Five days ago, Nigeria’s electricity workers called off of a nation-wide strike that had lasted for twenty-four hours and led to a national grid collapse leading to total darkness across the country – the twelfth of such collapse in twelve months.
On one hand, the national grid collapses occur often in Nigeria. The country’s Electricity System Operator said the national grid collapsed four times in January, once in February, twice in May, twice in November and during the National Union of Electricity Employees (NUEE) strike action, making a total of 12 times the country has been thrown into complete darkness in 2019. The collapses are largely due under-investment in critical transmission and distribution infrastructure.
On the hand, the electricity employees’ strike is as a result of fallout from Nigeria’s 2013 privatisation process. Some of the issues that needed attention were enumerated by Joe Ajaero, President of the NUEE. These included an allegation against the Bureau of Public Enterprise (BPE) for failing to address and pay over 2000 disengaged Power Holding Company of Nigeria since 2013. Ajaero also alleged underpayment of severance of over 50,000 ex-PHCN staff and illegal transfer of schools built by the union to investors.
This looks like a simple poorly managed labour case. But investors, analysts and engineers in Nigeria electricity industry and market say the sector is highly inefficient and price regulation is stifling it. From generation to distribution, companies are unable to sell electricity at a profit. Prices at which electricity distribution companies sell are below what it costs to generate and distribute electricity.
This has made the sector unattractive and led to investment shortfalls. As a consequence lack of investment in critical infrastructure, power evacuation has been inadequate which is largely responsible for the recurring supply shortages in the nation.
“Two mistakes have been made in the past; one of them is not managing expectation and not implementing the master plan as it was designed originally so with these challenges it’s possible for Nigerians to grow impatient,” Valentine Ozigbo, the current President and CEO of Transcorp PLC said in a recent interview with BusinessDay.
Ozigbo noted that just a few people are paying for power which is inadequate to cater to the value chain.
At every point along the power chain, Nigeria suffers from lack of investment; also, it does not have adequate pipeline infrastructure to transfer some of the world’s largest natural gas reserves to power plants.
“So to cover for this gap we need serious investments in transmission and distribution. We need good policies to solve this problem,” Ozigbo said.
Also, the distribution companies are so deeply indebted and underpaid to the tune of nearly $4 billion, according to their trade association that they do not invest in plants or meters that would enable them to collect from customers and improve collection rates of about 60 percent.
“We have to look at the entire value chain issues together not in part and solve the problem holistically. There are many reasons why it’s unable to fix the power sector because there is no enough alignment in technical, commercial and political level,” Ozigbo told BuisnessDay.
Nigeria has the capacity to produce 13,000 megawatts of power, compared with more than 50,000MW for South Africa, which has a similar-size economy and a quarter of the population. But Nigeria’s ageing grid delivers only about 4,000MW of power to its 200 million citizens — roughly what the city of Edinburgh provides for 500,000 residents.
Emmanuel Eru, technical solutions engineer at A1 Power Technologies Limited, an energy services and solutions provider said there are many inefficiencies in the power network from generation to distribution, which leads to these national grids collapses.
“Distribution companies reject load because they lack the capacity to take them and there is theft along the value chain too,” Eru said.
In solving the problem, Emmanuel Eru noted that smart metering can help resolve these challenges and it’s already working very well in South Africa.
“It will provide real-time feedback regarding what is happening in the system and this will help with problem shooting,” Eru said.
Efforts to reach TCN for reaction on the latest collapse proved abortive. Neither a text message nor a call made to the company’s spokesperson was successful.
The TCN had, in a statement, said the incessant system collapse was due to high voltage following a massive drop in load by the electricity distribution companies.
The International Monetary Fund (IMF) 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 (MAN) says that roughly 40 percent of the cost of production goes to power.
Diesel generators are the staple coping mechanism not just of Nigerian ministries, but of industrial estates, housing developments and shopkeepers, spewing pollutants while costing more than twice what power from the national grid would.
Since Nigeria privatised the power sector in 2013, the price set for electricity is not yet market reflective even as the naira has fallen by half against the dollar and inflation have hit double digits. The current price is so low that distributors operate at huge losses, according to the Association of Nigerian Electricity Distributors.
This year, Tony Elumelu, one of Nigeria’s richest men, announced plans to invest $2.5 billion in power. His company Transcorp won a $293 million bid in May for a second power plant, in which it plans to invest $190 million, roughly doubling the firm’s capacity to about 2,000MW.
Nigeria’s ministry of power has partnered with the private sector to electrify markets containing tens of thousands of family-run shops and secured $550 million in funding from the African Development Bank and the World Bank for rural electrification.
