Tuesday, June 28, 2011

Towards a low carbon industrial strategy for Nigeria (May 2011)

The Federal Government of Nigeria has set an ambitious growth target for the economy in the coming decade. Diversifying the economy away from the dominance of petroleum and expanding industrial production are important cornerstones of Vision 2020 – the country‟s economic development blueprint. Nigeria has over the years experienced de-industrialisation as a result of weak infrastructure, especially lack of access to power and financial resources to replace outmoded technologies. Most companies depend on expensive diesel to generate electricity to run their plants.

A low carbon industrial strategy is consistent with the County’s Vision 2020 plan to diversify and decarbonise the Nigerian economy. The strategy aims to achieve a structural transformation of the economy as a basis to launch industrial growth, create jobs as well as contribute to the reduction of greenhouse gases. However, the Vision 2020 fell short of identifying specific nuts and bolts of a low carbon industrial strategy. Low carbon development for Nigerian industries will require a switch from diesel to gas and renewable energy as well as the acquisition of more efficient technologies.

This paper identifies three priority sectors (energy, cement production and textile industries) where growth in low carbon technologies will make a difference and proposes a number of initial steps to expand low carbon industrial development in Nigeria.

However, the transition to high growth and low carbon development in all three identified priority industrial sectors is hampered by a number of factors, and these include the following

- Lack of infrastructure and high cost of industrial production. Power, water, roads and other vital infrastructure are in poor condition in Nigeria. As companies are made to provide these services for themselves, the cost of doing business remains high for them. As a result, companies experience cash squeeze and are often unable to make vital investments in technology renewal.

- Policy inconsistencies. Even though government has embarked on a number of stimulus packages for several industrial sectors, the implementation is often fraught with conflicting laws and regulations. As industrial associations recount various reversals in industrial strategies, the trust of investors on new government initiatives wane.

- No incentives for converting to low carbon energy technologies. Even though companies will benefit from fuel and technology switch programmes –allowing them to have more cost effective energy services, there are currently no incentives for converting to low carbon energy technologies for Nigerian industries.

- Inadequate inter-agency coordination. Industrial stakeholders are also concerned that government agencies often do not coordinate their policies – resulting in conflicting signals from a myriad of government agencies.

- Financing constraints. The Nigerian financial market is presently not deep enough to offer long-term loans at reasonable interest rates. This raises the cost of doing business and stymies efforts to invest in new technologies.

- Poor public awareness. Several leaders of industries are unaware of new efficient technologies, including domestic and international programmes that support their acquisition. As a result, only very few Nigerian companies have embarked on Clean Development Mechanism projects to meet the additional costs of cleaner technologies.

Noting the imperatives of growing the industrial sector along a low carbon pathway, the following recommendations have been proposed by senior leaders in government, industries, financial sector, international agencies and civil society:

- Set up a multi-stakeholder committee. This committee will include key stakeholders, such as government agencies, representatives of key industries, international agencies and civil society groups. The strategy will include a comprehensive package of incentives to stimulate the transition to more prosperous and efficient technology-driven industries in Nigeria.

- Build a political coalition. Stakeholders are concerned that agreed policies often are not followed up with effective implementation. A political platform is therefore needed to ensure that agreed green stimulus packages are fully implemented.

- Set up a green industrial fund. The Bank of Industry has set up a number of special purpose funds to address the challenges faced by Nigerian industries. The time has come for a clean technology fund to stimulate competitiveness of Nigerian industries, boost growth and contribute to emission reduction.

- Conduct clean technology research and advocacy. Both policymakers and industry leaders have significant gaps in their knowledge of the technology and financial requirements for low carbon industrial growth in priority sectors. An evidence-based advocacy programme will lead to greater awareness, stronger policies and better decisions by companies.

- Build international partnership. A number of Nigeria‟s bilateral partners and multi-lateral financial institutions have technology cooperation programmes that will benefit Nigeria‟s industries. These programmes include the Clean Development Mechanism under the UNFCCC. The government should promote these opportunities for technology and financial partnerships to support low carbon development in Nigerian industries.

Read the full paper ‘Towards a low carbon industrial strategy for Nigeria (May 2011) by Ewah O. Eleru et. al.from here

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