Sun. Feb 16th, 2025
Portugal-President-Sousa-Credit-Reuters

Portugal has announced plans to increase its purchases of Liquefied Natural Gas (LNG) from Nigeria and the United States as part of its strategy to reduce dependence on dwindling Russian gas supplies.

Portuguese Environment Minister Maria da Graça Carvalho, speaking at the World Economic Forum in Davos, emphasized that Portugal is already “practically independent of Russian gas” and aims to further diversify its energy sources.

“We want to reduce this figure further by importing more gas from Nigeria and the United States,” Carvalho said, according to economic website ECO.

Portugal’s LNG Imports

In 2024, Portugal imported 49,141 gigawatt-hours of natural gas, with LNG accounting for approximately 96% of the total. Nigeria supplied 51% of the LNG, while the United States contributed 40%, and Russia’s share stood at just 4.4%.

This marks a significant reduction in reliance on Russian gas, which previously accounted for 15% of Portugal’s LNG supply in 2021.

The European Union’s sanctions on Russian oil and gas via pipelines, following Russia’s invasion of Ukraine in 2022, have prompted member states to seek alternative energy sources. However, LNG shipped by sea remains exempt from the sanctions.

Energy Independence Challenges

Carvalho also urged greater cooperation within the European Union to bolster energy independence and security, particularly in addressing Iberia’s status as an “energy island.” She noted that building interconnections with France to integrate Iberia into the broader European energy grid has been challenging.

Impact on Nigeria’s Economy

While the increased demand for Nigerian LNG is a positive development, a recent report by SB Morgen Intelligence highlights potential challenges for Nigeria due to the global energy landscape.

The report, titled The Ripple Effect: How Trump’s Policies Will Impact Africa, outlines the risks posed by US President Donald Trump’s energy policies, including a surge in American oil production under his “Drill, baby, drill” agenda.

This policy could lead to a global oversupply of oil, driving down prices and threatening Nigeria’s fiscal sustainability. Nigeria, Africa’s largest oil producer, relies on oil revenues for over half of its national budget.

Fiscal Risks for Nigeria

The report warns that Nigeria’s 2025 budget, based on an oil price target of $75 per barrel, faces significant risks if global oil prices decline. Lower oil prices could:

  • Undermine government revenue.
  • Delay infrastructure projects.
  • Increase borrowing needs, exacerbating Nigeria’s debt burden, which is projected to reach ₦187 trillion in 2025.
  • Strain funding for social programs, pushing more citizens into poverty.

Broader Economic Implications

SBM Intelligence cautioned that reduced oil revenues could have ripple effects on other sectors of Nigeria’s economy, compounding existing challenges and exacerbating regional inequalities as poorer states face reduced federal allocations.

The report underscores the urgent need for Nigeria to diversify its economy to mitigate the risks associated with global energy market fluctuations and reduce dependence on oil exports.

Conclusion

Portugal’s pivot to Nigerian LNG presents an opportunity for Nigeria to strengthen its energy export portfolio. However, global energy dynamics, including increased US oil production, underscore the importance of economic diversification and prudent fiscal management for Nigeria’s long-term stability.

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