Africa's Gas Paradox: Exporting Wealth, Importing Poverty
Millions of African businesses and individuals continue to be starved of gas supplies not because of a lack of the critical resource, but because of a commercial model that prioritises exports, KINGSLEY JEREMIAH reports.
There is an economic absurdity that takes root slowly and eventually becomes taken as normal. How do you explain that Nigeria has over 200 trillion cubic feet of gas while most of the population is in darkness? How do you explain that at least 20 million households cannot afford gas and have to rely on charcoal, while over 60 per cent of gas is exported?
Across Africa, other countries that sit above some of the world's largest natural gas reserves are running their factories on diesel generators, cooking on charcoal and watching industrial zones fail before they are even built. This is not a misfortune but man-made and the blame can be better put on policy misalignment.
Ministerial Roundtable Highlights the Crisis
At a ministerial roundtable, convened jointly by Nigeria's Decade of Gas Initiative and the World Bank in Abuja, the question came up – who is Africa's gas serving? While Nigeria is struggling to run its over 80 per cent of power generation plants on gas, and industries in need of gas are seeking alternatives, compressed natural gas (CNG) and liquefied petroleum gas (LPG) are not adequately serving homes and industries.
Stories from other countries are pathetic. Benin's Minister of Energy, Kègnidé Paulin, said his country receives 27 million standard cubic feet per day (mmscfd) of gas, almost entirely through the West African Gas Pipeline (WAGP). By 2030, total national demand is projected to reach 153 mmscfd. By 2035, it rises to 178 mmscfd. The resulting deficit is 126 mmscfd or 82 per cent of projected need by the end of this decade.
The Glo-Djigbé Industrial Zone (GDIZ), Benin's flagship manufacturing and agro-processing development alone requires 66 mmscfd of gas to function at projected capacity. Power generation will absorb a further 87 mmscfd. Together, Paulin said, they account for the entirety of Benin's 2030 gas demand and together, they will be met with just 18 per cent of the supply required if current trajectories hold.
The consequence means factories that cannot be powered, jobs that cannot be created, and an industrial zone built at considerable public expense that risks becoming a monument to a supply failure that was entirely foreseeable. The Minister described the projected 150 mmscfd deficit by 2035 as “a matter of urgency requiring immediate action,” noting that expanding gas supply is “critical to achieving 70 per cent electricity access by 2030” and essential to underpinning industrialisation across the country.
Togo's Deteriorating Situation
Togo presents the same picture in a more advanced stage of deterioration. The country's Energy Minister, Robert Eklo, confirmed that Togo's electricity grid is “heavily dependent on gas supply through the West African Gas Pipeline,” with gas-fired plants in Lomé providing both baseload and flexible peak supply. Current gas supply, he told the roundtable, meets only a fraction of demand.
The result is “higher costs, increased emissions, and operational disruptions,” a combination that simultaneously raises the cost of doing business, undermines environmental credibility, and erodes the reliability that investors in manufacturing and services require above almost anything else.
Like the situation in Nigeria, when grid reliability fails, industry does not wait. It reaches for the next available fuel source. That source is overwhelmingly diesel. The Manufacturers' Association of Nigeria (MAN) said at least N1.2 trillion was spent on alternative energy last year.
The Economic Cost of Gas Misallocation
The economic cost of gas misallocation does not appear on any government balance sheet as a line item labelled “gas policy failure”. It appears, instead, in the operating costs of every business, factory, and small enterprise that has been forced to self-generate electricity because the grid is unreliable, and forced to run that self-generation on diesel because gas was never made available to them.
Diesel generation is not a minor inconvenience. It is a structural competitive disadvantage. Across West Africa, diesel-powered generation typically costs three to five times more per kilowatt-hour than gas-fired grid electricity. For a textile manufacturer, a food processing plant, or a fertiliser producer, that differential is frequently the difference between a viable business and an unviable one.
It is the reason that manufacturing as a share of GDP has stagnated across much of the region for decades despite significant labour cost advantages and, in many cases, proximity to some raw materials.
Infrastructure and Pricing Deficiencies
The Coordinator of Nigeria's Decade of Gas, Ed Ebung, acknowledged this structural failure directly, identifying “infrastructure deficits, pricing inefficiencies, and market structure constraints” as compounding barriers that mean “gas supply cannot meet demand without significant investment in pipelines, transportation networks, and processing facilities.”
The reference to pricing inefficiencies is particularly significant because it is an acknowledgement that the current pricing architecture actively discourages domestic industrial supply in favour of export revenue. Nigeria's situation is illustrative. The country exports LNG to international markets at commercial rates whilst domestic manufacturers, gas-to-power operators, and fertiliser producers struggle to secure a reliable supply at any price.
The former Chief Executive of the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), Saidu Aliyu Mohammed, called for “transparent and competitive pricing frameworks that reflect regional realities”. This development equally acknowledges the gap in the existing framework.
Meanwhile, the NUPRC Chief Executive Oritsemeyiwa Eyesan framed the required shift as moving from “resource control to resource optimisation.” This recognised that controlling a resource and deriving economic value from it domestically are not the same thing.
Fertiliser Production and Food Security
Nowhere is the cost of gas misallocation more economically consequential and less discussed than in fertiliser production. Natural gas is the primary feedstock for nitrogenous fertilisers, including urea and ammonia. Countries with abundant gas and functional domestic supply chains can produce fertiliser at a fraction of the cost of importing it.
Countries that export their gas and then import fertiliser are, in effect, subsidising foreign agricultural sectors whilst their own farmers pay international commodity prices. Although Nigeria has made significant progress in this aspect, such efforts are elusive in other African countries. Sustaining this with the Fertiliser Producer and Suppliers Association and through projects such as Dangote Fertiliser is critical to avoid supply inconsistency and repeated disruptions in production schedules.
Across West Africa, where smallholder farming dominates food production and fertiliser application rates are among the lowest in the world, the gap between potential and actual domestic fertiliser supply represents a direct constraint on food security and rural income.
Household Impact and Clean Cooking
Meanwhile, Ebung stressed the need to “expand domestic utilisation, particularly through increased LPG adoption for clean cooking,” an adjacent point that speaks to the same dynamic at the household level. Where gas is unavailable or unaffordable for domestic energy needs, families spend a disproportionate share of income on alternative fuels, reducing disposable income available for food, education, and healthcare.
The Programme Manager for the Decade of Gas, Ramatu Abdullahi, warned that “supply must scale in tandem” with growing demand “to avoid structural shortages and missed economic opportunities”.
SMEs Bear the Brunt
Large industrial zones attract ministerial attention and development finance. Small and medium-sized enterprises absorb the costs of energy failure silently, in reduced margins, constrained working hours, and decisions not to expand. Across the region, SMEs, which account for most of the private sector employment, operate in an environment where energy costs are both high and unpredictable.
A bakery running on diesel generators, a cold storage facility paying spot rates for LPG, a small garment manufacturer whose production schedule is determined by grid availability rather than order books. These businesses may not be captured in gas sector statistics, but they constitute the fabric of the economies that gas policy is supposed to serve.
Decentralised Demand Models
To address this, most stakeholders believe that decentralised demand models are critical. With this, small-scale LNG, compressed natural gas (CNG) trucking, and virtual pipelines can be designed to reach industrial clusters and commercial districts beyond the trunk pipeline network. They also believe that industrial demand hubs and bankable commercial structures such as Gas Sales and Purchase Agreements (GSPAs) can give smaller consumers access to supply on terms currently reserved for large offtakers.
The Independent Petroleum Producers Group Chairman, Adegbite Falade, stressed the need for a platform that creates alignment across the value chain from supply and policy to financing and execution. He stressed the need for “meaningful engagement that leads to bankable projects and practical outcomes.”
The emphasis on bankability is critical because it signals that the commercial structures required to extend gas supply to smaller consumers have not yet been built, and that building them is a prerequisite for any serious domestic industrialisation agenda.
Industry Perspectives
TotalEnergies Managing Director Matthieu Bouyer, speaking for major operators, noted that “several significant gas projects initiated in recent years are expected to come onstream within the next two to three years.” Renaissance Africa Energy's representative, Olatunji Bakare, noted “the role of local content and capacity development, particularly in fostering inclusivity and sustainability within the sector,” and expressed the company's ambition to scale domestic gas production.
The World Bank representative, Justin Beleoken, speaking on behalf of Country Director Mathew Verghis, said: “Financing alone is insufficient without strong institutions, coordinated policies, and actionable frameworks.” By implication, the problem is not that Africa lacks capital markets or development finance; the problem is that the policy environment systematically directs gas away from domestic industrial use and towards export, and that no amount of financing will correct a misaligned incentive structure.
Essential Reforms
Three reforms are essential. First, pricing architecture must be restructured so that domestic industrial supply is commercially viable for producers. At present, the gap between regulated domestic gas prices and international export prices means producers have a financial incentive to export. Cost-reflective domestic pricing, with appropriate protections for households and transition support for energy-intensive industries, is the foundation on which everything else rests.
Second, regulatory fragmentation is a key deterrent to investment and must be addressed through the regional coordination body proposed across multiple stakeholders. Investors willing to finance domestic supply infrastructure need consistent contract terms, enforceable offtake agreements, and a dispute resolution mechanism that functions across borders. Without these, cross-border industrial supply chains of the kind that would allow a Beninese industrial zone to source gas from Nigerian upstream production through a Togolese distribution network remain structurally impossible.
Third, most stakeholders, including NMDPRA, which the Nigerian government is using to scale domestic gas utilisation, identified that a $22 billion infrastructure gap must be treated as an investment priority, not a financing aspiration. The Nigeria–Morocco Gas Pipeline, virtual pipeline networks, mini-LNG terminals, and regasification infrastructure for countries like Togo that are not connected to trunk networks all require committed capital at scale. The World Bank's guarantee instruments and the International Finance Corporation's private sector mobilisation capacity offer a viable mechanism, but only if domestic supply is treated as a bankable, revenue-generating proposition rather than a social obligation to be funded from government budgets.
