ASSESSING THE FINANCIAL VIABILITY OF AJAOKUTA-KADUNA-KANO GAS PIPELINE AMIDST RISK MANAGEMENT STRATEGIES

Abstract

Natural gas has gained significant relevance as a source of cleaner energy and a major feedstock for product manufacturing. The International Energy Outlook report (2017) highlights natural gas as the fastest growing fossil fuel with an annual global consumption increase of 1.4% to 2040. With Africa being the next emerging market, the continent's energy demand is surging. According to BP statistical review, Africa's energy consumption grew by 1.2% in 2016 with its share in global primary energy consumption reaching 3.3%. Nigeria's underdeveloped natural gas reserves are a prime target for the international giants in the sector to meet increasing demand for energy, domestically and internationally. The Nigerian gas master plan of liberalisation approved in 2008 aims to expand infrastructure and the market for utilization. In line with this mandate, the Ajaokuta-Kaduna-Kano (AKK) pipeline identified as the major infrastructure for utilizing natural gas is appraised for its economic justification using different evaluation tools. The research aims to estimate the profitability of the gas route and determine its viability as an investment option in gas infrastructure expansion in Nigeria. The significance of the research lies in its empirical and analytical analysis of the proposed AKK gas pipeline, allowing for informed investment decisions by prospective investors and the government. The study also analyses the sensitivity of the gas project to different scenarios and exposes its risk to investors