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Nigeria's leading finance and market intelligence news report.

FG’s N104bn budget for generators enough for 250mw power plant

Nigeria plans to spend N104 billion ($252 million) on the purchasing and maintaining of power generating sets for its ministries, departments and agencies next year, an amount that has been deemed a wasteful use of resources for a country struggling to keep the lights on for its 200 million people.

A breakdown of data gleaned from the 2022 budget showed the federal government will spend N85 billion to purchase brand new power generating sets while another N19 billion will be used for the purchase of petrol or diesel for government agencies scattered across Nigeria’s 774 local government areas. The total comes to N104 billion or $252 million.

That amount can build a 250-megawatt power plant using global market prices which puts the cost of building a one-megawatt power plant at $1 million.

That’s more than enough to power all the government’s ministries, departments and agencies and just enough for the homes of 250,000 households or at least one million people with the assumption of four people per household.

“These numbers the federal government is proposing to purchase generators are outrageous,” Ayodele Oni, energy lawyer at Bloomfield law practice, told BusinessDay.

“How can we be spending this much on generators when the average international price for a kilowatt of power is one million dollars?” he asked.

Oni advised the government to leverage its gas potentials to power its ministries and agencies by building more power plants rather than spend so much on generators.

A further breakdown of the budget showed Federal Ministry of Finance, Budget, and National Planning proposed a sum of N82.03bn for the purchase of new generators followed by Federal polytechnic Ekowe with N237.8 million, Nigerian Institute of Medical Research (N230 million), Federal Teaching Hospital Ido-Ekiti (N140.8million), Federal college of education, Ondo (N135 million) and National Identity Management Commission (N131.5 million).

For Daniel Adebayo, a Lagos-based energy lawyer, the majority of these expenses on brand new generators are inflated.

“Why is a government agency lazily spending N237.8 million on brand new generators when they can do the hard work of constructing new power plants,” Adebayo asked.

He noted that the opportunity cost of this generator expenses can provide permanent solutions to some of Nigeria’s power challenges.

“Government ministries are not the only ones feeling the heat, a lot of businesses are also struggling to survive, or in the best-case scenario, many would at least downsize,” Adebayo said.

In Africa’s biggest economy, petrol and diesel generators guzzle cash and spew pollution, but they are reliable in a nation where nearly 80 million people – some 40percent of the population – have no access to grid power.

Read Also: Senate seeks ban of electricity generators despite poor power supply

An estimated 22 million small-unit generators are in use by Nigerians, and they plug a vital gap in a country that ranks 171 out of 190 nations in terms of access to electricity, according to the World Bank.

Nigeria’s grid has an installed capacity of roughly 12,522 megawatts, but due to poor infrastructure, it is only able to deliver around 4,000 megawatts most days, according to the US Agency for International Development.

As of February, 43 percent of Nigerians still had no access to on-grid electricity, according to the World Bank, and Nigeria loses $26.2bn annually (the equivalent of two percent of its gross domestic product) due to the lack of reliable electricity.

To bridge the gap between supply and demand, Nigerians are forced to generate power in small units from off-grid sources, usually fossil fuel-powered generators.

Along with the financial cost of generators are health and environmental costs. Two out of three generator users in Nigeria complained of hearing impairment, according to data cited in a 2019 report by the Access to Energy Institute (A2EI), a non-profit research and development institute working to advance the use of solar energy in developing countries.

“The noise is delirious,” Bello Ajayi, a businessman who works close to one of the government’s major agency told BusinessDay. “Every time a nearby generator goes off, it’s like a part of your soul you never knew was missing returns.”

“Everybody hates them,” he added, “but everybody including government officials has one.”

Most Nigerians are aware of more health and environmentally friendly options such as solar energy, but cost, quality and lack of expertise make implementing them difficult. That is why more investment in solar energy is needed, said Segun Adaju, the president of the Renewable Energy Association of Nigeria.

Solar potential

Nigeria gets between five to seven hours of sunlight daily, depending on the region. A 2019 report by the director-general of the Energy Commission of Nigeria estimated that if one percent of Nigeria’s land area were to be covered with a solar technology of five percent efficiency, about 333,480 megawatts of electricity could be generated, which is “more than enough for the country”.

Experts believe that solar power in Nigeria is currently underutilised.

For example, Nigerians are likely to own a solar-powered torchlight, solar-powered fan and perhaps solar-powered refrigerator, but each comes with its own solar plate and energy generation unit, rather than plugging into a single solar generator capable of powering an entire house and every appliance.

A solar generator with the capacity to power all of those devices is barely available on the market and inaccessible to the majority of low- and middle-class Nigerians. A high-capacity solar generator can cost well above 400,000 naira ($972.05). By comparison, the monthly minimum wage in Nigeria is 30,000 ($72.90) naira. And even when Nigerians can afford them, there is still a dire lack of expertise to help people maintain solar-powered generators.

In December 2020, the Nigerian government launched the Solar Power Naija programme, an ambitious project targeted to provide solar electrification to 25 million Nigerians who were not previously connected to the grid.

The programme plans to provide five million new off-grid or mini-grid connections and “incentivise the creation of 250,000 new jobs in the energy sector,” according to its website.

However, since the programme’s inception, the Rural Electrification Agency — the agency in charge of the programme — has so far deployed 100,000 solar home systems.

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