Nigeria, often called the “Giant of Africa,” possesses one of the world’s largest reserves of natural gas, with over 208.83 trillion cubic feet (Tcf) of proven reserves – Nigeria: proved natural gas reserves 2023 | Statista.
Despite this immense potential, Nigeria’s industrial and commercial sectors have historically relied on expensive, imported diesel and petroleum products for its energy needs.
These traditional fuels have contributed to high operational costs and environmental concerns. However, with the Federal Government’s renewed focus on domestic natural gas utilisation, Nigerian businesses can now benefit from this more affordable, efficient, and cleaner energy source.
As Nigeria’s economy continues to grow, particularly in critical sectors like manufacturing, telecommunications, transportation, and agriculture, the demand for stable and cost-effective energy has become more crucial. Natural gas is emerging as a critical solution, offering significant benefits for businesses seeking to enhance operational efficiency while reducing energy costs. With expanding gas infrastructure and distribution networks nationwide, more companies can now embrace natural gas as for their diverse energy needs.
The Economic Advantages of Natural Gas Adoption
One of the primary reasons Nigerian businesses are turning to natural gas is its cost-effectiveness. Historically, businesses have relied on diesel generators and other imported fossil fuels, which are subject to volatile global price fluctuations.
Diesel prices, for instance, have experienced significant spikes in recent years, rising by over 100%. The effects of this surge in Diesel prices have further trickled into increased production costs and reduced profits margins. By contrast, natural gas prices have remained stable, providing businesses with a more predictable and affordable energy source.
According to reports, industries that rely on natural gas for power generation report energy cost savings of up to 70% compared to diesel generators. This cost reduction is especially crucial in Nigeria, where businesses face high operational expenses due to inconsistent supply from the national grid, persistent inflationary pressures, and the resultant high interest rates.
With limited and more often disruptive electricity supply, industries rely on costly, inefficient diesel-powered generators to maintain operations during outages, significantly increasing energy costs.
However, natural gas is available and reliable, with assured supply security and long-term price stability. This enables businesses to mitigate financial risks associated with unpredictable fuel costs; allows industries to plan their energy budgets more effectively, thereby enabling better economic management and planning.
With a renewed focus on expanding infrastructural investments for the increased domestic utility of natural gas in key industrial zones, there is renewed optimism for industrialisation and economic growth in the real sectors.
Its cleaner combustion properties mean that natural gas-powered equipment experiences less wear and tear compared to machinery running on diesel or fuel oil. As a result, businesses experience reduced maintenance costs and longer equipment life spans. According to the Manufacturers Association of Nigeria (MAN), companies in the manufacturing and food processing sectors that have transitioned to natural gas have reported reduced maintenance costs.
Enhanced Operational Efficiencies
Another significant benefit of natural gas adoption is the improvement of operational efficiency, particularly in sectors that require a constant and reliable energy supply. Natural gas-powered electricity generation plants operate more efficiently than traditional diesel generators.
According to the Department of Petroleum Resources (DPR) – now the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), natural gas turbines can achieve efficiency rates of over 50%, compared to diesel generators, which often operate at below 30% efficiency.
This enhanced efficiency translates into lower fuel consumption for the same energy output, allowing businesses to optimise energy use and reduce waste. Industries such as telecommunications, manufacturing, and transportation, which depend heavily on continuous energy supply, have found that switching to natural gas can significantly reduce costly operational disruptions caused by power outages. A report by PwC Nigeria on energy reliability showed that industries in Lagos and Port Harcourt that adopted natural gas experienced a 25% reduction in energy downtime, leading to increased productivity and improved operational performance.
Natural gas also offers scalability, making it suitable for businesses of all sizes. Whether used for electricity generation, heating, or industrial processes, natural gas can be adapted to meet the specific energy needs of various industries. Large manufacturers such as Dangote Cement and Flour Mills of Nigeria have integrated natural gas into their operations, and these companies have reaped significant benefits from the switch in terms of cost savings and maintaining consistent production levels.
Sustainable and Reliable Energy Supply
Nigeria’s energy sector is undergoing a transformation as the government and businesses seek more sustainable solutions to meet the country’s growing energy demands. Natural gas is a pivotal part of this transformation. Natural gas emits significantly fewer greenhouse gases than diesel and coal, making it a cleaner and more environmentally friendly option.
For businesses conscious of their environmental impact and seeking to comply with stricter global and local regulations, transitioning to natural gas provides a clear pathway to reducing their carbon footprint.
The Nigerian Ministry of Environment has highlighted that industries adopting natural gas can reduce carbon emissions compared to diesel. This reduction in emissions is particularly significant as Nigeria works to meet its commitments under the Paris Agreement and reduce its overall greenhouse gas emissions. For businesses, the shift to natural gas improves environmental performance and enhances their reputation and marketability, especially among international partners and consumers prioritising sustainability.
The Axxela Advantage
Axxela Limited, one of Africa’s leading gas and power companies, has positioned itself as a foremost player in the natural gas space and innovative energy solutions provider on the continent, driving the adoption and utilisation of natural gas across industries. Axxela has been instrumental in expanding Nigeria’s natural gas infrastructure through its subsidiaries, Gaslink Nigeria Limited, Central Horizon Gas Company, Transit Gas Nigeria Limited, and Gas Network Services Limited. Over the past two decades, Axxela has enabled the switch to natural gas for over 200 industrial companies, significantly helping these businesses to reduce their energy bills and carbon emissions.
Axxela has developed over 360km of natural gas pipelines, across key industrial clusters within the Greater Lagos Area, Lagos-Sagamu, Trans-Amadi in Port Harcourt, West African clusters and the recent 5km commissioning for Eko Atlantic, bringing Victoria Island-Lekki into the natural gas pipeline network coverage.
These initiatives have marked significant milestones for domestic gas utilisation. Axxela’s leadership in infrastructure development and natural gas advocacy serves as a trailblazing effort for other players in the energy sector, promoting the economic benefits of natural gas and its environmental advantages.
This is in firm alignment with Federal Government drive to transform Nigeria into a gas-powered economy amongst other broader energy initiatives such as the Nigerian Gas Master Plan and the Decade of Gas initiative. These programmes aim to ensure a more sustainable energy mix, reduce dependence on diesel, and secure a reliable energy supply, which is crucial for industries like manufacturing, telecommunications, and data centres that operate around the clock.
For businesses considering the switch, click here to explore a simple calculator on the cost-benefit analysis of switching to natural gas.