Regional cooperation to offset W/African energy challenges
Energy ministers across West Africa who gathered for the Regional Energy Cooperation Summit 2017, that took place in Abidjan, Ivory Coast from January 25 – 27 provided perspectives to critical energy, finance and infrastructure issues in West Africa.
The forum was held in continuation of the Africa Energy Forum that took place in London in May 2016. West Africa’s head of utilities, regulators and industry operators from Nigeria, Senegal, Sierra Leone, Ghana, Liberia and Mali, had the opportunity to showcase investment opportunities and project pipelines at the event.
The Abidjan summit afforded all parties in the public and private sector, the opportunity to explore ownership for network assets, and hear directly from governments on the scale of the opportunities within the region’s integration strategy.
While energy cooperation in West Africa is in progress, not so much has been achieved with the West Africa power poll, with its headquarters in Ghana
An aggregation of the views of the panel members and speakers at the forum was the need to enhance regional cooperation when it comes to solving the energy challenges in the sub region.
Wale Shonibare, who was recently appointed director of energy financial solutions, policy and regulation at the African Development Bank highlighted that financing was a major issue in addressing the sub region’s energy needs.
Shonibare highlighted that lack of financing capacity due to weak capital bases of banks in the sub region. This situation is compounded by weakness of the local currencies prone to devaluation and foreign exchange uncertainties.
Nigeria presented a case study of a local currency that is in crises due to the decision of the country’s Central Bank to artificially prop up the Naira when all economic indices point to devaluation.
Since 2015, the Federal Government has been spending billions of naira to defend the currency which continues to fall in the parallel market.
Inefficient exchange rate management has seen about eleven different exchange rates providing inefficiencies and ‘opportunities for bad behaviour,’ according to Doyin Salami, Lagos Business School faculty member at a recent event in Lagos.
“The solution is implementing fully the Monetary Policy Decision reached last year to liberalise the foreign exchange market.
The guidelines were in place and the market started but because of the acute problems of the supply side we have not implemented the framework as articulated.
“I know people are worried that if we allow it, to what level do we allow the currency to depreciate, but there’s nothing that says also that it will not appreciate.
Salami said the issue is to determine the fair value of the currency and if it is liberalised the “value of the naira should probably be somewhere between N307/$1 and N325/$ depending on the assumptions you make.”
This summation was similar to the recommendation made by Shonibare who enjoined West African countries to enact forward looking fiscal and monetary policies that will stabilise their local currencies, create liquidity in the market and strengthen the capacity of financial institutions to provide funding for power projects.
The panel members suggested that banks and other development institutions such as the African Development Bank can mitigate the impact of foreign currency especially dollar by lending to operators in local currencies.
Public private partnerships in huge projects can help to ensure that delivery timelines are met the panel members said calling for more of such programmes.
It was also agreed that the power sector presents a set of complicated challenges as energy sources in the sub region is yet to be fully diversified. Many plants rely on gas-fired power plants to generate power.
In Nigeria, about 70 per cent of power is through gas-fired power plants, hydro constitutes the rest with a sprinkling of off grid renewable energy projects, mostly solar.
Ghana provides a better picture. The country’s total installed electricity generation capacity is 2 546.5 MW of which 52 per cent is produced from hydropower, while 47.9 per cent is thermal power generated from light crude oil, distillate fuel oil and gas. About 0.1 per cent of the country’s electricity comes from solar.
In 2011 Ghana enacted a renewable energy law with the goal of increasing the country’s renewable energy capacity to 10 per cent by 2020.
“Ghana has good potentials for developing their renewable energy sector with solar radiation levels at about 4-6 kWh/m2 and average wind speed along the coastal areas are estimated at 5 m/s. Wind speeds of 9 m/s have been recorded on the mountains along south eastern corner of the country” notes the Africa Environment Information Network (AfricaEIN).
The panel members urged that government should limit its role in the power sector and allow for increased private sector participation. For example, it was suggested that Nigeria sell down some of its stakes in the power value chain to allow for more private investors.
Nigerian Bulk Electricity Trader (NBET) which acts as an offtaker for the electricity market, the panel says has been bogged by debt. Gas producers have recently shut-in their taps after debts surged over N100bn now electricity generation has fallen to a paltry 2000mw.
It is the view of the panel that a way out of the numerous challenges including funding, limited capacity, lack of integrated market is for the region to increase cooperation among members.
The Morocco-Nigeria Cooperation was held up as a model that carries immense economic prospects for West Africa. The anticipated 4,000-kilometer pipeline between the Gulf of Guinea and Morocco could also extend to Europe
In Marrakech at the recently concluded Africa Renewable Energy Forum (ARF), the Ministry of Energy and Moroccan companies such as Masen, ONEE, OCP, IRESEN and Attijariwafa Bank highlighted their engagement to push forward the Moroccan’s South-South Co-operation strategy.
Valeria Aruffo, West Africa Regional Manager for EnergyNet presented the outcomes of ARF at the OCP stand during COP22; “we need an electrification and integration implementation strategy and there must be synergies with institutions to succeed at both national and regional level”.
The visit of Morocco’s Monarch to Nigeria highlighted the significance of the discussion between the two countries surrounding the construction of a gigantic pipeline, dubbed the TransAfrican Pipeline.
This joint effort to establish a strong economic collaboration paves the way to achieve the regional integration that is critical to addressing the real needs of Africans stated a statement from the Regional summit.
“The Trans-African Pipeline and other projects, such as the one aiming at developing a fertilizer production platform in Nigeria, are undoubtedly strategic initiatives with a strong South-South footprint that reflect the emerging partnership between the two continental powers,” the statement says.
Commenting on this south-south policy and the potential economic benefit resulting from the cooperation, the Swiss economist Jean-Marc Maillard offered this perspective:
“Rabat is launching an unprecedented strategic direction with Nigeria, the great African country that is increasingly aware of the Kingdom’s strengths to open a new chapter in economic integration at the regional level.”
Maillard continued in a statement to Morocco’s Press Agency (MAP), saying that Morocco presents itself as an essential player for the transit of gas and oil as it works on establishing a link between the major African hydrocarbon producers and the vast Western market.
The pipeline serves multiple commercial and economic ends and the prospect of helping the countries of the region accelerate electrification projects sheds light on its strategic aim.
Ghana and Côte d’Ivoire are already two producers and consumers of gas. Recent discoveries of large gas deposits in Senegal and Niger, as well as the upcoming exploitation of new discoveries in Côte d’Ivoire and Ghana, point to a promising future for this long awaited gas pipeline project.
ISAAC ANYAOGU