BusinessDay
NigeriaDecides2023

Gas and FX shortage cripple Nigeria’s power generation

Leading power generation companies in Nigeria GenCos say their operations have been crippled by persistent shortage of gas and foreign exchange which they need for routine maintenance of their turbines or to bring in new equipment.

BusinessDay learnt that the OKOLOMA gas plant operated by the NNPC gas subsidiary has been shut down since March this year, taking out atleast 1000MW of power generation at atime of surging diesel price.

While there are on-going contacts between the presidency, NERC and the GenCos with NNPC but these engagements have so far not produced the required result. The gas plant remains shut and the GenCos cannot generate the power that the country needs.

On the FX side, our reporters learnt that the five leading GenCos have put in a request for just over $5m but progress is being held down at the Central Bank which must approve the FX requests.

The presidential power initiative has dWorld Bank disbursed dollars held on its behalf by the Central Bank but a good part of this now needs to transferred into an account where it can be easily accessed by the power companies after required approvals.

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The GenCos whose costs are calculated at the official foreign exchange rate are unwilling to go to the parallel market to source their forex needs. Some that have tried claim they could not find the dollars even where they were prepared to pay the black-market rate of N660 to the dollar.

Government officials told our reporter in Abuja that more efforts will be made again Friday to untie the nots holding the FX disbursement and a deal could be reached whereby FX is made available to the GenCos by the CBN via letters of credit. This is because of fears that if cash was given, company officials could go to the black market with it.

An 8-page March 29th document prepared by a senior government official and titled “Update and analysis on recent generation challenges in the NESI”, said, peak generation had fallen from 5,316MW to 4,024MW, a drop of about 25% and at times generation dropped to as low as 3,000MW due mainly to gas shortage.

According to the document, the specific events that have led to the crash in available generation in the region of 2400MW resulted from the shut down of Okpai power plant operated by AGIP, the shut down of Ibom Power plant since January, the loss of 400MW at Afam VI power plant, the challenges at Egbin power plant impacting up to 800MW of generation capacity.

Stakeholders and even senior officials in government are agreed on the root causes of Nigeria’s power supply crises. They include age long issues like the lack of firm gas supply agreements, over reliance on gas to power, gaps in designation of strategic national gas supply infrastructure.

Others are the unreliability of the transmission network, TCN, low contribution of embedded and mini-grid which hovers around 600MW and persistent late payment to GenCos as well as FX shortage that hamper repairs and routine maintenance of the plants.

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