Investment, proper project planning vital to re-energize Nigerian energy sector
Unstable and inadequate power supply is a major hindrance to Nigeria’s development. According to data obtained from the World Bank Global Electrification Database, less than a half of Nigerians have access to the national electricity grid. In Nigeria, a majority of businesses and households have resorted to the use of generators to power their facilities and homes respectively and commuters have come to accept the reality of little or no street lighting. The reality is that the demand and supply for power in modern West Africa is far from commensurate.
Government and private individuals have embarked on projects to upgrade the power infrastructure which had little effect on the supply of power. The early privatization of electricity distribution to the Power Holding Company Nigeria (PHCN) did not herald hoped for success, partly as a result of power supply in the hands of private entities rather than a collaborative approach. However the issue is deeper and a true and effective solution will require a complete overall and stringent re-evaluation. There are several reasons for the inadequate power supply across Nigeria including the inability to attract adequate funds due to difficult business environment; poor project planning; risk of corruption of public officials and the loss along the various value chains of generation, transmission and distribution.
In regards to the latter, Nigeria’s actual installed generation capacity is the total available generation capacity assuming that all her power plants are working at 100 percent efficiency generating about 12,522 Megawatts. But what we see is a situation where Nigeria is only able to generate about one-third of its actual installed generation capacity at about 3500-5000 MWs. This means that a huge amount of installed capacity is lost along the actual generation value chain. If not lost, these lost megawatts of energy could have been channeled to help improve the social and economic wellbeing of Nigerians.
These losses which reduce the quantity of electricity available to the population can be attributed to the use of outdated infrastructure and the limitations in technology. In electricity generation, the quality of technology used is vital because the capacity utilization rate of power plants depends on the technology used as well as the age and condition of the electricity infrastructure.
Furthermore, unethical practices is another reason for the lack of optimal functionality of Nigeria’s electricity sector. Favoritism and illegal partnerships do not only reduce the profit that distribution companies make but also reduces the amount of electricity made available the everyday Nigerian who pays their electricity bills. If citizens who pay their bills cannot receive the electricity they have paid for, then Nigeria’s electricity sector is also in trouble.
Investments also play an important role in the improving the power sector. Developing nations are more advanced than Nigeria in terms of electricity generation because they are able to attract investments in electricity technologies that reduce the losses along the various value chains of generation, transmission and distribution. These value chain losses are more in rural areas because the infrastructure used in such areas are usually outdated and maintenance is irregular.
The importance of Investments in technological advancements especially in energy generation cannot be over emphasized. Nigeria faces a huge challenge in regards to attracting ideal investment opportunities, because in a post-privatization world, some of the main challenges investors face include; cost-unreflective tariff regime; obsolete transmission line assets and power sub-stations; non-bankable gas supply agreements; changes in government and uncertainties as to the future direction of government policies; bureaucracy of government agencies; lack of affordable long-term funding; foreign exchange and currency issues; Vandalism of power plants, equipment and transmission lines.
According to Christopher Cross, a partner at global law firm Hogan Lovells: “For Nigeria to improve its power sector it must first make its investment environment more favorable through good project preparation. International entities are there to invest in power infrastructure funds, provided that favorable, enabling regulation and business environments exist. If an investor can’t get money out of a country, they will think twice about going into it. Power infrastructure projects are long-term and investors need certainty of the tax scenario, political regime and business laws. Many African countries rely on short-term funding, which is more expensive than long-term capital.” Cross continues, saying that “many investors, particularly from Asia, want to enter the African power market but the conditions are not always encouraging.”
Power infrastructure deserves priority in a modern economy. It is the most important factor in successful development of the Nigerian, financial, agricultural and other sectors of Nigerian economy, including the overall standard of living of Nigerians. The Nigerian government and private sector institutions must work together to make great things happen in the power sector. Nigeria will then be positioned to achieve all the Sustainable Development Goals (SDGs). Nigeria must be a success story when the reports on SDGs are being presented in 2030.
FRANK UZUEGBUNAM