The Energy Transition Dilemma: Can Nigeria Balance Oil Dependence with Renewable Energy Ambitions?

For decades, Nigeria’s economy has been built on oil. As Africa’s largest crude producer, the country has relied heavily on fossil fuel exports to drive revenue, fund infrastructure, and sustain livelihoods. However, with the global shift towards renewable energy and net-zero commitments, Nigeria faces a critical dilemma: How can it transition to cleaner energy sources without destabilising its oil-dependent economy?

The world is rapidly evolving. Major economies are phasing out fossil fuels, investors are shifting towards low-carbon industries, and climate regulations are tightening. If Nigeria does not adapt, it risks being left behind in the global energy transition. But is a balanced transition truly possible?

Nigeria’s Oil Dependence: A Fragile Foundation

Nigeria’s reliance on oil is profound with the sector accounting for:

1. 90% of foreign exchange earnings, making the economy vulnerable to fluctuations in global oil prices.
2. 50% to 60% of government revenue, meaning public services and infrastructure projects are largely financed through petroleum earnings.
3. 6% to 10% of GDP, making it a key driver of national economic activity.

This dependence has created economic instability, as was evident in 2020 when the COVID-19 pandemic triggered a historic drop in oil prices, plunging Nigeria into recession. The lesson was clear—fossil fuel dependence is unsustainable in the long run.

The Push for Renewables: Progress and Challenges

Recognising the risks of oil reliance, Nigeria has taken steps toward renewable energy adoption:

• Nigeria’s Energy Transition Plan (ETP): Launched in 2022, it aims to achieve net-zero emissions by 2060, with a focus on solar, hydro, and natural gas as transition fuels.
• $200 Million Renewable Mini-Grid Project: Announced in 2025, this initiative seeks to provide clean electricity to rural areas through solar-powered mini-grids【1】.
• Growing Private Sector Investment: Companies like Daystar Power and Arnergy are leading the expansion of solar energy solutions across commercial and industrial sectors.

However, the transition has not been smooth, with the sector facing challenges like:

1. Lack of Infrastructure – The national grid remains weak, and renewable energy projects require significant investment in transmission and distribution.
2. Financing Barriers – Nigeria needs $10 billion annually to fund its energy transition, but investment has been slow due to policy uncertainty.
3. Resistance from the Oil Industry – Fossil fuel stakeholders argue that abandoning oil too quickly could lead to job losses and economic instability.
4. Energy Access Gaps – Over 85 million Nigerians lack electricity, and expanding renewables while maintaining affordability remains a challenge.

Finding the Balance: A Realistic Path Forward

Nigeria’s energy future cannot be an overnight shift from oil to renewables. Instead, a hybrid approach is necessary—one that:

1. Leverages Natural Gas as a Transition Fuel – Nigeria has one of the largest gas reserves in the world, which can serve as a bridge from oil to renewables while reducing emissions.
2. Prioritises Renewable Energy Investment – The government must create an attractive regulatory framework that encourages private sector participation in clean energy projects.
3. Strengthens Local Manufacturing of Solar & Battery Technologies – Reducing dependence on imported renewable energy components will drive affordability and create jobs.
4. Implements Gradual Fossil Fuel Phase-Out Plans – A structured timeline for reducing oil subsidies and increasing renewable incentives is key to a stable transition.
5. Improves Energy Governance and Policy Implementation – Ensuring transparency, efficiency, and accountability in energy policies will boost investor confidence and accelerate progress.

 Nigeria’s Defining Moment in Energy Transition

Nigeria’s energy transition is not a choice—it is a necessity. The world is changing, and fossil fuel-driven economies are being forced to adapt. While abandoning oil overnight is unrealistic, failure to strategically transition towards renewable energy will leave Nigeria economically vulnerable.

The time to act is now. With bold policies, strong investments, and a commitment to sustainable energy, Nigeria can chart a path that balances economic stability with a cleaner, more sustainable future. The question remains: Will Nigeria seize this opportunity, or will it remain stuck in the past?

References

1. Nigeria’s Energy Transition Plan (ETP) – Official strategy for achieving net-zero emissions by 2060. Nigeria Energy Transition Plan
2. $200 Million Renewable Mini-Grid Project – Initiative to provide clean electricity to rural areas through solar-powered mini-grids. Reuters: Nigeria Strikes $200 Million Deal for Mini-Grids
3. Challenges in Nigeria’s Green Energy Transition – Overview of the barriers to renewable energy expansion. World Economic Forum: Tackling Barriers to Nigeria’s Green Energy Transition
4. Financing Barriers in Nigeria’s Energy Transition – The country needs $10 billion annually for renewable energy development. Sustainable Energy for All: Nigeria Energy Transition Plan
5. Energy Access Gaps in Nigeria – Over 85 million Nigerians lack electricity, affecting economic development. World Bank: Solar Mini-Grids as a Solution for Africa