Achieving efficiency in power sector hinge on infrastructure investment
Nigeria’s per capita electricity generation is among the lowest in the world with level of 140Kwh to 1,110kwh as at 2015.This shortfall is limiting economic growth and productivity due to the impact on practically all other sectors.
As in most sectors of the economy, the energy sector which comprises the oil and gas as well as the power sub-sectors represent one of the most important sectors to Nigeria because of its multiplier effect across all sectors of the economy, its contribution to tax revenues, and its potential to spur significant economic growth.
Industry watchers in the wake of these realities continue to express concern over the state of the power generation in Nigeria stressing that the growing shortfall in electricity generation which have resulted in various disruptions to the operations of other enterprises in the economy have brought untold hardship to citizens who constantly bears the brunt of this power shortfall.
They observe that Nigeria, Africa’ssecond biggest oil producer behind Angola continues to experience challenges within the power sector despite the huge outlay of funds and unprecedented reforms in the power sector. The persistent challenges in the power sector add to already existing problems, such as the slump in oil prices and the foreign exchange issues that are currently threatening Nigeria’s appeal as a destination for investors.
Challenges around power sector
There is an extreme electricity deficiency in Nigeriawhich are attributed to financial, socio-political, and structural issues.
Ivie Ehanmo, a senior legal and regulatory consultant for Energy Markets and Rates Consultants in a recent write up observed that the challenges in the power sector are largely due to lack of funds on the part of the generating companies (GenCos) and the distributing companies (DisCos), though more on the part of the DisCos.
Ehanmo also pointed out that shortage of gas supply to power plants as a result of the impact of pipeline vandalism in the Niger-Delta region of the country poses another challenge.
Power sector reform was anchored on the use of gas as fuel for most of the power plants. However, the availability of gas to ensure consistency in power supply has been a great challenge. This challenge according to analysts is a result of the inadequate infrastructure needed for gas gathering, processing and transportation.
The negative effects of saboteurs and vandals in gas productionaffect the availability of gas. This represents a major challenge to power generation growth projections.
Analysts insist that energy is the mainstay of Nigeria’s economic growth and development because itserves as an input into the production of goods and services in the nation’s industry, transport, agriculture, health and education sectors, as well as an instrument for politics, security and diplomacy.
From all indications, Nigeria continues to grapple with the challenge of high-energy loss due to the physical deterioration of the transmission and distribution facilities, an inadequate metering system and an increase in the incidence of power theft through illegal connections.
In the midst of all these challenges, Nigerian government is yet to find permanent solutions that will resolve the problems despite several reforms.
Infrastructure investment to rescue
IvieEhanmomaintain that the GenCos and DisCos need to improve the quality and capacity of existing infrastructure. It is also imperative for the DisCos to identify key equipment required to generate and distribute power to meet capacity and demand.
“A proper metering system with improved meters need to be utilized. To adequately reach the capacity of the power plants and meet the distribution needs of end users, it is germane that the generation, transmission and distribution equipment are updated to meet international industry standards”Ehanmo said.
Analysts in the energy sector are optimistic that Nigeria electricity generation output will receive a 15,000 megawatt increase once the federal government and its other joint venture partners intensive its investment commitment to gas gathering projects which will further achieve zero gas flaring in the country.
Wale Shonibare, managing director, Investment Banking, United Capitalopines that a step into achieving this aspiration should start with the introduction of the domestic gas obligation which imposes an obligation on the oil companies to assign certain percentage of the gas being produced for domestic uses.
He sees a significant opportunity for the country to use her gas domestically for power purposes. “Looking at what is going on in the industry, the future is selling our gas domestically because the international prices are in decline”,he said.
At least $20bn would be needed to develop gas infrastructure in Nigeria over the next few years Rolake Akinkugbe, Head, Energy and Natural Resources, FBNQuest observed.
“The current situation in global oil and gas markets also necessitates urgency for Nigeria in focusing on create domestic markets for her gas, given the muted demand in our traditional exports markets including Asian emerging markets”. She pointed out.
Akinkugbe reiterated that Nigeria is extremely rich in natural gas reserves, and the main thrust appears to be the delivery of gas in sufficient volumes that would boost Nigeria’s power generation capacity.
“I think that level of production is quite achievable, but it is going to require significant capital investment and a strong and water-tight regulatory framework to drive it.
“Of critical importance will be the funding requirement in the sector, with gas transporting via pipeline as well as gas processing facilities likely to be the most costly parts of the value chain.
Analysts are of the opinion that that the country is endowed with abundant gas resources and the sector holds huge potentials for unprecedented growth, they are however concerned that the existing legal and regulatory framework, written primarily for oil does not provide robust technical and commercial framework for gas.
They further insist that the gas sector policies will provide Nigeria with the opportunity to harness and get maximum value from its stranded gas resources.
They however urge government to deepen market penetration and sustain demand growth and also vigorously pursue the completion of gas gathering and utilisation projects.
KELECHI EWUZIE