Nigeria’s power sector: The safari so far

As at today, over 56 per cent of the Nigerian populace (Approximately 97 million people) have no access to grid electricity and those who are connected to the grid face substantial power interruptions. Systemic issues affect all phases of the power value chain from generation to distribution thereby forcing Nigerians to rely on self-generation. An estimated 41% of Nigerian businesses generate their own power supply to augment the national grid supply according to a recent World Bank Report. Nigeria lags far behind other developing nations in terms of grid- based electricity consumption with 126 kWh per capita. Based on the Nigeria’s GDP and global trends, electricity consumption should be at least five times higher than it is today.

A recent study of power generation statistics between January and August 2015 conducted by the Power Advisory Group within the presidency showed that only 25% of Nigeria’s 12,522 MW of installed capacity reaches the end user. Widespread inefficiency means that only 3,879 MW of this capacity is operational, with 3,600 MW transmitted and 3,100 MW distributed. Most of the short fall which was about 5,381 MW is capacity that is unavailable due to obsolete equipment and poor maintenance or to ongoing maintenance and repair activities at existing power plants. Also, about 3,262 MW is non-operational primarily due to gas, water, high frequency, and transmission line constraints.

However, the purpose of this discourse is not to over emphasize the infrastructure deficiencies in theNigerian power sector but to focus on the recent improvements and sugges t recommendations on how these green shoots can be sustained in the medium to long term. You will recall that at the commencement of the Buhari/ Osinbajo led democratic administration on May 29th 2015, the Nigerian power sector was plagued with several challenges which included under-utilization of generating plants partly due to insufficient gas availability occasioned by frequent vandalism of gas distribution assets, inadequate transmission infrastructure and very high distribution losses coupled with liquidity and viability issues affecting most of the successor distribution companies.

Although these challenges still exist today, it is important to note that since June 2015 the power sector has recorded some operational improvements, mainly driven by increased availability of gas. In August 2015, Nigeria hit historical highs for both peak generation and total energy generated across the system at 4,811 MW and 4,213 MWh/h respectively. Transmission losses fell by 10% between June and August 2015 compared to the first four months of 2015. The recent decisions by the new government to fast track execution of the first set of World Bank partial risk guarantees, granting of sovereign immunity waiver aimed at progressing development on the first tranche of project-financed IPPs and the interim extension of the TCN management contract are also very commendable and has helped to res tore investor confidence in the sector.

Though these improvements are laudable, they are merely the beginning of the extensive change required in the power sector. This administration has demonstrated a rare dedication and determination to providing stable and constant electricity to all Nigerians, which has manifested in the post-handover improvement of electricity supply. In spite of this recent progress, the new administration must tackle some fundamental structural issues before electricity supply can meet the ever growing demand.
The most critical issue is to ensure that the successor distribution companies are able to generate the revenues to fund their wholesale obligations , cater for their operating expenditure requirements and invest in new and modern capacity. Reviewing electricity tariffs to be more cost reflective is just one piece of the puzzle. The required interventions cannot be limited to any specific segment because of the contemporaneous nature of the power value chain, in which disruptions cascade across the whole sector, e.g., a decrease in power generation has an impact on the power distributed and in turn distribution collection losses have an impact on the financial health of all market players.

Several resilient initiatives will be required to develop the power sector and improve electricity supply which will undoubtedly lay a solid foundation for the actualization of rapid industrial development that will transform Nigeria to a highly industrialized economy. I have no doubts that the improvements highlighted above have helped to increase confidence in the future of Nigeria’s power sector. Nonetheless, huge challenges remain in all phases of the power value chain if electricity supply is to meet the current electricity demand. The long-term viability of the Nigerian power sector is tied to the health and sustainability of all stages of the value chain from generation to payment by end users. We all have a significant role to play.

Moses Nasamu (@Mos_Hygh) is an Electrical Engineer and a certified Management Consultant who practices in Lagos Nigeria. He currently volunteers as a Trustee of Energy Savers Nigeria, a Non-Profit Initiative.