Gas as Nigeria's Transition Fuel: The Investment Case

Nigeria is often described as an oil country, but it is just as much a gas country. Its proven gas reserves are among the largest in the world, at more than 200 trillion cubic feet, and the government has framed 2021 to 2030 as the Decade of Gas. For a country with a severe power shortage and a growing population, gas is the bridge between today's needs and a lower-carbon future.

Why gas matters

• Power: most of Nigeria's grid generation already runs on gas, and more reliable gas supply is essential to more reliable electricity.
• Industry: gas feeds fertiliser, petrochemicals and manufacturing.
• Clean cooking and transport: LPG and compressed natural gas can replace firewood, kerosene and petrol for millions of households and vehicles.
• Emissions: ending routine flaring and replacing diesel generators cuts emissions and pollution.

The policy framework

The Petroleum Industry Act introduced a framework for gas pricing, domestic supply obligations and incentives for gas development. Commercialising flare gas and developing gas-rich fields are now viable business opportunities rather than afterthoughts.

The challenges

Investors must weigh payment risk in the power sector, pipeline security, infrastructure gaps and currency risk. Projects succeed where offtake is creditworthy, infrastructure is secured and contracts allocate risk sensibly.

Where finance meets engineering

Gas projects require long-term capital and careful structuring: reliable reserves estimates, firm offtake agreements, appropriate currency arrangements and robust security packages. This is the combination of technical and financial discipline that we focus on at Haricot Energies.

Where domestic gas creates value

• Power generation: most of Nigeria's grid-connected power comes from gas-fired plants, so reliable gas supply means more reliable electricity.
• Industry: fertiliser, cement, steel and manufacturing depend on affordable energy and feedstock.
• Cooking: LPG replaces firewood and kerosene, improving health and reducing deforestation.
• Transport: compressed natural gas offers a cheaper alternative to petrol and diesel for vehicles.
• Flare reduction: capturing gas that would be flared turns waste into revenue and cuts emissions.

Making projects bankable

Investors in gas processing, pipelines and distribution need confidence on several fronts: a credible gas supply agreement, a creditworthy buyer, pricing that covers costs and returns, secure infrastructure and payment guarantees where buyers are weak. In power, the challenge often lies in the payment chain, where distribution companies struggle to collect from customers. Projects that serve industrial customers directly, or that include payment security, are easier to finance.

Opportunities for Nigerian companies

Midstream and downstream gas offer opportunities for indigenous companies: mini-LNG and CNG for off-grid customers, gas processing near producing fields, LPG distribution and gas-to-power for industrial clusters. These projects require combined technical and financial expertise, from engineering design to structuring finance, which is exactly where Nigerian operators and advisers can build strong businesses.

A leader's view: build the whole value chain

Gas creates value only when every link in the chain works: production, processing, transport, distribution and payment. A gas field without a pipeline is stranded; a power plant without reliable gas is idle; a distribution company that cannot collect from customers cannot pay for gas. Leaders in the sector must think in value chains, not individual assets.

This has practical implications. Upstream companies should secure buyers and transport before developing gas. Midstream investors should look for anchor customers with strong credit. Industrial users should consider long-term supply agreements and, where appropriate, co-investment in infrastructure. Governments and regulators can help by enforcing contracts, maintaining cost-reflective pricing and protecting critical infrastructure.

Partnerships across the chain reduce risk for everyone. A cluster of industrial users sharing a gas supply and power plant can secure better terms than any single user. An upstream producer partnering with a midstream developer can monetise gas that would otherwise be flared. These arrangements require technical and financial structuring skills: understanding reservoirs and facilities, and also contracts, credit and financing. That combination is where Nigerian companies can create significant value in the years ahead.

The opportunity

If Nigeria turns its gas into power, industry and clean energy at home, it can transform living standards and its economy. That is a goal worth investing in.

Common questions

Why is gas important for Nigeria?

Nigeria has one of the largest proven gas reserves in the world. Using gas at home can expand power, industry, clean cooking and transport while reducing flaring.

What limits gas investment in Nigeria?

Pricing, infrastructure gaps, security, and weak payment discipline in parts of the power sector. Projects with creditworthy buyers and secure payment structures attract investment more easily.