The AKK Gas Pipeline: Arewa in Need of Exigent Regional Industrial Reforms and Policy

AREWA AGENDA – On the 13th of July 2020, the BusinessDay editorial board published an editorial titled “Nigeria’s AKK-Pipeline project lacks economic viability”. In the editorial, the renowned business newspaper examined the Ajaokuta-Kaduna-Kano(AKK) Gas Pipeline project, its host region(Northern Nigeria) and the country’s economic realities and concluded that the project lacks economic viability citing challenges such as lack of industrial capacity to offtake the gas and Insecurity among others as the reasons buttressing their conclusion.

Naturally, as passionate Northerners, and considering the timing of the report being barely a month after the official launching, we immediately debunked such a poking editorial and tagged it as another stereotypical attempt by the “Lagos Interests” to ridicule the North and stand in the region’s path towards becoming the next industrial hub of the country and experiencing unprecedented economic development.

However, it is almost one year after and I make bold to say I have gathered enough reasons to call out The North and ask; Is economic development really part of our regional agenda?

For context, Nigeria is endowed with enormous natural resources, the most dominant and abundant of which is GAS. Nigeria holds Africa’s largest gas reserves and stands 9th in the world largest gas reserves ranking holding about 188 trillion cubic feets of gas in its proven reserves.

Nigeria since the discovery of crude oil in the late 60’s has maintained a mono-product economic status. But with the unsteady and unhealthy volatility of crude oil prices in the global market, there has been serious agitations for economic diversification especially towards manufacturing by aggressively pursuing industrialization options(of which GAS is a major catalyzing factor).

It is on this basis that the government sought to develop a robust network of gas transmission(from gas reserves/production/gathering centers to Demand centers) throughout the country through the Trans-Nigerian Gas Pipeline (TNGP) project and enhance its export potential through the broader Nigeria-Algeria Gas Pipeline Project (Trans-Sahara Gas Pipeline).

The Ajaokuta-Kaduna-Kano(AKK) Pipeline Project is a section of the TNGP with a dimension of 40-inch x 614km and a capacity of transporting about 3,500 cubic feet daily. The project was launched by President Muhammadu Buhari on the 30th of June 2020 with an expected completion period of 24 months.

The project’s cost is about $2.8 billion, 85% of which will be financed through a sovereign guaranteed loan facility to be provided by the China Export & Credit Insurance Corporation (Sinosure) at London Interbank Offered Rate (LIBOR) interest rate plus 3.7% and a repayment period of 12years while the 15% will financed by NNPC(equity).

This massive project is expected to stimulate, or rather rejuvenate the Northern moribund industries and usher in new ones, improve electricity generation, unlock over 3 million jobs and enhance the domestic utilization of gas as proposed by the Nigeria Gas Masterplan.

While I still frown at the BusinessDay editorial for rendering the project economically non-viable, it is with the same passion that I would like to call the attention of Northern State governments to a statement made by Milton Friedman, one of the great economists of the 20th century that “One of the great mistakes is to judge policies and programs by their intentions rather than their results”.
But the question is, how do we achieve reaping the expected benefits of this massive and capital-intensive project? How do we prove BusinessDay and it’s proponents wrong? How do we work towards getting positive results out of this project?

The North should understand that the Gas Sector unlike the Oil sector is driven by market forces and devoid of governmental interventions especially in the downstream sector. The pipeline construction might be completed within the stipulated period but the only guarantee for gas to continually flow through those pipes is if there is consistent demand by an effective downstream sector.

Although it is always portrayed that the natural gas resources that sit in our reserves is in excess of even our crude oil reserves, it should be understood that only 60% of the said 188 trillion cubic feet of gas is available in the short term as 40% of the reserves are said to be stranded in gas gaps and not accessible until much after oil production. This coupled with the fact that there is already a bias towards LNG export(which proves more profitable) gives investors the opportunity to choose where exactly to invest and where to push the proceeds from the currently available gas reserves.

To be able to fully take advantage of this massive project, there is need for the constitution of a robust and sustainable gas off take portfolio and a display of commitment(to boost the suppliers’ confidence) by the different actors in the downstream sector ranging from the Strategic Domestic Sector(e.g power plants) to the Strategic Industrial Sector(e.g fertilizer and petrochemical plants) and the Commercial Sectors(industries that use GAS as fuel e.g steel, cement manufacturers, textile industries etc).

This could be done through the development of a Northern Regional industrial policy that will seek to explore our industrial and manufacturing comparative advantages
and coordinate the private sector into setting up the necessary gas offtake industries (and rejuvenating existing ones) around those advantages that will guarantee consistent demand for the gas. This will surely boost the confidence of the gas suppliers to be able to commit to a consistent supply of gas through the AKK corridor.

It is sad to learn that almost one year from the commencement of the project, no single investor has indicated interest in setting up a gas plant along the AKK corridor by submitting a Final Investment Decision(FID). And only Kano and Kaduna State out of all the Northern states that are potential beneficiaries have set up mechanisms to effectively leverage on such a massive opportunity. Kano State Government have set up the Kano State Gas Pipeline Project Delivery and Gas Industrialisation Committee while Kaduna State Government have stated its commitments during the KADINVEST 5.0 Summit titled “Infrastructure, Industrialization and Innovation”.

The Northern Governors’ Forum and other relevant stakeholders should see ample reasons why there is need for “Arewa Manufacturing and Industrialization Summit” that will aim at converging all relevant stakeholders in one room to brainstorm issues around Northern Nigeria’s industrialization potential and develop an Industrial Policy for the region that will ensure effective transformation of our potential into reality. Arewa should pursue conscious political economics that will make an industrial hub out of the region and sustain it.

We should start seeing independent power plants, fertilizer producing industries, petrochemical industries, textile industries etc indicating genuine interest through the submission of FIDs. We cannot afford to lose this opportunity for it has the potential of partly solving some of the deep rooted challenges facing us including poverty, unemployment, insecurity etc. With an effectively utilized AKK pipeline, the North will surely become Nigeria’s next industrial hub and would experience whirlwinds of unprecedented economic development.

Abdulhaleem Ishaq Ringim is a Political and Public affairs analyst, he writes from Zaria and can be reached through [email protected]

Arewa Agenda is a Publication of Young writers/journalist from Northern Nigeria towards Peaceful Coexistence and National Development through positive narratives

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