The Mambilla hydropower project: The journey so far

The journey to construct Nigeria’s largest hydropower project started in 1972. However, this journey has been in fits and starts. At inception, the hydropower project was to generate 2,600 megawatts (MW) of electricity. However, the project stalled on many occasions under both military and democratic governments. It would take 35 years for a contract to be finally awarded to the Chinese consortium in 2007.

Afterwards, there was progress. Contractors completed the ground survey for the project in 2010, and it received environmental approval in 2011. In 2012, the project owners proposed to increase its capacity to 3,050 MW by including four dams and two underground powerhouses to the initial plan. Still, another stall in the project was the administrative clash between decision-makers and executive leaders in government. It would take another four years for government approval after resolving the administrative disputes.

In 2017, the Federal Executive Council (FEC) approved and awarded the Mambilla hydropower project development contract to a consortium of Chinese companies, including China Energy Engineering Corporation and Sinohydro. The contractors estimated project cost at US$5.8 billion. Later in the year, efforts were made to begin construction; however, the project was stalled owing to landslides and legal disputes. In February 2020, the International Court of Arbitration resolved the disputes. The Federal Government is now finalising settlements with Sunrise Power and Transmission Company Limited (SPTCL). The company previously faulted the Federal Government of breaching its 2003 agreement by awarding a separate contract to the Chinese consortium in 2007.

Now that the relevant parties have resolved major obstacles have, construction was expected to begin in 2020. The hydropower project is now estimated to cost US$4.8 billion, credit to the government for negotiating a lower fee with the transaction parties. Chinese Export-Import (Exim) Bank will fund 85 percent of the project cost, while the remaining will come from the Federal Government through counterpart funding. When completed, the plants will evacuate generated electricity to the national grid through 700-km high-voltage transmission lines that connect Makurdi and Jalingo.

It remains uncertain if the contracted consortium can complete the Mambilla hydropower project within the projected seven years. The reasons for these doubts are the typical project delays in Nigeria, financial constraints of raising the counterpart fund, and of course, the coronavirus (COVID-19) pandemic. COVID-19 is likely to impact investments in sub-Saharan Africa. Mambilla is very much a capital-intensive project, and as such, there could be financial issues in the future.
On the positive side, if the 3,050MW project gets completed earlier than scheduled, Mambilla will become the largest hydropower project in Africa until others are complete.

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The Challenges
Network Unreliability

Network unreliability has impacted the on-grid electricity supply in Nigeria. According to a Rocky Mountain Institute report, Nigerian utilities have the third-lowest reliability in sub-Saharan Africa. Ninety percent of the grid connections are unreliable. Outages are longer and more frequent in rural areas than in urban areas. As a result of unavailable and unreliable transmission and distribution networks, an additional 3,000 MW (from Mambilla) might pose some evacuation and dispatch problems through the grid networks. So, the primary challenge would be to efficiently dispatch this additional electricity capacity to where it is needed.

Market Revenue Losses

An expensive project such as Mambilla will need to recoup most of its project cost by selling electricity in an underperforming market. Any generated electricity that is unutilised will significantly increase its generation cost and make it difficult for the investors to run their business operations.

According to a Nextier Power study, the electricity market lost a combined revenue of about ₦1 trillion in 2019. During the period, the privatised distribution companies recorded Aggregate Technical, Commercial and Collection (ATC&C) losses of 44 percent. Collection losses were about 32 percent.

Financing

Financing the hydropower project remains a challenge, and it needs to be properly monitored and prudently managed. The loan from the Chinese EXIM Bank will likely add to the fiscal burden on the Federal Government, in addition to the 15 percent counterpart funding. Also, there are other sectors of the economy in need of financing for infrastructure upgrades. How the government intends to plan, prioritise and allocate adequate financial resources to these other sectors will need to be considered to avoid opportunity cost concerns. So far, the Federal Government has spent about US$1.8 million (₦700 million) to survey the potential project site in Taraba State.

The Prospects

Rebuild the Economy withSustainable Energy

Nigeria is slowly reopening and rebuilding her economy after the impact of the pandemic. There are opportunities to recover with the adoption of disruptive and sustainable energy technologies like hydropower. Now is the time to invest in clean, reliable, affordable and efficient renewables to bear the fruits of a resilient economy: more jobs, improved energy access and a cleaner environment. The construction phase alone of the Mambilla Project can create 50,000 temporary and permanent jobs. Dollar for dollar investments in clean and renewable energy creates three times the number of jobs than fossil fuels. Also, Sustainable Energy for ALL has recently estimated that 238 million households will need to gain electricity access in sub-Saharan Africa, Asia and island nations by 2030 to achieve universal access. An operational Mambilla power plant can contribute to this goal by providing about 4.7 billion kilowatts (kWh) of electricity a year to Nigerians.

The West African Power Pool

As a result of unavailable distribution networks, the Transmission Company of Nigeria (TCN) is planning to export some of the stranded electricity (about 3,000 MW) to the West African Power Pool (WAPP). There is a likelihood that the electricity generated from the Mambilla power plant could get stranded on occasions.

WAPP
, as it concerns large-scale energy projects, can help optimise Mambilla’s generation capacity. The electricity trading pool provides an opportunity to facilitate large economies of scale; improve regional market competition at wholesale and retail levels, and ensure electricity supply security within the region. WAPP currently consists of 14 member countries and 27 national utilities. Seven percent of the region’s electricity trade is done among ten connected countries. The World Bank already estimates that electricity trading in West Africa could lead to cost savings of about US$5-8 billion per year.

Leverage on the Presidential Power Initiative (PPI)

The construction of the Mambilla hydropower plant will result in more corridors to evacuate electricity to major load centres in the country. Generating more power to evacuate creates an opportunity for an alignment with the Presidential Power Initiative (PPI) (commonly known as the “Siemens Deal”). The initiative intends to resolve existing challenges in the power sector and increase electricity supply for future power needs. The PPI targets a grid capacity of 25,000 MW by 2023. This objective will be realised by resolving the constraints at the transmission and distribution networks. The Mambilla project can leverage on the PPI to ensure that it evacuates most of its generated capacity to the grid.

Utilise the Dams Beyond Electricity Supply

Besides large-scale electricity supply, the four proposed dams can also help control flood, improve irrigation and promote recreational activities. Above all, the proposed dams will contribute to the agriculture, manufacturing and tourism sectors of the economy. The increase in the dams’ size (in 2012) was to enable irrigation and farmland development to improve agricultural production and food security. States like Benue and Taraba can benefit significantly to relieve their socio-economic and security problems.

Conclusion

The Mambilla project journey has been in fits and starts. Over the years, the project stalled on many occasions under both military and democratic governments. Despite the project’s chequered history, there remains an optimistic future, albeit cautious. Now that the major obstacles have been resolved, construction will begin. The construction phase needs to proper planning and close monitoring to avoid further delays. If completed on time, Nigerians could benefit from a reliable and efficient power supply for many years.

Nigeria, a country looking to accelerate economic growth, can also leverage the Mambilla project to rebuild its sustainable energy economy. Mambilla can also contribute to developing the West African electricity trading market, upgrading electricity supply networks and promoting agriculture, manufacturing and tourism.