Nigerians expend over N796billion on fuelling electric power generators annually, the highest in the world, a development, some discerning public have argued, is blatantly outrageous. Ibrahim Apekhade Yusuf examines the implications for the economy
Nigeria spends an estimated sum of N796.4 billion annually on fuel to power electric generators no thanks to incessant power cuts all year round.
This figure is strikingly similar to the federal budget of N796.7 billion for capital expenditure for the current fiscal year. A breakdown shows that N540.9 billion is spent on diesel and N255.5 billion goes into the purchase of petrol annually for power generating sets.
According to a study conducted on electricity distribution among the six geo-political zones in late 2009, Nigerians enjoy only four to six hours of power supply; hence many Nigerians have to expend a lot of money to augment the rather poor supply by providing electricity for themselves.
Painful reality
To many observers, the big expenditure on power generation is perhaps a sad commentary on the low level of infrastructural development in the sector.
In the view of Godfrey Ogbemudia, Programme Director, Community Research and Development Centre, the expenditure on power largely due to inadequacy in power supply.
Speaking at the official launch of the Nigeria Renewable Energy for All Project in Benin recently, Ogbemudia explained that the figure represented Federal Government’s budget of N796.7 billion for the capital expenditure for the 2009 fiscal year for 36 states of the federation.
He lamented that in spite of the various government policies to revive the energy sector, many Nigerians still get as low as four hours of electricity supply per day, hence the need for Nigerians to embrace solar as a viable source of power.
Ogbemudia said that CREDC had been playing a key role in the deployment of renewable energy to rural communities since 2006, part of which was the installation of stand-alone solar systems for no fewer than 550 households in Edo, explaining that the solar project, also known as Nigeria-REAP, was aimed at improving access to sustainable and interrupted electricity supply using renewable energy in collaboration with Schneider Electric.
“A 2009 study on electricity distribution among the six geo-political zones in Nigeria shows that some Nigerians enjoy only four to six hours of power supply. Also Nigerians spend about N796.4 billion on fuelling their electric generators to provide themselves with electric power.”
The craze for generators
Unreliable power supply in the country has seen most households resort to the use of power generating sets as their primary means of electricity, while the state utility company, Power Holding Company of Nigeria, (PHCN), which is essentially a monopoly, hardly meets up to 20 per cent of the nation’s demand. It generates between 1,6000mw and 1,500mw. This has led to a situation where power supply from PHCN is viewed as a standby source, to be used when available, while generators are seen as the principal mode of catering for power needs.
Industries operating under the aegis of Manufacturers Association of Nigeria (MAN) spend an estimated N350 billion to fuel their generating sets annually, The Nation learnt.
To make PHCN more efficient, it was unbundled into 18 successor companies comprising 11 power generating companies, GenCos, six power distribution companies, DisCos, and one transmission company, Transmission Company of Nigeria.
The blame game
A former President, Chief Olusegun Obasanjo, has blamed his successors for the rot in the power sector.
The former President said that the country needed to generate 2,000 megawatts every year for the citizens to enjoy stable electricity.
Obasanjo, after his second coming as a civilian president, handed over to the late former President Umaru Yar’Adua in 2007 while President Goodluck Jonathan assumed office after the death of Yar’Adua in May, 2010.
The former President, spoke at a programme tagged: ‘First Green Legacy Moment with Chief Olusegun Obasanjo on Leadership and Human Security in Africa’, which held in Abeokuta.
He said subsequent administrations after his reign as military ruler between 1976 and 1979 did nothing on power generation until he returned in 1999.
According to him, leaders in the country lack the political will to confront national challenges.
He said, “Part of our problems is lack of political will on the part of the leaders. What does a leader understands about development? Any leader worth his salt should know that power is very important. It is the driver of all developments, be it social, economic, and even political.
“When I was military head of state, I developed the Jebba Dam, I developed Shiroro, I started Egbin. (Ex-President Shehu)Shagari came and completed Egbin and commissioned Jebba and Shiroro.
“Between Shagari in 1983, until I came back in 1999, there was no single dime invested in power generation. If anything, the ones that were there were allowed to go down.”
Maj-Gen Muhammadu Buhari (retd.) came into power on December 31, 1983 after Shagari was overthrown in a military coup. Buhari himself was shoved out in 1985 by Gen. Ibrahim Babangida, who stepped aside in 1993 following the tension that greeted his annulment of the June 12, 1993 presidential election, won by Bashorun Moshood Abiola.
Ernest Shonekan, head of the Interim National Government, and late dictator Sani Abacha followed while power was transferred to Gen. Abdulsalami Abubaka on the death of Abacha in 1998. It was Abdusalami that handed over again to Obasanjo as a civilian president in 1999.
Obasanjo said, “A country like Nigeria must be adding not less than 2,000 megawatts every year if we are to be moving on the path of development.
“If you will remember, when I came back in 1999, my first Minister of Power was late Bola Ige. I won’t say Bola didn’t know what he was doing and he said publicly that he would fix the power problems in six months.
“After one year, Bola with his capacity couldn’t fathom what was wrong with power. It was riddled with corruption. Then we had no money. People have forgotten that in 1999/2000, the price of crude oil was US $9 per barrel. So, I wanted the oil companies, Mobil, Total and they wouldn’t go.
“When we started having money, we started the National Integrated Power Plant. When we said the money we had should be invested in power, my successor didn’t understand; he stopped it. If for almost 20 years we did not achieve anything in power generation, then we may not be able to get it again.”
Obasanjo, who cited South Africa as an example, said with its population of 55 million people, SA generated 45,000 megawatts, while Nigeria with about 180 million people could not generate 4, 000 megawatts.
He said, “For us to say that we are industrialising the country, we must be generating much more than what South Africa is generating, say 100,000 megawatts.
“What year will Nigeria get there if we are adding 2,000 megawatts each year? For us to get to 100,000 mega watts, I leave the mathematics to you. It sounds very discouraging but that is the reality.”
Solar energy to the rescue
Although the initial financial outlay in setting up a solar-powered plant is astronomical, it can last for 25 years without fuel other than solar energy which is captured by the solar panel.
The government also recently signed a contract with a French outfit to establish a wind-fuelled plant in Katsina as a mark of its seriousness to diversify public power supply sources from the traditional hydro and thermal to wind, solar and coal, among others.
To improve power supply however, it has been realised that the private sector must play a critical role, which has led to NERC licensing about 29 independent power producers, IPPs, which are in various stages of completion.
A gas master plan has however been put in place to make gas more readily available to fuel the over 70 per cent of power plants that depend on thermal source of energy.
How other Africans are faring
In his contribution entitled: ‘Resource conflicts: energy worth fighting for?’ in the International Handbook of Energy Security’, Joshua Olaniyi Alabi said at the centre of the energy crisis bedeviling African countries is the problem of low budgeting.
He was however quick to admit that over the years, countries have spent substantial sums on institutional reforms in the power sector, including management training, improved internal accounting and external auditing, improved boards of directors, financial and operational information and reporting systems, and establishment and strengthening of supervisory and regulatory agencies.
Whether in South Africa, Rwanda, Kenya, Ghana, Togo and the across the continent, there is renewed vigour by the government in those countries to scale up investment in the area of power generation and supply.
In Rwanda for instance, there are plans to import 30MW of power from Kenya in a bid to address the energy needs of the growing manufacturing sector and bring down power costs.
Rwanda imports a combined total of 17MW from DR Congo and Uganda annually.
Importation of power will require Uganda and Rwanda to upgrade the capacity of their power transmission lines from the current 220kV to 400kV like Kenya’s.
The two countries have started negotiations that are expected to pave the way for power purchase agreements. Thereafter, Rwanda should start receiving power from Kenya by June 2015.
The 30MW will be almost twice what Rwanda imports from Uganda and the Democratic Republic of Congo. Rwanda imports a combined total of 17MW from DR Congo and Uganda annually. The imports could increase further when the country completes its high voltage power projects.
However, the importation of power will require Uganda and Rwanda to upgrade the capacity of their power transmission lines from the current 220kV to 400kV like Kenya’s.
The higher voltage transmission lines, according to analysts, should allow the three countries – which still grapple with energy deficits that have slowed industrial growth in the region – to partly address the problem.
“Upgrading the transmission lines to 400kV will allow Rwanda to address the current power shortages but also export when there is excess,” said Ntare Karitanyi, chief executive of Energy Water and Sanitation Authority (EWSA).
Before the transmission lines are upgraded, at least $2 billion (Rwf1.3 trillion) will be spent on feasibility studies in Uganda and Rwanda. The two countries are required to source for the funding.
Rwanda has started construction of the interconnection lines with neighbouring countries. There is a line from Birembo in Rwanda to Mirama Hills in Uganda. These lines will increase the country’s access to cheaper energy sources from the region.
In another project aimed at boosting energy supply, studies for the transmission line with Tanzania are already complete and will be implemented after the environmental impact assessment is carried out.
Without its own major power generation plants, the country spends Rwf190 million monthly on importing power, which translates into Rwf2.8 billion annually. Another Rwf40 billion is spent on running the thermal power plants that produce almost half of the energy needs of the country.
The heavy reliance on thermal power pushes up the country’s energy costs. In Rwanda, consumers are paying $0.22 per kilowatt-hour (KWh), compared with $0.08 to $0.10 in the rest of the region, according to World Bank figures.
The World Bank said Rwanda experiences the highest number of power outages, with an average of 14 blackouts per month, followed by Burundi and Tanzania, both with 12. Ugandans experience 11 blackouts a month. Kenya’s power grid is more reliable, but still experiences an average of seven blackouts a month.
The Rwanda Utilities Regulatory Authority said that the country exports power valued at Rwf12 million monthly to Uganda through the Cyanika-Gisoto line. The study is also expected to address the power losses in the two countries.
Rwanda imports a combined total of 17MW from DR Congo and Uganda annually.
Importation of power will require Uganda and Rwanda to upgrade the capacity of their power transmission lines from the current 220kV to 400kV like Kenya’s.
Like Rwanda, the energy sector in Kenya is largely dominated by petroleum and electricity, with wood fuel providing the basic energy needs of the rural communities, urban poor, and the informal sector. An analysis of the national energy shows heavy dependency on wood fuel and other biomass that account for 68% of the total energy consumption (petroleum 22%, electricity 9%, others account for 1%). Electricity access in Kenya is low despite the government’s ambitious target to increase electricity connectivity from the current 15% to at least 65% by the year 2022.
Kenya plans to spend as much as $15 billion boosting electricity production fourfold over the next 40 months to help accelerate growth in East Africa’s biggest economy, Energy Minister Davis Chirchir said.
The country plans to produce an additional 5,500 megawatts, mostly from coal, gas and geothermal sources, by 2017, Chirchir said in an interview yesterday in the capital, Nairobi. Added to existing capacity of 1,700 megawatts, that would bring total output to 7,200 megawatts, he said.
Speaking with Bloomberg recently, Chirchir said needed about $10 billion to $15 billion in investment to reach that target, adding: “We need that power to support double-digit economic growth.”
In his inaugural speech in office, Kenyan President Uhuru Kenyatta, pledged to accelerate annual economic growth to more than 10 percent as part of plan to create more than 1 million jobs a year. The country is preparing to sell its inaugural Eurobond to raise as much as $2 billion by early next year to fund infrastructure development.
Kenya is talking to suppliers of coal from South Africa and Zimbabwe to fuel a 900-1,000 megawatt plant at Lamu on the coast, for which they are in the process of procuring a developer. The ministry is also talking to Qatari suppliers of liquified natural gas for a 700-800 megawatt plant at Dongo Kundu in Mombasa, according to Chirchir.
The government plans to use competitive bidding tenders to award contracts for power generation to private companies, Chirchir said. “The criteria for selection will mainly be the tariff at which the companies propose to sell us the power they generate,” he said.
Kenyatta said in September the country plans to become more reliant on coal-fired, geothermal and natural-gas generation to lower costs by as much as six-fold. Of the total 5,500 megawatts that will be added, only 24 megawatts will be sourced from hydropower, according to the Energy Ministry.
The state wants to reduce the industrial cost of power to $0.09 per kilowatt hour from the current $0.15, Chirchir said.
Currently, Ghana’s installed capacity for power generation is estimated at 1,960 megawatts (from hydro and thermal sources) growing at about 10 per cent annually. In the medium to long term, an additional 2000 megawatts will be needed in order to catch up with demand.
Unfortunately, efforts to increase supply have been hampered by limited fuel supply due to rising costs of light crude oil and unstable rainfall patterns affecting hydro-generation. This is further compounded by irregular supply of gas from Nigeria which renders thermal plants such as the Asogli Power Plant – which provides 180 megawatts of gas-run power – non-operational.
Ghana is estimated to spend about $1bn annually on light crude oil for power generation, resulting in an uncompetitive private sector characterised by high cost of production, high price of goods and services and low patronage of deliverables.
In Botswana, its success story is worth commending, as the state-owned electricity utility Botswana Power Corporation (BPC) formed by government decree in 1970 to expand and develop electrical power potential in the country, has made a good job of it thus far.
In the view of Mr. Alero Danjuma, an energy expert, the power crisis is taking a heavy toll on economic growth and productivity across Africa.
To mitigate the crisis, Danjuma holds the view and very strongly too that Africa needs to harness larger-scale and more cost-effective energy sources in order to reduce energy system costs by US$2 billion and carbon dioxide emissions by 70 million tons annually.
“With increased utility efficiency and regional power trade in play, power costs would fall and full cost recovery tariffs could become affordable in much of Africa. This will make utilities more creditworthy and help sustain the flow of external finance to the sector, which is essential to close the huge financing gap.”
