Nigeria needs 8 years to increase 800mw, despite its investment

The Nigerian power sector is moving at an incredibly slow pace. Despite billions of dollars invested and an eight-year-old privatization, the average constant capacity delivered into the country’s grid has increased by 800 megawatts.

Electricity

The country has been suffering from chronic power shortages for decades. Election campaigns have made repeated promises to solve the problem.

According to data sourced from Nigeria Electricity System Operator, Generation Companies (Gencos), delivery to Distribution Companies (Discos via Transmission Company of Nigerian (TCN) increased by 23 percent. This is a change from an average of 3,400mw in Nov 2013 to an average of 4,261.25mw over the past 30 days. There has been no system failure.

Eyo Ekpo Eyo, a former Commissioner at the Nigerian Electricity Regulatory Commission (NERC), stated that this was a ‘big’ milestone with real value. However, it took far longer than expected.

Eyo stated that “certainly, this has more value then the usual talk about 13,000mw installed power (but no fuel and transmission capacity to move them around),”

He stated that this is an indication of the potential future of Nigeria’s power sector if all parts of Nigeria’s electricity value chain were allowed to function as intended.

Pedro Omontuemhen is a partner at PwC Nigeria and a leader in energy, utilities, and resources. He believes that Nigeria still needs more power, despite an 800mw increase.

Omontuemhen stated, “This is a positive development, but it is still far from the required capacity to Nigerians’ energy needs.”

Nigeria can produce 13,000MW of power, compared to South Africa’s 58,095mw and similar-sized economies. However, its grid is aging and only provides 4,200mw power to over 200 million residents — about the same as what Edinburgh provides for 548,000.

According to the most recent World Bank estimates, Nigeria’s transmission capacity has increased 20 percent to 4,200mw on average over the past eight years. However, BusinessDay’s analysis has shown that Nigeria’s population has grown by 57 percent in eight years.

Nigeria is moving at a snail’s pace, but the stories of other African countries are different.

Egypt, for instance, has a population of 104,000,000 inhabitants. Between December 2015 and December 2018, it added 28,229mw total to its national grid, giving it a total installed capacity totaling 55,000mw.

This was achieved by a fast-track project worth $2.7 billion, according to the United States Department of Commerce International Trade Administration. It installed 3,636MW of electricity in just 8.5 months.

In March 2015, Egypt signed another agreement with Siemens. This project added 14,400mw in 2.5 year by building three mega combined-power cycle stations.

The US report stated that 1,850mw more were installed by converting existing simple cycle power plants into a combined cycle.

According to data from Ghana’s energy agency, Ghana’s electricity generation capacity increased by 6.4 percent per year between 2000 and 2020. It went from 1,358mw up to 4,695mw.

At the 12th Annual Power Roundtable event, Ahmad Rufai Zakari, special advisor to the President on Infrastructure said that Nigeria needs to undergo a comprehensive review of its power sector policy.

He explained that there is a need for regulatory and policy alignment. This will include raising tariffs in a sustainable manner, which will reduce the gap between allowable and cost-reflective tariffs.

Nigeria’s electricity generation is currently at a mere 4,000 MW, but the generating companies have a capacity of 13,000 MW.

This means that Nigeria’s electricity consumption has more than doubled. It means that more people have to generate power from small units off-grid. Usually, these are usually powered by fossil fuel-powered generators.

Ekpo stated that in the same timeframe, 800 MW was generated, and backup power supply doubled. This has led to an increase of approximately 40,000 mw.

Despite the challenges that face Nigeria, the Central Bank of Nigeria has spent more than N2 trillion over the past seven years to save the country’s power sector.

The interventions include Power and Aviation Intervention Fund, hovering at N300 billion, Nigerian Electricity Market Stabilisation Facility NEMSF at N213 billion, N140billion Solar Connection Intervention Facility and over N600billion in tariff shortfall interventions. There is also another N120billion intervention for mass metering.

“Despite this intervention, the receivables that the generating companies have estimated at over N400 billion for 2020 were still in excess of N400 billion. Augusto & Co. noted that while interventions were crucial in ensuring profitability for operators across the value chain of the industry, they are still insufficient and unsustainable.

Omontuemhen believes that there must be a positive environment for the private sector to invest in the power sector. He also recommends increased efforts to reach 100 percent metering and a reorientation within the mindset of the population – power is no longer considered a public service that the government provides, but a service that requires payment.

According to the International Monetary Fund, Nigeria’s economy suffers from electricity supply issues that cost it $29 billion annually. Ninety percent provides its own electricity. According to the Manufacturers Association of Nigeria, roughly 40% of production costs go to power.

Muda Yusuf (immediate past director-general of Lagos Chamber of Commerce and Industry) stated that “the inadequacy of electric supply is one of most significant impediments to competitiveness of manufacturing sector in 2022.”

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