The Struggling Nigerian Energy Sector: How FG’s Outlook Failed
As 2022 draws to a close, a retrospective look at the energy sector holds grim hope. It has been a cycle of stuttering growth and rotten failures from the transmission, generation and distribution sub-sectors. Like the Nigerian economy, the energy sector has refused to progress due to lack of investment and managerial competence. There is a relationship between the energy sector and manufacturing. Indeed, one cannot do without the other; An adequate supply of electricity is a key factor in the growth of a business, especially small and medium enterprises.
Nigeria needs an estimated 25,000 MW to 40,000 MW to serve its population of 218 million. However, at present, the installed power generation capacity is about 12,522 MW, and the transmission and distribution infrastructure can only supply an average of 4,000 MW to businesses and homes.
President Muhammadu Buhari, upon resuming office in 2015, gave renewed prospects to the electricity sector; However, as he prepares to leave Aso Villa on May 29, 2023, the industry remains a playground for embarrassment.
Nigeria’s energy industry faces multidimensional challenges, suffering from under-investment, outdated infrastructure, debt and inefficiency. Energy shortages have paralyzed small and medium-sized businesses, hampered the growth of productive sectors, and made the cost of local products uncompetitive.
Developed the Electric Power Sector Reform Act of 2005 and the subsequent Power Sector Reform Roadmap of 2010 to comprehensively transform the power industry through privatization, increase production to 40,000 megawatts by 2020 and attract investment and the best global players to the market. Unfortunately, the milestones have been missed due to the long-running decline due to mismanagement of privatization.
About 90 million Nigerians will lack access to electricity by 2019, the World Bank said, the worst in the world, less than 70 million in the Democratic Republic of the Congo and 58 million in Ethiopia. The International Monetary Fund says Nigerian companies hemorrhage about $29 billion annually from energy shortages.
Every method has collided to save the Nigerian power sector as most Nigerians live without 24 hour electricity.
Thus, the current power generation is less than 3,800 megawatts, and per capita electricity consumption is 136 kilowatt-hours, which is among the lowest in the world. in Libya 4,270 KW/h. India, 616 kWh; China, 2,944 kWh; South Africa, 4,803 kWh; and Singapore, 8,307 kWh.
DAILY POST highlights four significant events that affected Nigeria’s energy industry, namely: the ongoing collapse of the national grid, the electricity distribution company liquidation crisis, and the unsuccessful National Mass Metering Project, NMMP.
collapse of the national grid
Continuous breakdowns of the national grid marred the period under review. Although the Nigerian Electricity Regulatory Commission, NERC, still needs to compile data on system collapse in 2022, network performance and various updates from DisCos showed that the Nigerian power grid had collapsed around eight times by September this year.
For example, on September 25, 2022, a grid meltdown occurred when the power generation on the system went from more than 3,700 MW to 38 MW.
On July 20, 2022, the Nigerian power grid witnessed the sixth meltdown in 2022, while on June 13, the grid collapse was also reported. The country’s power system collapsed twice in March (in the same period TCN said it recorded a peak of 5,615.40 megawatts) and twice again in April this year.
Electricity bill 2022
The Senate passed the Electricity Act 2022 in July to advance reforms in the power sector; However, President Muhammadu Buhari has not yet approved the bill. Senator Gabriel Soswam, chair of the Power Committee, said the bill sought to provide an ideal legal and institutional framework for the industry. He further stated that the bill would rectify imbalances in the current transmission infrastructure in Nigeria.
Disco filter crisis
It has been an ups and downs for power distribution companies in Nigeria. Debt overhang, weak balance sheet and lack of investment are the hallmarks of the challenges facing DisCos. However, the problem of distribution infrastructure continued to affect the sub-sector. Upon privatization in 2013, Nigerians believed that development would herald new horizons, but the opposite is true. Energy Minister Abubakar Aliyu said nine out of 11 discotheques are on the brink of bankruptcy. Aliyu further disclosed that the situation forced the Nigerian government to authorize the banks to find serious investors interested in buying 60 per cent of its shares in Abuja, Kano, Kaduna, Benin, Ibadan and Portarcourt Discos.
National Mass Measurement Project
In 2022, the Federal Government has promised to provide free meters to Nigerians through the National Mass Metering Project; However, this has not yet been achieved. The Governor of the Central Bank of Nigeria, Godwin Emfiele, stated that the bank has disbursed 47.8 billion naira for some 865,956m across the country. However, with projects being implemented by DisCos and Meter Asset Provider, MAPs are yet to achieve the expected results of providing free meters to Nigerians.
Presidential Power Initiative – The Siemens Project
In 2019, the Nigerian government signed an electricity roadmap agreement worth €63 million with Germany’s Siemens with the aim of modernizing the country’s national grid and achieving 7,000 MW by 2021, 11,000 MW by 2023 and 25,000 MW by 2025.
The Federal Executive Council, FEC in December last year approved the project with the hope of driving improvement in the country’s energy sector; However, the first target of 7,000 MW by 2021 has been missed, while the 2023 and 2025 targets of 1,100 MW and 25,000 MW, respectively, clearly cannot be achieved.
The Minister of Energy, Abubakar Aliyu, announced the delivery of the 10 phased power transformers to be laid across the country, but on Wednesday, the former Director General of the Nigerian Transmission Company, Dr Osman Mohamed, revealed that the Siemen-FG deal could not achieve 7,000 MW.
Responding to Power Nigeria’s performance in 2022, energy expert Eliugu Joseph said the industry has been a complete failure.
He revealed the need to localize electricity transmission in Nigeria to address the issue of the collapse of the national grid.
“The power sector in 2022 is an abject failure. We have never seen this much collapse of the national grid in Nigeria. It was as if the national grid was a switch that was turned on and off. The Nigerian transmission company must be dissolved, electricity must be localized. We are squandering material resources and Finance Department in TCN.
“Why are we struggling to generate more than 5,000 MW? The answer is simple. Small and small power generation companies should be encouraged and given the necessary financial assistance to increase generation. Imagine a situation where 2,000 small and small enterprises generate from 200 MW to 2,000 MW across the length and breadth of Nigeria – using sun, water, wind and resources other?
Regarding distribution, let the government reconsider privatizing distribution companies again. Let competent organizations join in, and the narrative will change drastically. Look at the telecom sector as a reference point. Distribution companies do as they please because NERC, as the regulatory body, is not efficient and effective. The war between consumers and disco companies will continue over the dog eat dog situation among them. Why on earth should consumers buy poles, meters and transformers for distribution companies?
In general, the government should declare a state of emergency in the energy sector and bring reputable international power generation and distribution companies to enter this vital sector. Without electricity, we are doomed as a nation.”
He also stated that “domestic manufacturers will continue to feel the pain, and the economy will continue to slump”.
Likewise, Dr. Othman Muhammad, in an interview conducted on Wednesday, said that the strength of the nation is the worst in our day.
He said the sector has regressed rather than progressed with the intervention of one billion naira by the Nigerian government.
As a way forward, he suggested that whoever emerges as Nigeria’s president in the upcoming elections should personally advocate for energy sector reforms in Nigeria.
He also stated that the key to unlocking the sectors potential is adequate investment across the three sub-sectors: Transmission, Generation and Distribution.
Usman said that a competent management team must be engaged if the Nigerian energy sector is to change in the coming years.
Indeed, no matter the direction of the energy industry today, Nigerians hope that the country will be on the right track in the future.
The Struggling Nigerian Energy Sector: How FG’s Outlook Failed