The power supply gap has become worrisome. Forty-four per cent of the country’s estimated 170 million population lack access to the national power grid. Those connected to the grid enjoy less than six hours of supply daily. Big-time industrial and commercial concerns operate off-grid. The power sector has nothing to show for the billions of naira injected into it. EMEKA UGWUANYI examines what is responsible.
As a rule of thumb, 1000 megawatts (Mw) of electricity must be generated for the consumption of every one million people in any developed industrial nation. This standard has exposed the scale of Nigeria’s power supply deficit.
With its 170 million estimated population, Nigeria requires 170,000Mw of electricity to adequately cater for industrial and residential power consumption need. But the highest generation ever attained in the country was 5074.7Mw and the record peak generation was achieved on February 2 with the wheeling of 109,372 megawatts/hour (MwH). It was the highest daily energy wheeled nationwide.
However, the euphoria that greeted the 5074.7Mw feat ended up being a flash in the plan as nosedived four weeks after, shedding 1319.7Mw and leaving the entire nation to ration 3755Mw in March. In May 17, electricity generation into the national grid that had dropped to 1400Mw, worsened last month when it plunged to an all-time low of 1,075Mw. No thanks to renewed attacks on gas pipeline facilities militants by militants in Niger Delta. The development threw most parts of the country into darkness.
According to ESI Africa, Africa’s power journal, “Nigeria’s power generation hit zero megawatts six times in May this year, the highest level since 2009″. The magazine stated that “power supply to households and businesses across the country dropped significantly in May as the national grid recorded six total collapses and one partial collapse within the period”. It explained that the national grid collapsed eleven times in the first five months of 2016, compared to six and nine times for the whole of 2015 and 2014 respectively.
The unreliability of supply from the grid has forced big-time industrial concerns like Dangote, Nestle, WAMCO, Lafarge and many foreign and indigenous firms operating in the country to run permanently on alternative power supply. All operators of mobile tele-communication services run their base stations of generators all through the day.
But despite these firms operating off-grid, the shortfall in generation remains huge. According to the Transmission Company of Nigeria (TCN), power generation as at July 24, was 3,142.40Mw at a time national demand was put at 17,720Mw, reflecting a gap of over 14,000Mw.
Going by a research data by electricity Distribution Companies (DISCOS), Nigerians rank among the lowest energy consumers in the world. The report said: “Nigeria’s per capita electricity consumption is amongst the lowest in the world and far lower than many other African countries. Nigeria’s per capita electricity consumption is just seven percent of Brazil’s and just three per cent of South Africa’s.
“Brazil has 100,000Mw of grid-based generating capacity for a population of 201 million people. South Africa has 40,000Mw of grid-based generating capacity for a population of 50 million people. By the end of December 2015, the peak generation supplied was about 4,600Mw for a population of about 160 million people.” The data described the power generation level as discouraging considering because Nigeria is the biggest economy and the most populated African nation.
The irregularity and unpredictability of the grid have made it impossible to determine national power consumption, the DISCOS have said.
Sunday Olurotimi Oduntan, the Executive Director, Research and Advocacy, Association of Nigerian Electricity Distributors (ANED), the DISCOS umbrella body said: “It is even difficult to determine national consumption now as most of the big consumers are off-grid. The fact is that it will certainly be a very tall dream to adequately meet national power requirements especially now the country is going through dire financial strait with many issues clamouring for attention from the limited revenue. He stated that Nigeria cannot generate 170,000Mw of power in 10 years, and besides, the Federal Government doesn’t have the resources to generate such quantity of power.
“The actual national energy demand may be difficult to determine because many organisations, industrial concerns and rural communities such as the headquarters of The Redeemed Christian Church of God and Faith Tabernacle (a.k.a Winners Chapel), as well as Dangote Industries Limited, among many others, are not connected to the grid.
“Therefore, the current level of generation explains the huge power deficit in Nigeria but going by the number of customers currently captured on the grid, 20,000Mw would be able to give the stable electricity supply expected by Nigerians. However, It is a herculean undertaking to be able to generate the 20,000Mw.”
The issue
Since the return of democracy in 1999, the Federal Government has injected several millions of the tax payers’ money into the power sector to stimulate economic growth. The unbundled Power Holding Company of Nigeria (PHCN) before its privatiation on November 1, 2013, got over N5 trillion.
Even without any budgetary provision for the defunct PHCN in 2013, N5.2 billion was distributed to Generation Companies (GENCOS) and (DISCOS) as well as to TCN. The money was part of the N13 billion power intervention funds voted for critical projects implementation to bridge the gap created by the zero budget for the successor companies.
When the government felt the PHCN was gulping huge funds with little results, it established the National Integrated Power Project (NIPP), which is supervised by a special purpose vehicle, the Niger Delta Power Holding Company (NDPHC) Limited. The arrangement was aimed at fast-tracking the attainment of stable power supply.
The NDPHC mandate under the NIPP was to build 10 mid-sized thermal power plants close to source of natural gas supply in the Niger Delta in its Phase I. It was also mandated to build medium-sized hydropower plants in the North in the second phase. Apart from increasing power supply, the power plants built under the NIPP were meant to take substantial quantity of natural gas to reduce gas flaring.
A whopping $12 billion was disbursed in the NIPP first phase. The Nation investigation showed that $7.1 billion was used in building of the 10 gas-powered generation plants, $0.5 billion went into gas assets, transmission assets ($2 billion) and distribution facilities ($1.5 billion).
The power plants built under the NIPP and their capacities are as follows
- Alaoji Power Plant in Abia State (1,131.4Mw)
- Ihovbor Plant in Edo State (508Mw)
- Egbema Plant in Imo State (380.7Mw)
- Gbarain Plant in Bayelsa State (253.8Mw)
- Calabar Plant in Cross River State (634Mw)
- Geregu Plant in Kogi State (506.1Mw)
- Ogorode Plant in Sapele, Delta State (507.6Mw)
- Olorunsogo Plant in Ogun State (754Mw)
- Omoku Plant in Rivers State (264.7mw)
- Omotosho Plant in Ondo State (512.8Mw).
These plants and investments into the power sector exclude the independent power plants (IPPs) and intervention funds from development financial institutions and there are over 20 IPPs in the country. They include: Afam VI built by Shell Petroleum Development Company Limited (SPDC) Joint Venture; Okpai Power Plant by Nigerian Agip Oil Company (NAOC) Joint Venture; Bresson AS Nigeria Ltd; and Azura, among others. The IPPs have cumulative capacity to generate over 2000Mw.
The Federal Government, according to the former Minister of State for Power, Hajiya Zainab Kuchi, spent N162, 990,364,379.30 in 2012 to implement the Zungeru Hydroelectric Power Plant, which was expected to generate 700Mw. Seventy-five per cent of the funding, according to her, came from the EXIM Bank of China and the counterpart funding of $309 million came from the Power Ministry. She added that the project was being implemented by a Chinese consortium, CNEEC-Sino Hydro.
The ex-Power Minister, Prof Chinedu Nebo, also stated that there were several interventions from bilateral partners in form of loans including a $700 million from the World Bank; $200 million from JICA; $370 million from African Development Bank (AfDB); $500 million from EXIM Bank of China and $1 billion from Turkey Projects.
Prof Nebo also noted that in the transmission segment, the AfDB also granted $100 million as a loan of to the TCN to enable it improve efficiency by reducing transmission technical losses.
The Rural Electrification Agency (REA) was established by Section 88 of the Electric Power Sector Reform Act 2005 to facilitate the provision of reliable power supply at economic rates for residential, commercial, industrial and social activities in the rural and semi-urban areas of the country.
At the agency’s board inauguration, Hajia Kuchi said that as much as N16 billion was approved by government for the REA to undertake projects and revive abandoned projects. The agency has long been abandoned because of alleged diversion of over N5.2 billion from the fund meant of the rural projects.
According to power sector experts, it costs about $1 million to build a one megawatt power plant. So, what has happened to the outputs from all the power plants and the funds provided by the development financial institutions?, they asked.
The DISCOS blamed the power sector woes on poor funding and sabotage.
Some of its the top officials said: “The reality is that the nation’s power sector problems are far from being fixed except major and sustainable steps, which ensure massive investments in infrastructure are taken. The choking regulatory stance of the Nigerian Electricity Regulatory Commission (NERC), which put a ceiling of N50 billion per year for the entire 11 electricity DISCOS in the country, is not in the interest.
“For the Federal Government to achieve its industrialisation aspiration, which is primarily premised on adequate and stable power supply, the sector should be opened to massive investment. What will attract this investment is to put in place cost-reflective tariff that would enable investors to recoup their investments, at least in the long term.
“But as long as the government applies politics in driving the growth of the power sector, Nigeria will continue to take the back seat in the committee of emerging industrialised nations of the world because power is key here. Imagine that e some distribution companies cannot exceed N4 billion investments in a year.”
ANED’s Executive Director (Oduntan) said: “The renewed attacks of the pipeline by the Niger Delta militants have worsened the supply situation. Due to shortage of gas supply to the thermal power station as well as no cost-reflective tariff, power supplied to the grid has been far below expectation. It is not a healthy development because Nigeria is the most populous country in Africa, and its population is expected to grow to 230 million by 2030.
“The power sector had a shortfall of about N290 billion from November 2013 handover to December 2014 because the data was not in line with the agreement signed upon privatisation. This was partly addressed by the N213 billion Central Bank of Nigeria (CBN) loan facility (repayable over 10 years with interest).”
Admitting that the challenges in the power sector are numerous, he cited energy theft including meter bypass, which has reduced revenue expected by the utilities. As at the end of last year, only about 40 per cent of electricity supplied to customers was paid for, causing serious financial challenge for the sector because the DISCOS are collecting agents for the entire power supply chain – generation, transmission distribution, regulator, and indirectly for the gas suppliers.
According to Oduntan, the huge debt owed by customers is a major setback to the sector, saying “customers owe the 11 distribution companies over N93 billion as at end of May.”
Despite the firms’ threat, the ANED chief noted that government establishments across the three tiers including the military have not paid, adding that the nation’s hope of improving power supply may remain a mirage without resolving the numerous challenges, including the tariff structure.
Relying on its research, Energy Savers Nigeria, a non-governmental organisation (NGO), said that no fewer than 97 million of the 175 million Nigerians lack access to grid electricity, and that the remaining 78 million people who are connected to the grid face substantial power interruptions.
A member of the company’s Board of Trustees (BoT), Moses Nasamu, said an estimated 41 per cent of businesses generate their own power supply to augment supply from the grid, adding that the country trails other developing nations in terms of grid-based electricity consumption with 126 kilowatts hour (kwh) per capita. Electricity consumption is expected to be five times higher than what it is today, considering the Nigeria’s Gross Domestic Product (GDP).
The impact
Poor electricity supply has cost the country a lot. Large and small scale businesses have closed shops. The textile industry has gone moribund. Grave power deficit and cost of alternative power sources, accounted for relocation of Dunlop Nigeria Plc, a tyre manufacturing giant from its Oba Akran Road in Lagos to Ghana in 2006.
A 2015 report of the Good Governance Initiative (GGI), a NGO, said Nigerians spend N3.5 trillion to fuel their generators annually. The experiences shared by the business community corroborated such claim.
Manufacturers Association of Nigeria (MAN) says its members spend about N20.8 billion monthly on power generation. Its President, Frank Jacobs, enumerated the ripple effects of poor power supply and constant outages. He said it ranges from cut down in production, job loss, to outright closure or relocation to other countries by operators.
He decried the erratic power supply, saying that companies opt out of the grid completely because outages often occur in the middle of production processes, a situation that causes enormous damage and makes them incur so much loss.
His words: “Most companies such as Nigerian Bottling Company (NBC) Plc., Nigeria Flour Mills and other multinationals generate their own power. They don’t rely on supply from the grid. And for the last three years, study showed that our members spend an average of N20.8 billion per month.”
The Director-General of the Lagos Chamber of Commerce and Industry (LCCI), Mr. Muda Yusuf, said members of the group, including the large, medium, small and micro businesses, have all resorted to alternative energy sources.
Yusuf listed such sources being used to power machineries as natural gas and outright construction of power stations in order to cut cost of production. He said some of the companies still manage to operate on supply from the grid but keep big diesel generators as back-ups whenever there is an outage.
He said: “Those hard hit by the situation are the small, medium and micro enterprises that rely on petrol powered generators. I think something has to done if this country is to move forward. We cannot continue this way as a nation.
“Where in the world does the manufacturing sector run generators as major source of energy supply? Government should see to the plight of the manufacturers in the country before all the industries relocate to Ghana as we are experiencing currently.”
The way forward
The Energy Institute says the country requires a combination of on-grid and off-grid sources of energy to meet its citizens energy needs. The Institute’s Chairman, Mr. Osten Olorunsola, who was a former Department of Petroleum Resources (DPR) director said the adoption of the available energy sources remains the way out of the energy crisis.
Olorunsola s recommended energy mix as a viable option since the country has tried a single method of generating electricity without much success. The Federal Government, he noted, should leverage energy sources such as coal, solar, gas, hydro, biomass and others to lift the power sector growth and sustainability.
He said: “Energy mix is the way out of the problem Nigeria has found itself in. We have no choice than to use a combination of different sources of energy to generate the required electricity.
“The government needs to marry both the renewable energy and traditional energy sources together to attain the goal of providing stable electricity for Nigerians. While solar and wind are used to generate renewable energy, gas and hydro are used to provide the traditional energy.
“Other countries have adopted this strategy, and Nigeria should not be an exception. Another problem is that we have a lot of skills gap, so we have to help brush up and sharpen the capabilities of all our engineers and other energy related professionals.
“Northern part is blessed with solar while the eastern part has huge coal and gas reserves, but the failure of the government to make use of different sources of energy have not augured well for the country.”
The DISCOS urged the government to stop pipeline and power equipment vandalism and compel government ministries, departments and agencies (MDAs) to pay the arrears and future electricity bills.
NERC’s former Chairman Dr. Ransome Owan, now Aiteo Power Limited’s Managing Director urged consistency in government’s policies.
Speaking at a forum in Lagos, Owan insisted on the need for government agencies to adopt good policies including those inherited from past administrations, if such policies will advance the sector.
Managing Partner of Lonadek Oil and Gas Consultants, Dr. Lola Amao, said the power sector more than ever should assemble those with the ‘out of the box thinking capacity’ to design strategies for the sector to experience a turnaround on sustainable basis.
