuwom, 1994) with an additional consequence of severe fuelwood shortages. Already Nigeria has experienced definite shift in the long-term rainfall mean towards more arid conditions. These climatic changes have had adverse implications for water resources availability for power generation and agriculture. Likewise, Nigeria’s low-lying lagoonal coasts stand threatened by sea-level rise, particularly because most of its major and rapidly expanding cities are on the coast. If sea level rises, inundation could occur along more than 70% of the Nigerian coastline, placing land at risk many kilometres inland (Awosika et al., 1992). In Nigeria, inundation is the primary threat for at least 96% of the land at risk (Awosika et al., 1992; French et al., 1995). With a 1-m rise in sea level, up to 600 km² of land would be at risk. This area includes parts of Lagos and other smaller towns along the coast. The periodic overflow of the Atlantic across the Bar beach bank is an indication of a phenomenon that may accelerate as climate change intensifies and the seal level rise even further.

The above analysis clearly suggest that it will not only be economically beneficial for Nigeria to craft a climate change-response development strategy, but that factoring climate change abatement into the overall economic development plan is also crucial for its own self preservation. Besides, the headroom allowed developing countries such as Nigeria to increase their greenhouse gas emission is only temporary. Nigeria, will inevitably be subjected to the International climate change abatement measures and beginning now to put adequate climate change abatement institutions and regulatory framework in place will obviously be to its benefit. Additionally, globalisation of markets means that SSA nations must compete increasingly with production lines in other countries. As various environmental treaties designed to penalise environmental intensive production of goods and services come into force, Nigeria’s competitive edge may be jeopardized if it fails to apply environmentally sensitive methods of energy abstraction and consumption in its economic development.

In terms of policies for remedying the situation, the key is the diversification of the economy away from oil production as earlier mentioned. This will ensure that the global switch away from fossil fuels and the consequent reduction in fossil fuel demand have little impact on the Nigerian economy and foreign exchange earnings. Also research on climate change and the socio-economic implications for Nigeria is necessary for developing adequate response strategies. Further, study of the science of climate change and its potential impacts on Nigeria is very important for creating awareness and providing the background information for targeting policies adequately. This point is made in view of the recognition that the major constraint to adequate forecasting and formulation of adaptation policies is the paucity of climate data in Nigeria. Long term studies on national and regional climate change in Nigeria should be embarked upon and vigorously pursued. The findings of such studies will be crucial for the formulation of adequate response and adaptation policies such as adequate resettlement programmes for those that may be displaced by climate change.

For reducing its contribution to climate change, the mandate for Nigerian energy planners is to institutionalise its development of energy efficiency and renewable energy with appropriate goals and timetables for increasing the use of renewable energy resources in areas where grid extension is too costly and where opportunities for the use of renewables is economically warranted. This should be accompanied by an inbuilt mechanism for stock taking and reassessment of progress towards the objective. In addition to building institutional framework, Nigeria should also adopt specific regulatory measures. Establishment of comprehensive air quality standards and creation of national energy efficiency codes can furnish the driving force for rapid development of the country’s energy efficiency and renewable energy opportunities. Additionally, policy makers in the country need to end government subsidies for fossil fuels as it impedes the pace of the transition to energy efficiency and renewable energy use. Likewise, market transformation mechanisms similar to that adopted in the developed countries which will encourage more rapid development of its energy efficiency and renewable energy potential should be explored. This objective will obviously benefit from an increase in government-industry collaboration, a key avenue for development rarely explored in Nigeria’s development initiatives.

Finally, increased government participation in the global climate change deliberation in order to negotiate a better deal for Nigeria and Africa is necessary. The suggestion that oil-producing countries should be compensated for their projected income losses in the event of the implementation of the Kyoto protocol and assisted in their economy diversification attempt should be vigorously argued and canvassed. Nigeria can only be sure that its interest is protected in the emergent global abatement strategy if it increases its level of participation. Its participatory capacity in turn will be enhanced by findings from studies and research into various ramifications and dimensions of the climate change issue as suggested above.

To conclude, we have demonstrated that Nigeria can not afford to continue ignoring the potential impacts of the global climate change response measures on its oil-based economy. It was also made clear that though Nigeria should capitalize on the emission headroom afforded it for its low historical contribution to the climate change problem, it is in its interest to begin to introduce measures to reduce its greenhouse gas emissions, due to the negative impacts of climate change on its economic, social and environmental resources. It is imperative that full attention is paid to ways through which the Nigerian economy can be diversified and steered away from fossil fuels both in terms of production and consumption. Only such a strategy will save the country’s economy from certain collapse in the event of implementation of climate change abatement measures.

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