Until recently, two of the fiscal dispensations that mirrored Nigeria’s penchant for profligacy and waste were the fuel subsidy regime and the flaring of natural gas. While the subsidy regime was touted as offering relief to the masses, even as serving as a major drain pipe on the economy, gas flaring is ‘justified’ as a necessary pain in the course of producing crude oil, with which it is associated underground. While oil is produced, gas comes along and when there is no immediate option to utilise it; flaring comes in handy.
While subsidy was reportedly terminated by the administration of Bola Tinubu during his inauguration as president on May 29, 2023, gas flaring has persisted with telling effect on the country. Just as well, while the subsidy regime imposed on the country in 2022 a whopping sum of N4.3 trillion, gas flaring also claimed the sum of $30 million on a daily basis and N16 trillion per annum. Thus, it constituted another waste pipe through which the country’s patrimony is drained avoidably.
According to data from the National Oil Spill Detection and Response Agency (NOSDRA) under its programme ‘Gas Flare Tracker’, Nigeria lost an estimated $5.5 billion (roughly N8.7 trillion) in direct market value from routine gas flaring between 2021 and 2025. Meanwhile, the financial implications of gas flaring spread across several critical sectors of the country’s public space, including the economy, health and others.
Beyond the financial aspect, while the subsidy regime in its positive context offered some benefits, such as reliefs like cheaper prices of petroleum products to sections of the society – contentious as such may be, the dispensation of gas flaring remains officially and primarily illegal, attracts fines and is insidious in its impact on the society, especially with respect to the environment.
The unfortunate twist is that the perpetrating companies are allowed to pay the stipulated fines and continue with their operations; hence, gas flaring is actually serving the interests of the oil producing companies and not of the country.
This situation thereby accentuates the slack management of the industry by the government, and has drawn concern from not a few Nigerians.
That is why the recent visit to President Bola Tinubu by the management of the Nigeria Liquefied Natural Gas Limited (NLNG) qualifies for interrogation. In the course of that visit, the president gave them a new mandate to deepen the domestic utilisation of the country’s gas by tackling gas flaring, as well as ensuring that the country’s abundant gas resources translates into cheaper energy for ordinary Nigerians through facilitating cheaper domestic usage of the fuel.
According to him, Nigeria’s energy resources would be of little value if they remained underground or failed to improve the lives of citizens, stressing that NLNG must balance its drive for increased revenues from the international market with the need to ease the energy burden at home.
The presidential directive comes against several justifying factors. First is the official approval for expanding the NLNG mandate beyond its original one of merely harnessing the country’s gas reserves for export and revenue generation to the additional task of looking inwards as well.
The original mandate of the NLNG when it was established upon its incorporation on May 17, 1989 was to harness Nigeria’s vast natural gas resources and produce Liquefied Natural Gas (LNG), as well as Natural Gas Liquids (NGLs) for export.
At its core, this foundational mandate was driven by three main economic and environmental objectives. First was the elimination of gas flaring. Prior to NLNG’s formation, Nigeria routinely flared the associated gas produced during oil extraction. The primary goal was to monetise and capture this wasted resource, effectively converting an environmental hazard into a commercial asset.
Second was the diversification of the Nigerian economy. The government sought to generate a massive, alternative stream of foreign exchange to reduce the country’s heavy over-reliance on crude oil exports. The third objective was to position Nigeria as a reliable major player in the global energy market by safely and profitably supplying cleaner energy to international buyers.
This dispensation spawned the joint venture that brought together the federal government-represented by the NNPC-and international oil companies, such as Shell, TotalEnergies and Eni, to execute this mandate under a unique, self-funding business model.
However, with the passage of time (after 27 years), the old mandate now has to adjust to new realities, which makes the president’s directive well placed.
Third is the operational imperative for the country to transit from an oil- driven economy to a gas-driven one as Nigeria is more endowed with gas than oil reserves. The country’s oil reserves is 37.5 billion barrels, while its gas reserves of 215 trillion cubic metres is expected to last for 85 years.
Fourthly, and in the light of the contemporary circumstances the Nigerian gas industry is currently migrating to a high-growth expansion phase, heavily anchored by the federal government’s ‘Decade of Gas’ initiative (2021-2030) and the operational enforcement of the Petroleum Industry Act (PIA), courtesy of the massive proven natural gas reserves.
In the context of the foregoing lies an unanswered question: Is gas flaring still compatible with the country’s energy management circumstances?
The answer is not only a definite no; the inexcusable situation dictates that gas flaring must stop immediately.