Energising the power sector with AfDB’s $250m loan

As another official attempt to resuscitate a vital but critically ailing sector of the Nigerian economy, a plan by the Africa Development Bank (AfDB) to disburse $250 million into Nigeria’s off-grid energy sector to boost electricity supply could not have come at a better time. The power situation in the country has remained for decades an embarrassment to all.

For a country that claims to be the most populous in Africa, with over 200 million citizens, an average daily wheeling capacity of 4,100 megawatts (MW), according to recent data from the Transmission Company of Nigeria (TCN), is abysmal. That output cannot even meet the social needs of the people.

The Minister of Power, Adebayo Adelabu, gave the hint of the impending disbursement in a message he posted on the social media platform X at the Korea-Africa Economic Cooperation (KOAFEC) Ministerial Conference 2023 held in Busan, South Korea. He indicated that the fund for the Nigeria Electrification Project (NEP), under the Rural Electrification Agency (REA), is underway.

The NEP is a Federal Government initiative that is private-sector driven and seeks to bridge the energy access deficit by providing electricity to households, schools, hospitals, medium and small-scale businesses in remote and poorly served communities. The project uses Solar Home Systems (SHS), captive power plants to sustain off-grid solutions.

The project is expected to provide more than 500,000 households with access to electricity; with about 76.5 MW generation capacity, including eight universities and 20,000 MSMEs in renewable supplies.  The project promises immense opportunities for private operators in mini-grid systems that will cover 250 sites; 24,500 productive use of solar PV appliances installations.

For an economy that is announced as the largest in Africa, that energy capacity cannot deliver what local manufacturers need to produce at a scale that will keep a tolerable lid on unemployment and inflation figures. Indeed, for a country that is wooing Foreign Direct Investors (FDI); and one that is lagging in the sidelines at concerts of emerging powers (BRICS) and big global players in the G20, that energy capacity is a non-starter.

For the umpteenth time, Nigerians have queried the failure of the power sector to scale up on generation, distribution and transmission of adequate and affordable electricity to millions of Nigerians. The World Bank has reported that 85 million Nigerians do not have access to grid electricity. That represents 43 per cent of the population and a deficit that is among the world’s highest. Those who are on the grid have had to endure debilitating outages that make public power unsafe for sensitive 24/7 production. Many have opted for private alternatives at prohibitive costs.

Before he left office, former president Muhammadu Buhari signed an amendment to the Constitution to decentralise the power sector and empower states and the private sector to participate in power generation and distribution.  In June, President Bola Tinubu signed into law a new electricity Act, which authorises states, companies and individuals to generate, transmit and distribute electricity. The new law repeals the Electric Power Sector Reform Act (EPSRA), signed by former President Olusegun Obasanjo in 2005.

The Act consolidates all legislations dealing with the electricity supply industry post-2013 after which some private companies were licensed to generate and distribute power. The new law provides a framework to accommodate rural, unserved and poorly served sectors through use of conventional and renewable off and mini-grid alternatives.

With that, states are now able to issue licences for private operators to build power plants within their catchment areas. However, the Minister of Power needs to come clean on which of the assisted power programmes and projects he is referring to. This is because previous governments had equally flagged off similar power projects, some of which have not been delivered. As far back as June 2018, the World Bank had approved a $350 million low-cost loan to the Federal Government, through REA, to provide technical assistance for independent solar solutions to rural areas that have little or no potential of receiving power systems in a reliable and affordable manner.

On June 9 this year, the World Bank approved what it called Additional Financing of $449 million in IBRD loan and $301million IDA credit for further support of the performance-based Power Sector Recovery Operation (PSRO). According to the bank, the programme aims to continue to improve the reliability of electricity supply, achieve financial and fiscal sustainability of the Nigerian power sector, as well as enhance its transparency and accountability.

Nigerians are aware that the REA had embarked on a comprehensive electricity project to accelerate connectivity to seven universities and two associated Teaching Hospitals across the country; together with 500,000 households that are headed by women, 700,000 MSMEs and 250,000 others.

As at November 9, 2022, the World Bank Group had announced a major initiative to electrify Sub-Saharan Africa (SSA) with distributed renewable energy (DRE). The World Bank feared then that at current rates, over a billion people in SSA will be without electricity by year 2030.

While the advent of funders and creditors in the electricity sector is salutary and welcome, the monitoring and evaluation (M&E) teams at both the World Bank and AfDB should collaborate to coordinate all the promises and funds released in the sector. Also, all disbursements, at least in the last 10 years, be evaluated with a view to ascertaining what projects have been delivered and which are still in the works before fresh facilities are approved. This will minimise or eliminate possibilities of overlap.

It is instructive that some past rural electricity projects have not seen the light of day as they are often abandoned. In August 2017, the REA lamented that over 1,600 projects were abandoned by contractors in different rural communities for more than five years. The REA had said that it would need $204 million to complete those projects.

The new minister should be interested in the state of all REA projects before new loans are procured. This administration cannot afford to toe the business-as-usual attitude of previous regimes, nor propagate fake promises. The Buhari administration for instance promised to deliver 40,000MW of electricity in eight years but could not even sustain what it inherited.

The government of Bola Tinubu should take a critical look at the sector, and proffer solutions to all challenges including incessant grid collapse. The grid failed twice in September. In 2022, it failed a record 22 times. Each failure throws the whole country into darkness with attendant huge economic losses. It is time to give the country a real facelift in power generation, transmission and distribution using the paraphernalia of reforms and new laws enacted.