Chap-3

3
Natural Gas Dependence and Electricity
Vulnerability in Nigeria
Abiola AkandeandBabatolaBickersteth
Abstract
Natural gas is becoming the fastest-growing fossil fuel and one of the sources of
electricity generation in Nigeria. This study examines the over-dependence on
naturalgasfor electricity generation inNigeria between1999 and2012. Thestudy
employed the gas supply security index (GSSI) derived from four indicators of
security of gas supply, with a higher index indicating higher gas supply that might
leadtovulnerabilityinelectricity generation.TheresultsrevealedthatNigeriawas
least and most vulnerable in 2000 and 2005 respectively. In 2012, the GSSI was
0.83, making it the second mostvulnerable among the years considered. This was
duetothenation’sover-relianceonnaturalgasforelectricitygenerationaswellas
itsgreaterexposuretogeopoliticalrisks.Oncethereisanydisruptioninnaturalgas
supply,theresultanteffectisfluctuationsinelectricitygeneration.Thestudysuggests
thatgovernmentshouldtargetotherpossiblesourcesforpowergenerationtomitigate
natural gas supply disruption.
3.1 Introduction
Natural gas is the fastest-growing fossil fuel and one of the sources of power
generation in the 21st century (IEA, 2014). With advances in industrialization in
emerging markets, population growth and electricity access continue to increase
62

NaturalGasDependence andElectricityVulnerabilityin Nigeria 63
along withrising livingstandards. Asaresult, global electricityusage isprojected to
rise annually. Electricity demand is rising twice as fast as overall energy use, and is
likely to increase by more than two-thirds between 2011 and 2035. In 2012, 42 per
cent of primary energy used was converted into electricity (IEA, 2014).2
In most
developed and developing countries, electricity is seen as an essential source of
energy for many activities and acts as a catalyst for socio-economic development
(Nakawiro, Bhattacharyya and Limmeechokchai, 2007; Ayodele, 1999; 2001; IEA,
2002 and Samuel and Lionel, 2013). Electricity plays a multi-faceted role in an
economy; it is a productive input that facilitates economic growth process by its
direct influence on the productivity of other factors of production. Its availability
and quality directly affect the degree to which households can enjoy most of the
comfort and quality of living provided by modern society (IEA, 2012). Electricity
availability and accessibility is one of the fastest ways to alleviate rural poverty,
boost productivity among women and accelerate education and health outcomes;
especially among people living in rural and semi-urban centres. Nigeria, being a
commercial and economic stakeholder in Africa, requires about 120,000MW of
electricity to become an industrialized nation (Adenikinju, 2013).3
Gas has been touted as the cheapest and easiest option for power generation.
Moreover,Nigeria isblessed withabundant gasassets withinthe NigerDelta region
whereit isfound in reservoirs orproduced alongwith oilas associatedgas. However,
the Nigerian government has established price controls to keep a cap on gas prices,
making gas prices artificially low, creating market imperfections and negative
externalities. The gas industry has played a significant role in Nigeria’s overall
economic performance having arobust agenda on gas usage which places emphasis
on the use of gas for power generation. Furthermore, its vision of an aggressive gas-
basedindustrial growthwill invariablyboost further growth of electricity demand.
As at 2011, electricity generation from hydropower represented 20.9 per cent of
Nigeria’s total production (Trading Economic, 2014)4
while natural gas accounted
for theremaining 79.1 percent. Electricity productionfrom natural gashas steadily
increased over the years. Many power plants that were built before and during the
ongoing National Integrated Power Plants (NIPP) project to improve electricity
generation in Nigeria are dependent on natural gas as a feedstock.5
As the country
adds new capacities to meet the demand for electricity, the additional capacity
would require a significant increase in natural gas supply for the power sector.
Electricitygeneration in Nigeria isvastly relianton natural gas; thus, ahigh share of
natural gas in power generation raises concerns of security of electricity supply and
could even make the country vulnerable to high gas dependence in its power
generation over time.
Studies (Olomola and Adejumo, 2006; Adedipe, 2004; Adeniyi, 2011; Adeniyi
et al, 2011; Muhammad et al, 2010; Ogundipe and Ogundipe, 2013) abound in the

64 FutureEnergy PolicyOptions:Assessment,Formulation andImplementation
literature which assess oil volatility in Nigeria, but little attention has beengiven to
gassupply securityin thecountry that emphasizes theelectricity sector.This paper
attempts toaddress this gap inthe literature.Thepaperaims toassess theimpact of
natural gas dependence on power generation and how it can make the Nigerian
economy vulnerable over time. Furthermore, the paper analyses how gas supply
security will affect power generation over time, especially since natural gas is the
major feedstock for electricity generation. The paper is divided into six sections.
Following this introduction, section 3.2 presents a range of stylized facts on the
nation’s power h=generation. Following this in section 3.3 is the literature review;
and then section 3.4, which provides the methodology used in the study. Section
3.5 is based on the vulnerability analysis, while section 6 presents the conclusion of
the paper.
3.2 Stylized Facts
Nigeria is endowed with abundant gas reserves but the enormous challenge facing
the country is how to use this resource for economic growth especially in power
generation. Thecountry’s agendaon gasutilization isrobust becauseit placesgas at
the coreof thenation’s powergeneration endeavour.Thus, its vision ofan aggressive
gas-based industrial growth will invariably boost further growth of electricity
demand. Electricity generation in the country currently stands at4,044MW on
account of improved gas supply to generation stations and the rise in the water
levels at the various hydro stations (Business Day, 4 September 2014). The
4,044MW generated as at September 2014, later dropped to 3500MW6
by
16 December 2014 presumably due to shortage in gas supply.
The main source of electricitygeneration in Nigeriahas shifted over time. First,
it was coal that predominated, followed by oil, then hydro and now gas. The
dominance of coal ended in 1997, followed by hydro and natural gas; thus natural
gas has remained the pre-eminent source of fuel for electricity generation (OECD/
IEA, 2014).7
Indeed, natural gas has been promoted as “a noble fuel” for enhancing
electricity generation in the country because it is reliable, available in abundance,
easy to manage, flexible, and more environment-friendly. This has fostered the
greaterinvolvement of government andthe oilcompanies in the developmentof the
gas market in the country. Consequently, a lot of gas projects were developed to
exploit the country’s enormous gas reserves and reduce the large quantum that is
flared. Many gas-to-power plants were built and the ongoing National Integrated
PowerProjects (NIPP) wereinauguratedto improveelectricity generationin Nigeria
using gas as feedstock.8
Therefore, electricity production from natural gas has increased steadily over
the years, rising from about 5.94 per cent in 1971 to 63.3 per cent in 2011 (CIA,
2014). Nevertheless, there seems to be a real challenge with supplying gas to the

power plants. For example, gas pipelines and infrastructure are being sabotaged
and vandalized continually just as low gas prices and technical faults further
constrain the power plants. Also, there are uncertainties and increasing regulation
around gas prices. The consequence is a significant drop in electricity generation as
shown in the power sector polls that NOI Polls conducted in November 2014. The
surveyshowsthat 63 percent ofNigeriansreceivedlessthanfivehoursof continuous
power supply daily,while the majority (72 per cent) spent alot more on alternative
energy sources (Vanguard, 24 July 2013; 28 January 2014).9
Figures 3.1and 3.2 complement eachother in reporting the sources of fuel used
to generate electricity in the country. It also reveals the transitional trend over the
years. Figure3.2 showsthat coaland hydroweretherespective dominant sources in
the 1970s and 1980s. Then came the era of oil which ended in 1997, thereby paving
the wayfor natural gas to dominate the scene. Thus, coal, oil, gas and hydro sources
accounted for0.1 percent, 13.7percent, 53.7per centand 32.5 percent, respectively,
ofpowergenerationin 1990.By1993,coalwasno longerusedforelectricity generation
in the country while the share of oil and gas fell to 13.5 per cent and 48.1 per cent,
respectively. This automatically raised the share of hydro source of energy to 38.4
per centin the same year. Another dramatic turn was witnessed in 1997when oil
accounted for 0 per cent of power generation. This reduced the major sources of
electricitygeneration from four totwo,namely,gasandhydro, thus exerting pressure
on these remaining twosources which accountedfor 80.3 per cent and 19.7per cent,
respectively, in 2012 (EIA, 2014).
Figure 3.1. Nigeria Generation Electricity Fuel Sources (1970-2012).
Source: OECD/IEA, 2014.

Naturalgasistraditionallyusedmostlyforcooking andheating intheresidential
and commercial sectors. In the industrial sector, fertilizer plants use natural gas as
rawmaterial,just asthepowersector usesit forelectricity generation.Theelectricity
sector is among the key users of natural gas, accounting for 53 per cent and 80 per
cent of natural gas consumption in 1990 and 2012, respectively (IEA, 2014). This
huge share of the electricity sector is attributed to government policies which gave
it priority in gas allocation in Nigeria (Ige, 2014).
It wasobserved thattheelectricitysectorhasshown fastergrowth ingasdemand
during the post electricity reforms period and the same has been attributed to the
failure ofelectricity markets.Thepowersector isby farthe largestuser ofnatural gas
with around 40 per cent of global gas demand as the fuel contributes to meeting
incremental power demand and produces less CO2
than coal. Industrial sector uses
roughly 24 per centof totalgas consumption and theresidential/commercial sector
uses 22 per cent. Other uses include energy industry consumption which accounts
for about 10 per cent (IEA, 2014).
Figure 3.2. Share of Fuel Sources for Electricity Generation in Nigeria (1990-2012)
Source: IEA, 2014
As in most developed countries, natural gas is seen as the fastest global
commodity for generating electricity owing to its attributes of environmental
friendliness, high efficiency and least cost (Cabalu and Manhutu, 2009; BP, 2014).
This has made other sources of generation highly expensive compared to natural
gas. Natural gashelps to drive the electricity sectorin Nigeria;hence, thenation has
built her electricity base on a mono-fuel supply mix with the commodity resident
in the most fragile and volatile zone – the Niger Delta region (this is prior to the
adventofBokoHaraminNigeria).Thezoneis alsocharacterizedbyincessant pipeline

vandalism which has resulted in fluctuations in electricity supply in Nigeria, thus
raising concerns for gas supply security.
Nigeria has failed to maintain a balanced electricity mix as compared to other
gas exporting countries. Figure 3.3 reveals the share of electricity mix in the Gas
Exporting Countries Forum (GECF). It reveals that Russia has the most balanced
electricitymix, followedby Iran. Both Nigeriaand Egypt have themost imbalanced
electricity mix and both have a disproportionate dependence on natural gas for
their electricity supply (Adegun, 2014).
Figure 3.3. Electricity Mix of the Selected Natural Gas Exporting Countries
Source: Adegun (2014) Wikipedia (list of power plant, 2014)
3.3 Literature Review
Over the past decade, much of the work done on energy security has focused on oil
and has been carried out mainly in developed countries. However, of the few ones
done in Nigeria, most used descriptive analysis while others placed emphasis on
energy as a whole. The gap thus created by this analytical method and the area of
emphasis has necessitated this study.
Bhattacharyya et al (2008) examined the electricity capacity expansion in
Thailand, an analysis of gas dependence and fuel import reliance. They adopted the
traditionalelectricitycapacity planningusingtheWienAutomaticSystem Planning
version IV. They found that high gas dependence in power generation makes the
Thai economy vulnerable over time.
Cabalu (2009) similarly examined the indicators of security of natural gas
supply in Asia (Japan, Korea, China, India, Singapore and Thailand). He found that
both India and China are moderately less vulnerable to gas supply disruptions
because they produced gas domestically as against other countries that relied on

imported gas for energy generation. Also, the two countries have a balanced energy
mix such that the share of natural gas as fuel source is relatively small compared to
other countries.
Sonya (2012) examined gas supply security for selected European countries
(UK, Germany, Spain,Ireland, Netherlands,France, Italyand Greece).Theresearch
adopted gas supply security indicators such as gas intensity, net gas imports
dependency and domestic production to consumption and geopolitical risks for all
the countriesin 2000 and 2010. Also, it explored hownatural gashas evolvedfor the
selected countries over the years. The research found that UK had the highest level
of gas supply security in 2000 while the pendulum swung to Netherlands by 2010.
During the period of study, France, Italy and Greece had improved in terms of gas
supply security while Ireland remained highly vulnerable and most susceptible
among all the countries under study.
Cabalu andAlfonso (2013) examined theenergy securityin sixAsian countries10
using agas supply security index that cut across 1996 to 2009. Theyfound out that
both China and India are the least vulnerable to natural gas security. This can be
attributed to the fact that both countries produced natural gas domestically and it
accountedfor aminor shareof their energy mix as comparedto othercountries. The
over-reliance and huge exposure of Thailand electricity sector to natural gas made
the country the most vulnerable with greater exposure to geopolitical risks in the
country.
Borok et al (2013) examined energy security in Nigeria with emphasis on oil.
Theyarguedthat oilandgasarevitaltotheNigerianeconomy becausethey accounted
for about 80 per cent of government revenue,90 per cent of exports and90 per cent
foreign exchange earnings. They evaluated the challenges facing the oil and gas
sector in terms of its availability, accessibility and utilization using a descriptive
analysis. In similar view, Agbaeze et al(2014) explored Nigeria’s dependency on oil.
They adopted descriptive analysis and argued that Nigeria’s economy is highly
volatileto internationaloil priceshocks becauseoil constitutesthe bulk of Nigeria’s
oil export, revenue and foreign earnings.
Biresselioglu et al (2014) investigated the natural gas supply security in 23
importing countries11
from different regions of the world. They employed the
principal component analysis (PCA) to evaluate the gas supply security index.
They focused more on two supply securities for all the selected countries on yearly
basis between 2001 and 2013. They found that the greatest consumers of gas by
volume and thegreatest dependence on imports are not certainly the most exposed
to supply security shocks. The results reveal that the most natural gas import-
dependent countriesarealsothe securecountries, whichare Spain,France, Belgium,
Italy and UK, while Brazil, Mexico and the US are the less secure and have the
highest levelsof importdependence byasinglesupplier ofnatural gas. Furthermore,

Hungary, Slovakia, UAE, Iran and Finland are the least secure countries. They
ascertained that for the period under study, Spain and France remained the most
secure countries and concluded that diversification has a great impact on natural
gas supply security.
Kamsamrong et al (2014) examined an assessment of energy security in
Thailand’s power generation. They employed the ESSI and found that coal power
plants produced the highest emission which raised the unit cost of electricity.
We have found from the reviewed literature that most studies were done in
developedcountries withscanty worksin developingcountries, andmost especially
in Nigeria. The few works done adopted descriptive analysis, to the best of our
knowledge. The over-exposure of the electricity sector to natural gas has raised
concerns and necessitated this study.
3.4 Methodology
The literature on oil shocks in the 1970s and 1980s and the recent dwindling in oil
prices have revealed how vulnerable the world’s economy could be to supply
disruptions and oil price fluctuations. The Nigerian electricity sector is vulnerable
to disruptions caused by insufficient gas supply, vandalism, technical faults and
increasedinsecurity in the NigerDelta by limiting thecontinuous supply of natural
gas to the electricity sector. This study employs the gas supply security indicators
(GSSI) as postulated by Cabalu (2009) and has been widely used by different
authors (Bhattacharyya et al, 2008; Sonya, 2013).
GSSI provides combined quantitative indicators which are easy to compute,
making it a preferred method. It also captures the main components of gas supply
security and takes into consideration the interactions and interdependence among
the various indicators. Each of the indicators allows for aggregation to create a
composite indicator (GSSI). It is derived as the root mean square of the scaled
values of four indicators of security of gas supply (Gnansounou, 2008). These
indicators are gas intensity (G1
), gas dependency (G2
), ratio of domestic gas
production to consumption (G3
) and geopolitical risk (G4
). The GSSI helps to
capture the sensitivity of the Nigerian electricity sector to development in the
international and domestic gas market, with a higher index indicating higher gas
supply insecurity and vulnerability of the electricity sector in Nigeria. For this
purpose, the indicators were modified, as against the literature, to address the
objectives of this study.
The G1
measured the ratio of domestic gas consumed (GC) in an economy to
gross domestic product (GDP). It implies the amount of natural gas required to
produceadollar’sworthofgoodsandservices.Also,it explainshowthegasconsumed
locally is used efficiently in producing the economy’s output. The gas intensity
(G1
) is computed as:

1
GC
G
GDP
 (1)
Thegasintensityofthecountryisexpressedastheratiooftotalnaturalgasconsumed
to GDP in Nigeria.
It is expressed as the ratio of natural gas to produce electricity to GDP. The
Nigerian GDPis measuredin USdollar andsourced from IEA. Therelative indicator
for Nigeria associated with G1
(N1) is estimated as:
1 1
1
1 1
( )
( ) ( )
t
t
G Min G
Max G Min G



 (2)
The relative indicator, 1t results in projection of 1tG that lies between 0 and 1. The
low value of 1t implies that attime (t) Nigeria is less vulnerableor less insecure to
supply shocks compared to other years in the study.
Secondly, the G2
is expressed as the ratio of electricity generated from natural
gas (GTP) to total electricity produced (TEP) in the economy. This is one of the
modifications that makes this work different from other conventional methods.
This is used to capture the degree of electricity generation dependency on natural
gas consumption.
TEP
GTP
G21 (3)
Where GTP is the natural gas to power at time t and TEP is the total electricity
generated in Nigeria at time t, which is expressed as a percentage. Similarly, the
relative indicator for various time t associated with G2
((N2)) is computed as:
)()(
)(
22
221
21
GMinGMax
GMinG


 (4)
The modified indicator lies between 0 and 1 such that the values consider both
extremes. The values 0 and 1 are assigned to express the least and most vulnerable
ofthe selectedsecurity of supply indicators,respectively, for Nigeria for the various
years under study.
Thirdly, we consider G3
, which measured the ratio of domestic gas production
to total domestic gas consumption. Cabalu (2009) argued that domestic gas
production is one of the best yardsticks of a country’s capacity to survive with
short-term supply disruption than domestic reserves, as production excludes gas
from stranded reserves which cannot be tapped immediately. It is expressed as:

GC
GP
G31 (5)
Where GP is the domestic natural gas production in Nigeria over the selected time
frame and GC is the total natural gas consumed (total final consumption). The
computation of G3
is quite different from other previous indicators since it is
negatively related to gas supply vulnerability or security. To accommodate this
negative relationship, t is adjusted to ensure that it is consistent with GSSI design.
Thus, high G3
andlow(N3)is preferable.Therelativeindicator fortime (t)associated
with G3
(N3) is computed as:
)()(
)(
33
313
31
GMinGMax
GGMax


 (6)
Lastly, weconsidered the geopoliticalrisk (G4
) using theadjusted Shannon Weiner
Newman Index which accounts for the political stability of the supply source of
natural gas in Nigeria. The index is modified as follows:
)(41 iiInmmG  ( 7)
Where mi
represents the political stability in natural gas producing areas (Niger
Delta) in Nigeria. The number of cases of vandalism on natural gas pipelines was
used asaproxyto capturethisvariable. AlowG4t
denotes higherexposuretosecurity
supply risk. It is relatively related to security of natural gas supply for the period
under study. The relative index for the same period is calculated as:
)()(
)(
44
414
41
GMinGMax
GGMax


 (8)
After all the four indices were derived, we then computed the gas supply security
index(GSSI) for the selectedyears. TheGSSI forthe selectedyears canbe calculated
as the root mean square of the four relative indicators discussed above. The GSSI
ranges lies between 0 and 1 in which zero and one means the highest and lowest
relative level of gas supply security, respectively. The GSSI is computed as:
  4/2
2
2
3
2
2
2
1  GSSI (9)
3.5 Data Analysis and Interpretation
The methodology used here was adopted for Nigeria based on data derived for the
years 1999, 2000, 2005, 2008, 2010 and 2012. Data on GC, GTP, TEP, GP and GDP
were obtained from IEA Energy Balance of Nigeria (IEA, 2013). The GDP is quoted
in US dollars. The number of cases of pipeline vandalism was used as a proxy for

political stability factor in the NigerDelta wherenatural gasis producedin Nigeria.
The individual gas security indicators are shown in Table 3.1. It reveals the areas of
strength andweakness ofthe indicatorsand howthey tend to influence the relative
indicators overtime. Thereafter,wepresentTable3.2which showsthe resultsof the
analysis of relative indicators for gas supply security between 1999 and 2012 for
Nigeria.
Table 3.1. Individual Gas Supply Security Indicators for Nigeria Between 1999 and 2012
Source:Author’scomputation.
From Table 3.1, natural gas intensity, G1, was zero for all the years considered
which was measured in cubic metres per unit of GDP (in $US). The share of
natural gas in electricity generation over time, G2, measured in percentages, shows
an upward movement over the years considered in the study. This depicts a huge
relianceon naturalgas forelectricity generation.In 1999,the contributionof natural
gas to electricity generation accounted for about 62 per cent, and kept increasing
overtime.
G3represents theratio ofnatural gasproduction tonatural gasconsumption in
Nigeria. G3 was low in 1999 and rose to about 10.86 in 2012, owing to gas
monetization and gas-to-power initiatives. The geopolitical risk, G4, reflected the
level of vandalism in areas where natural gas is found. The individual gas supply
security indicators were used to compute the relative indicators between 1999 and
2012 for Nigeria.
Table3.2. RelativeIndicators for 1999-2012
Source:Author’scomputations
G1(m3
/$) G2 (%) G3 G4
1999 0.00 61.79 6.65 0.64
2000 0.00 61.78 10.50 0.00
2005 0.00 67.00 7.03 1.00
2008 0.00 72.90 12.70 0.96
2010 0.00 75.60 21.94 0.93
2012 0.00 80.29 10.86 0.98
N1 N2 N3 N4
1999 0.32 0.00 1.00 0.64
2000 0.38 0.00 0.75 0.00
2005 1.00 0.28 0.98 1.00
2008 0.49 0.60 0.60 0.96
2010 0.00 0.75 0.00 0.93
2012 0.56 1.00 0.72 0.98
Average 0.46 0.44 0.68 0.75

Note: N1
is the relative indicator or scaled value for G1
(gas intensity); N2
is the relative
indicator or scaled value for G2
(gas dependency on electricity generation); N3
isthe relative
indicator or scaled value for G3
(ratio of domestic gas production to total domestic gas
consumption); N4
is the relative indicator or scaled value for G4
(geopolitical risk).
This paper estimated the GSSI for Nigeria between 1999 and 2012. The final
values of the GSSI for the six years that natural gas was utilized with a drastic
reduction in gas flaring in Nigeria is shown in Figure 3.4.
Figure 3.4. Comparison of GSSI for the Selected Years in Nigeria 1999-2012
Source: Author’scomputations, 2015.
From Figure 3.4, year 2000 is revealed to be the least vulnerable in the event of
anatural gas supply disruption. It shows that GSSI was the lowest at 0.42, ranking
it first among other years in the study. The reason for this might be attributed to
weak N2
and N3
where the strength lies in N1
and N4
. This implies that the gas
dependency for electricity generation and geopolitical risk for the concerned years
wasweakorlowasagainst otheryearsin the study,and hencenot relianton imports.
With hydro and natural gas being the main sources of energy for power generation
in Nigeria,gas intensity of theeconomy’s GDPwaslow.However, in 2000, Nigeria’s
natural gasconsumption rosefaster than any otherfuel dueto thegas monetization
initiatives of the Nigerian Gas Master Plan and other gas-to-power strategies that
had positioned initially flared gas towards electricity generation.
In 1999, the GSSI was0.62, ranking it the third among the selected years under
study. The gas intensity was low because a large volume of natural gas was flared
and it was reflected by N1
. Also its share of total domestic consumption is high
relative tototal domesticproduction ascapturedby N3.
Thehigh indicatorwitnessed
in N3
canbe attributedto thegas monetizationpolicy that ledtoutilization through

LNG exports to Asia and other parts of Europe. However, the gas intensity waslow
and geopolitical risk was high in the region as captured by N1
and N4
respectively.
The GSSI rose to 0.87 in 2005 which was the highest recorded under the period
of study and later declined to 0.68 and 0.59 in 2008 and 2010, respectively. The
significant valuesrecordedcan beattributed to gasintensity (N1)
,gassupplysecurity
(N3
) and geopolitical risk (N4
) respectively. The gas intensity and geopolitical risk
wererelatively high due tohigh pricesof naturalgas atthe internationalmarket and
pipelinevandalism activitiesin the region where gas isfound, respectively; hence an
increase in natural gas dependency for electricity generation. This implies that the
share of natural gas in electricity generations is weakand lowand began to increase
till 2012.
There was a significant improvement in GSSI for year 2008 and 2010 that
accounted for 0.68 and 0.59, respectively. For both years, gas supply security (N3
)
and geopolitical risk (N4
) improved, which made Nigeria less vulnerable as awhole
but electricitygeneration washighly vulnerable dueto high dependencyon natural
gas. This was obvious in the results as N2
has witnessed an upward trend since
2005. Theworldfinancial meltdownled to alowdemand forgas atthe international
market which resulted in low gas intensity in 2000 and raised its domestic usage
towards achieving the gas-to-power strategy for Nigeria.
In 2012, the GSSI deteriorated to 0.85 compared to 0.59 in 2010, which made
Nigerian electricity generation highly vulnerable to natural gas dependency in the
event of natural gas supply disruption. This ranked fifth among other years in the
study and the strength lies in all thefour indicators of GSSI. This has raised natural
gas as the main source of fuel for power generation in Nigeria so as to drive the
nation’s economy.
However, thefollowing deductionwasarrivedat in the courseof this study: Gas
monetization led to the utilization of natural gas and reduction in gas flaring in
Nigeria over time. In addition, natural gas has become a viable and dominant fuel
sourcefor electricitygeneration in Nigeria. Therefore,natural gassupply disruption
andover dependencyon naturalgas willfurther makethe Nigerianelectricity sector
more vulnerable.
3.6 Conclusion and Recommendation
There were fluctuations in GSSI over the years in which the two extremes are 0.46
and 0.88 in 2000 and 2005, respectively, compared to the overall average of 0.76. In
2012, all the indicators were high which led to high GSSI that accounted for about
0.84. The overall average GSSI was 0.76 with strength in gas supply security (N3
)
and geopoliticalrisk (N4
) which accountedfor 0.68and 0.75,respectively. Therefore,
theelectricity sectorandtheexport marketi.e.,theLNGexports,arethekey demand
drivers for natural gas in Nigeria. With the increase in demand and supply for

naturalgas andmultiple playersenteringthemarket anddwindling crudeoil prices,
the Nigeriangovernment must be proactive in ensuring sustainability, availability,
security and diversification of the electricity-mix away from natural gas which
currently accounts for a bulk of the electricity generation and domestic gas
consumption in the country.
The following recommendations were made to promote the need to diversify
electricity mix in Nigeria. Firstly, there is need to diversify the Nigerian electricity
fuel source mix from natural gas and embrace other sources such as renewables.
Secondly, the government shouldimplement policiesto addresspipeline vandalism
in the country particularly in the areas where natural gas is found. Thirdly, the
government should improve and emulate best practices for all the component
indicators.
Endnotes
1. Abiola is a doctoral research student at Centre for Petroleum Economics and Law
(CPEEL), University of Ibadan.
2. http://www.world-nuclear.org/info/Current-and-Future-Generation/World-Energy-
Needs-and-Nuclear-Power/
3. Cited from Punch newspaperreport entitled “Nigeria needs120,000MW of electricity
for industrialization”, dated Thursday, 18 April, 2013, p. 33.
4. Cited from article written by Yinka Abraham titled “renewable energy options for
embedded generation“ of the BusinessDaynewspaperdated 26 August, 2014filed under
power West Africa Energy.
5. HowtodevelopNigeriaGasMarket,TheGuardian newspaperdatedFriday,13Dec., 1996.
6. See http://www.today.ng/news/power-supply-drops-to-3500mw-due-to-gas-
challenges/
7. Electricity generation by fuel for Nigeria, www.iea.org/statistics
8. HowtodevelopNigeriaGasMarket,TheGuardian newspaperdatedFriday,13Dec., 1996.
9. See http://www.punchng.com/business/business-economy/power-supply-hasnt-
improved-with-privatisation-survey/
10. Japan, Korea, China, India, Singapore and Thailand.
11. US, Mexico, Austria, Spain, France, Belgium, Italy, UK. Hungary, Slovakia, UAE,
Iran, Finland, Brazil,Poland,Germany, CzechRepublic, Greece,Ireland, Netherlands,
Turkey, Singapore and Thailand.
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