Friday, May 19, 2006

Nigerian Electric Power Sector: The $9 Billion Mess

At present, power generation in Nigeria is at about 3,000 megawatt; about 50% of what it was earlier in the year, and way less than what it should be for a nation the size of Nigeria- some have estimated that the nation needs at least 120,000MV of power.

I read with dismay that after spending about 1.3 trillion Naira (about 9 billion U.S dollars) on power generation between 1999 and 2005 Nigerians will not enjoy a stable supply of the commodity until 50 years from now! Yes, Nigerians should expect stable electricity by year 2056 if investment in the power sector grows at the same rate as the economy, according to the Nigerian minister for power and steel:
"The current growth of the Nigerian economy stands at seven per cent. If the power sector grows at a rate of seven per cent per annum from now on, we will take another 50 years to catch up on where we should be and that is a real challenge.

"So, if we set a target for growth of the economy at 10 per cent, then indeed, the power sector has to grow in the region of 12-15 per cent, each year. And when you translate that into cash, it means an investment in the region of $10 billion each year."—Dr Imoke, Nigerian Minister for Power and Steel.
It is puzzling that a nation- that seems so reform-crazy, so eager to liberalize its economy, and whose worn and hoarse head of state have spent more time overseas repeatedly giving sales pitch to foreign investors- has failed to implement any measurable reforms in the power sector. Yet adequate and regular power supply is the number one prerequisite for industrial and economic growth; it is a catalyst that impacts both big and small businesses.

The first noticeable activity in the power sector was not registered until 2005 when the Nigerian Electricity Regulatory Commission was established under the Nigerian Electric Power Sector Reform Act.

Some government sources claim that deregulation in the sector has already led to private sector participation in the power generation and the operation of a number of independent power plants in the country, these achievements appear to exist only on paper and often come to life whenever officials wants to use them as points of reference.

Despite spending $9 billion in six years, power generation is at an all-time low in Nigeria. The excuse for the recent decline in supply has been attributed to the insurgency in the Niger-Delta region, a region that has been volatile for more than 10 years. One wonders if gas is the only ingredent for electricity generation; coal is plentiful in Nigeria, why not use more of it? In 2000, the United States derive 40% of its power supply from coal i.e. 260,990MW of power!

I wonder if there isn’t more going on at the power and steel ministry than meets the eye; an accounting audit may not be entirely out of place in my opinion.