BusinessDay

Nigeria takes 8yrs to add 800mw despite investment

Nigeria’s power sector is moving at a snail pace as the average constant capacity delivered to the country’s national grid has recorded an additional 800 megawatts despite billions of dollars investment and an eight-year-old privatisation exercise.

For decades, the country has suffered from chronic shortages of power, and repeated promises to fix the problem have long been a staple of election campaigns.

Data sourced from the Nigeria Electricity System Operator showed Generation Companies (Gencos) delivery to the Distribution Companies (Discos) via Transmission Company of Nigeria (TCN) has increased by 23 percent from an average of 3,400mw in November 2013 to an average of 4,261.25mw within the last 30 days with no system collapse.

“So, this is a ‘big’ milestone, one with real value, albeit it has taken far longer than expected to achieve,” Eyo Ekpo Eyo, a former commissioner at the Nigerian Electricity Regulatory Commission (NERC), told BusinessDay.

“Certainly, this has more value than the usual talk of 13,000mw installed capacity (but no fuel or transmission capacity to move it around),” Eyo said.

This development is a sign of where Nigeria’s power sector could be if the various moving parts of Nigeria’s electricity value chain were allowed to work as designed, he stated.

Pedro Omontuemhen, partner and energy, utilities and resources leader at PwC Nigeria, believes so much more is still required to meet Nigeria’s power needs despite the additional increase of 800mw.

Read also: How Nigeria can successfully solve her power sector puzzle

“This is a good development, but we are still far away from the required capacity for Nigerians energy needs,” Omontuemhen said, noting, “Between generation and transmission, Nigeria is losing a lot of power – 9,000mw – to all sorts of fixable problems.”

Nigeria has the capacity to produce 13,000mw of power compared with more than 58,095mw for South Africa, which has a similar-sized economy and a quarter of the population. But its aging grid delivers only about 4,200mw of power to its over 200 million citizens — roughly what the city of Edinburgh provides for 548,000 residents.

BusinessDay analysis shows that although Nigeria’s transmission capacity has increased by 20 percent to an average of 4,200mw in the last eight years, Nigeria’s population has soared by 57 percent in the last eight years from 131 million people to 206, according to the latest World Bank estimates.

While Nigeria seems to be moving at a snail pace, the stories for other African countries seem different.

For instance, Egypt, a country with a population of 104 million inhabitants, added a total of 28,229mw to its national grid between December 2015 and December 2018, resulting in a total installed capacity of 55,000mw.

According to the United States Department of Commerce, International Trade Administration, this has been achieved through a fast-track project that worked on installing 3,636mw of electricity in 8.5 months and is worth $2.7 billion.

Egypt also signed another project with Siemens in March 2015, which added 14,400mw in 2.5 years by building three mega combined power cycle stations.

“By converting old simple cycle power plants to combined cycle, another 1,850mw were installed,” the US report said.

In Ghana, between 2000 and 2020, electricity generation capacity increased at a rate of 6.4 percent a year from 1,358mw to 4,695mw, according to data from the country’s energy agency.

“Nigeria needs to have a holistic review of policy in the power sector,” Ahmad Rufai Zakari, special adviser to the President on Infrastructure, said at PwC’s 12th Annual Power Roundtable event a few weeks ago.

He explained the need for a regulatory and policy alignment that includes raising tariffs in a sustainable way, which will help eliminate the gap between cost-reflective tariffs and allowable tariffs.

Nigeria’s current electricity generation stands at about 4,000mw but the generating companies have an installed capacity of 13,000mw.

This development means that the number of Nigerian electricity consumers has more than doubled, which means more people are forced to generate power in small units from off-grid sources, usually fossil fuel-powered generators.

“Within this same period we generated 800mw, backup power supply has doubled, growing exponentially to an estimate of about 40,000mw,” Ekpo said.

Despite prevailing challenges, the Central Bank of Nigeria (CBN) has in the past seven years spent over N2 trillion to keep the nation’s power sector from collapse.

The interventions include Power and Aviation Intervention Fund (PAIF), hovering at about N300 billion, Nigerian Electricity Market Stabilisation Facility (NEMSF) at about N213 billion, N140 billion Solar Connection Intervention Facility, over N600 billion tariff shortfall interventions and another N120 billion intervention designed for mass metering, among others.

“Despite this level of intervention, the generating companies had estimated receivables of over N400 billion in 2020 alone. While the interventions have been central in ensuring the profitability of operators along the industry’s value chain, they remain insufficient and unsustainable,” noted Augusto & Co.

Omontuemhen advocates the need to create an environment that gives the private sector the confidence to invest in the power sector; increased efforts to achieve 100 percent metering, and a reorientation of the mindset of the populace – a shift from power being considered a public good that the government provides to a service which requires payment, among others.

The International Monetary Fund estimates that Nigeria’s economy loses about $29 billion a year because of electricity supply problems. Ninety percent of the industry provides its own power. The Manufacturers Association of Nigeria says that roughly 40 percent of the cost of production goes to power.

“The inadequacy of electricity supply is one of the biggest impediments to the competitiveness of the manufacturing sector in 2022,” Muda Yusuf, immediate past director-general of the Lagos Chamber of Commerce and Industry, said.

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