For Nigeria to enjoy unrestrained power supply that can boost economic activities, the country will require investment of about $445 billion, the bulk of which must come from the private sector, financial experts say.
With the Gross Domestic Product (GDP) of Nigeria in 2017 put at about $450 billion, which is not enough to finance the power sector, they argue that it is mandatory for Nigeria to seek the intervention of the private sector to help finance the sector.
Anthonia Okoh, director, project and export finance, Africa, Standard Chartered Bank, who spoke at the Centre for Petroleum Information (CPI) Energy Finance Forum, stresses the need for the country to move from the current 12,522MW to 180,000MW to realise its fullest industrial potential, adding that the average household in the country receives approximately three hours of power a day from the grid.
She states that the investment will cut across the whole value chain of the power sector, such as meeting the cost of gas exploration, processing, pipeline transportation, generation, transmission and distribution.
Giving a breakdown of the cost of each of the segments that make up the value chain, she says an estimated $56 billion would be needed for gas exploration, gas processing $67.5 billion, pipeline transport, $3 billion, power generation $270 billion, transmission $9 billion and distribution $40 billion.
Nigeria has large gas reserves estimated at 192 trillion cubic feet (Tcf), but the lack of regular gas availability has been a major contributing factor to the problems of grid-connected power plants.
Distribution companies need to improve their network in order to better segment their customers and channel power while Technical and non-technical losses are occurring at the distribution level due to poor network infrastructure.
She however says the country can realise the objective of giving her citizens adequate power supply if it is ready to partner with many international banks.
“Many international banks, ECAs and DFIs investors are willing to fund limited/non-recourse projects in Nigeria. This allows them to manage and diversify their existing asset and liability portfolios and invest in a strategic sector. Partnerships with renowned international developers/contractors/
Nigeria, she notes, has an opportunity to leverage its progress in developing an enabling regulatory environment to attract institutional investors.
Victor Eromosele, chief operating officer of ME Consulting, says there are huge gas resources in the Niger Delta, but notes that much of this should have ended up in form of power in our various homes if the necessary investments had been made.
“We must monetise the nation’s gas by putting it into values that can enhance the economy,” he said.
He says there are already a number of gas projects ear-marked for execution in the country by the Nigerian National Petroleum Corporation NNPC. Only two of these projects have had their Final Investment Decisions (FID) taken.
These gas projects are valued at $14 billion whereas about $2.2 to $2.7 billion would be required for pipeline infrastructure alone to move the gas.
Currently, he says, the amount of stranded gas in Nigeria is about the equivalent of 5.2 Gigawatts or 5000 megawatts. Stranded gas is the gas that cannot be delivered to power plants because of infrastructural challenges, such as lack of pipelines. Industry operators blame this on lack of investments in the sector, which they trace to investor apathy.
He stresses that Nigeria must create the environment that makes international investors have trust in the system and operational environment; that government would not change the goal post in the middle of the game.”
He urged the government to de-risk the sector by making the power value chains to work, stressing that unless this happened financial institutions would not participate in the power sector. “If there is a break in the value chain the investors would be discouraged and they will withdraw.”
