The power agreement signed between the Nigerian government and Siemens, a leading German electric company, on Monday will see the German company upgrade transmission and distribution networks which could double Nigeria’s electricity generation and raise distribution capacity three-fold to 11,000 MW by 2023.
BusinessDay gathered that Siemens will try to resolve gas constraints to power plants by seeking to tap into the AKK pipeline for fuel supply so abandoned turbines can be restarted. Half of Nigeria’s 13,000MW generation is constrained due to lack of gas.
President Muhammadu Buhari said he directed Siemens to fix the power distribution and transmission aspect of the electricity challenge in a roadmap brokered by German Chancellor Angela Merkel when she visited Nigeria in 2018. The pair agreed to work on an electrification roadmap for Nigeria with greater focus on resolving power distribution challenges in its initial phase.
According to the presentation Siemens made to the Nigerian government, seen by BusinessDay, the company’s intention is to deliver results similar to those in Egypt that are tailored to the specific needs of Nigeria. Siemens built three combined-cycle power plants and wind farms adding over 14GW to Egypt’s capacity at the cost of £8 billion.
A source with knowledge about the deal says the company will spend as much as $3 billion over the next five years to improve Nigeria’s power sector. DisCos will be tasked to improve collections aided by smart metering, cost-reflective tariffs and technical support. The Nigerian government through the Ministry of Finance will provide Sovereign Guarantee.
Siemens will carry out a comprehensive upgrade of Nigeria’s weak electricity grid capable of wheeling less than 5,000MW and reduce technical and non-technical losses. It will aggregate all DisCos’ investments in their network including cables, switches, transformers and substations to raise distribution above the current 4,000MW.
President Buhari, speaking while signing the roadmap, said his government was clear that fixing the power sector was a key priority for the administration and lamented the failed past attempts.
“These various interventions to solving the electricity problem have yielded an imbalance between the amount of power generated and the amount available for consumers. Despite over 13,000 megawatts of power generation capacity, only an average of 4,000 megawatts reliably reaches consumers,” Buhari said.
He said this was why he directed his team to ask Siemens and the Nigerian stakeholders to first focus on fixing the transmission and distribution infrastructure – especially around economic centres where jobs are created.
“Whilst it was evident that more needed to be done to upgrade the sub-transmission and distribution system, our government was initially reluctant to intervene as the distribution sector is already privatised. I am therefore very pleased with the positive feedback from private sector owners of the distribution companies, who have all endorsed government’s intervention to engage Siemens on this end-to-end plan to modernise the electricity grid,” he said.
Buhari disclosed that government’s aim is to deliver electricity to Nigerian businesses and homes.
“My challenge to Siemens, our partner investors in the distribution companies, the Transmission Company of Nigeria and the electricity regulator is to work hard to achieve 7,000 megawatts of reliable power supply by 2021 and 11,000 megawatts by 2023 – in phases 1 and 2 respectively,” he said.
“After these transmission and distribution system bottlenecks have been fixed, we will seek – in the third and final phase – to drive generation capacity and overall grid capacity to 25,000 megawatts,” he said.
Buhari said the strong commitment to the development of Mambilla Hydroelectric and the various solar projects under development across the country, the long-term power generation capacity will ensure adequate energy mix and sustainability in the appropriate balance between urban and rural electrification.
“Our intention is to ensure that our cooperation is structured under a Government-to-Government framework. No middlemen will be involved, so that we can achieve value for money for Nigerians. We also insist that all products be manufactured to high quality German and European standards and competitively priced,” he said.
“This project will not be the solution to all our problems in the power sector. However, I am confident that it has the potential to address a significant amount of the challenges we have faced for decades,” he added.
ISAAC ANYAOGU & TONY AILEMEN