Nigeria’s energy sector remains a sore point in the country’s economic development and exhibits a contradiction of sorts. While Nigeria is Africa’s biggest oil producer, it refines barely 10 percent of its oil and relies on refiners abroad.
Worse still, the country has Africa’s biggest gas reserves but sells the bulk of this gas to other countries even though it had 85 percent of its power sources from gas-fired plants. Even with abundant sunshine and vast water resources, Nigeria cannot produce enough power for its people.
To resolve this problem, the Federal Government created an Economic Recovery and Growth Plan (ERGP), a medium-term structural reform created in 2017 to diversify Nigeria’s economy, including expanding the power sector infrastructure.
It projected that electricity supply would continue to grow, hitting 10,000 megawatts (MW) by 2020. Despite installed capacity of 12,000 MW, and actual generating capacity of more than 8,000 megawatts, distribution continues to hover around 4,000 MW since 2016.
The Federal Government also created the Power Sector Recovery Programme (PSRP); a series of policy actions, operational, governance and financial interventions to be implemented by the government to restore the financial viability of the power sector, improve transparency and service delivery, and reset the Nigerian Electricity Supply Industry (NESI) for future growth.
The aggressive nature with which the present administration is pursuing the PSRP, many are optimistic that the ERGP’s goal for power generation might be achieved; even though there might still be issues with distribution given the state of distribution infrastructure currently.
In furtherance of this goal, the Ministry of Budget and National Planning conducted Focus Labs in six priority sectors: Manufacturing, Processing, Agriculture, Transport, Power and Gas. These sectors were identified as having the greatest capacity to drive economic development, foster inclusive growth and create employment for citizens.
The focus labs were designed to develop critical projects and resolve complex inter-agency problems that inhibit private sector investments in these sectors. The actualisation of the ERGP is heavily reliant on improved power and gas supply and the success of the other identified sectors heavily depend on the success of the Power sector. This led the Lab to focus on increasing private sector investments in electricity generation and the expansion of the domestic gas market.
Nigeria is banking on achieving these through twenty-three new and nine revitalised projects in on-grid gas and solar generation as well as large, mini and micro off-grid solutions. With the ninth largest gas reserve in the world, the government has identified gas as a critical enabler to powering the Nation. The planned gas-to-power plants aims to generate an additional 4.7GW of power to the national grid.
The projects conceived at the Focus labs aim to attract $8.6 billion in private sector investments and create over 18,000 direct and indirect jobs over the next three years. These investment commitments are expected to come on stream over the next 18 to 36 months with all projects expected to be active by 2020. In this first wave of Labs, 164 projects were conceived from a collaboration of Government MDAs, international organisations and about 300 private companies.
The highly politicised nature of the power sector means that the viability of the projects will be heavily dependent on the outcome of the 2019 elections. While implementation plans have been developed with planned governance, a change in administration might stall and even halt the ERGP projects.
This first wave of labs stands to be extremely beneficial to the country if the political will to implement them are followed through. We expect to see a series of future labs carried out over the coming years and it is critical for the Government to ensure that these projects are seeds that bear fruit.