Efforts to Reduce Dependence on Russian Energy Supplies

Portugal has announced plans to significantly boost its imports of Liquefied Natural Gas (LNG) from Nigeria and the United States in a bid to further reduce reliance on dwindling Russian energy supplies. This move comes in the wake of sanctions imposed by the European Union on Russian oil and gas transported via pipelines, following the country’s invasion of Ukraine in February 2022.

Speaking at the World Economic Forum in Davos, Portugal’s Environment Minister, Maria da Graca Carvalho, highlighted the country’s shift in energy sourcing.

“Portugal is now practically independent of Russian gas … but we want to reduce this figure further by importing more gas from Nigeria and the United States,” Carvalho said, according to a report by economic website ECO.

Current LNG Supply Structure

Data from Portugal’s electricity and gas grid operator, REN, reveals that the country imported 49,141 gigawatt-hours of natural gas in 2024, with LNG accounting for 96% of the total supply. Key highlights include:

• Nigeria supplied 51% of Portugal’s LNG.
• The United States accounted for 40%.
• Russia contributed a marginal 4.4%, down significantly from 15% in 2021.

Portugal’s decision underscores its commitment to diversifying energy sources and ensuring long-term energy security.

Challenges in European Energy Integration

While Portugal’s pivot to Nigeria and the US marks a step towards energy independence, the minister highlighted structural challenges within the European Union. Specifically, she pointed to Iberia’s status as an “energy island,” citing difficulties in building energy interconnections with France.

Carvalho emphasized the importance of greater collaboration within the EU to ensure robust energy security across the bloc.

Impact of Trump’s Energy Policies on Nigeria

Meanwhile, a report by SB Morgen Intelligence (SBM Intel) suggests that US President Donald Trump’s energy agenda could have profound implications for oil-dependent economies like Nigeria. In its latest report, titled ‘The Ripple Effect: How Trump’s Policies Will Impact Africa,’ the Lagos-based research firm warns that Trump’s aggressive energy policies might undermine Nigeria’s fiscal stability.

Increased US Oil Production Threatens Global Oil Prices

Trump’s administration has emphasized energy independence through increased domestic oil production. With his “Drill, baby, drill” approach, the US is poised to expand its role as a dominant oil exporter. This could lead to a global oil supply glut, driving down prices.

For Nigeria, Africa’s largest oil producer, this presents significant risks:

• Fiscal Vulnerability: Nigeria’s 2025 budget projects an ambitious oil price target of $75 per barrel. Any substantial decline in global oil prices could destabilize this target, undercutting the country’s revenue base.
• Economic Strain: Oil accounts for over 50% of Nigeria’s national budget revenue. A drop in oil prices would force the government to adjust its fiscal plans, potentially delaying critical infrastructure projects and curbing social programs.
• Rising Debt: Lower oil prices would necessitate increased borrowing to bridge budget deficits. Nigeria’s public debt is projected to hit ₦187 trillion this year, raising concerns about the government’s ability to meet financial obligations.

Broader Economic Consequences

SBM Intel warns that declining oil prices could have ripple effects across Nigeria’s economy:

1. Government Spending Cuts: Reduced revenue would force the government to scale back on expenditures, impacting public sector wages, debt servicing, and social welfare programs.
2. Increased Poverty Levels: Strained funding for social safety nets could push more Nigerians into extreme poverty.
3. Regional Inequalities: States dependent on federal allocations might face severe financial shortfalls, exacerbating regional disparities.

Nigeria’s Role in Portugal’s LNG Strategy

Amid these challenges, Portugal’s increased demand for Nigerian LNG presents a bright spot for the country’s energy sector. Nigeria, already a leading supplier to Portugal, could strengthen its position as a reliable energy partner for Europe. However, ensuring stable production and efficient distribution will be critical to leveraging this opportunity.

Conclusion

Portugal’s decision to ramp up LNG imports from Nigeria and the US reflects a global shift toward energy diversification in response to geopolitical tensions. For Nigeria, this represents an opportunity to expand its LNG market share, but it also underscores the urgency of economic diversification.

As US energy policies under President Trump exert downward pressure on oil prices, Nigeria must navigate these challenges carefully to sustain fiscal stability and support long-term growth. Developing a more resilient, diversified economy will be essential to mitigating the impact of volatile global energy markets.