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Nigeria’s manufacturing sector’s GDP to hit N49.6tr with 40,000Gwh of power supply

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If electricity supplied to industries increases to 40,000Gwh within the next seven years, the manufacturing sector’s contribution to the Gross Domestic Product (GDP) is projected to rise to N49.6 trillion with at least 46.59 million jobs created.

According to estimates from PwC Nigeria, increasing electricity supply to industries has an indirect effect on employment in other sectors of the economy at a multiplier rate that almost triples direct employment.

Besides, stakeholders in the power value-chain noted that consumers only pay for about 1,000MW of the average 3,500MW energy distributed daily, hence causing a dislocation in the value chain.

To address financing challenges in the power sector, the stakeholders advocated improved revenue collection, metering of consumers and review of energy tariff to check losses suffered by value-chain operators.

Speaking at the yearly power and utilities roundtable organised by PwC, themed “Financing the Power sector: The facts, fiction and the future”, Partner and Chief Economist, PwC Nigeria, Dr. Andrew Nevin noted that with population growth rate higher than GDP growth, there is a need to increase power generation and utilisation for productive use.

Nevin, who spoke on “Effective power sector financing: An economic perspective”, noted that people in the diaspora are the ones sustaining the economy as a result of their huge remittances, adding that the country needs an investment rate of at least 26 per cent of the GDP to grow at 7%.

“To revitalize liquidity in DISCOs, we consider 50% of the energy received by DISCOs is transmitted to industries at a cost-reflective rate of N80/Kwh. At N80/Kwh charged to industries, an estimated N400 billion will be injected into the power sector yearly.

“The effect of charging industries a tariff of N80/Kwh and supplying 50% of electricity received by DISCOs to industries 24/7 is an increase in the level of manufacturing GDP from N6.4 trillion to N13.3 trillion”, he added.

On his part, Managing Director/CEO of Niger Delta Power Holding Company (NDPHC), Chiedu Ugbo in his keynote address, advocated the need to explore alternative financing models that would spur economic growth and revitalise the power sector.

Citing various models that have been adopted in the country, Ugbo noted that private investment remains the future power financing in Nigeria in view of the huge capital requirement of the sector.

He, however, identified the need for the government to play its role in the market with the well-coordinated policy as it is currently doing under the Power Sector Recovery Plan – with Payment Assurance Facility (PAF) of N701bn and N600bn as precursors.

He also stressed the need to empower NERC to perform its responsibilities, saying that the quality of regulation is critical.

“Transparent, fair and accountable regulators that produce credible and predictable regulatory decisions are necessary for creating the certainty around market access, tariffs, and revenues that encourages investment”, he added.

On the push for commercially viable sector driven by the cost-reflective tariff, he said there was a need for balance between sector insolvency and political pressure, saying: “how do you increase tariff where supply is intermittent with brownouts and blackouts resulting in political pressures to maintain low electricity prices?”

The Senior Special Assistant to the Central Bank of Nigeria’s Governor on Energy and Power, Ebipere Clark stated that many of the interventions in the power sector have been repaid, adding that focus should be on revenue collections for viability in the sector.

“It has been observed that maximum demand on the grid is at 9 pm, showing that many households use energy at that time. There should be transparency in consumption billing and collection, rather than focusing solely on the tariff”, he added.

From the electricity distributors’ perspective, the Chief Financial Officer of Ikeja Electric, Mrs. Olubunmi Olukoju stressed the need for stiffer regulations to ensure that consumers pay for the electricity that they consume and punished whenever they bypass or tamper with meters.

According to her, energy theft has increased, despite the metering exercise embarked upon by distribution companies.


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