Why power projects in Nigeria, others fail to attract investments – World Bank

The World Bank says Nigeria and other West African countries fail to attract investments for their power projects because they rely on small-scale, expensive oil-fired power generation rather than large projects that benefit from economies of scale.
This is a function of low domestic demand in the countries and the absence of large multi country projects and lack of planning which has led to reliance on emergency rental plants, which further inflates costs.
“Access to electricity in West Africa is at 52 percent, with shortages of up to 80 hours per month, and yet electricity there remains among the costliest in the world, at $0.25 per kilowatt-hour, more than twice the global average,” says the World Bank Group.
The organisation is now encouraging is now calling for investments in large projects among West African countries that benefit from economies of scale and encourage integrated power trade in the region.
The World Bank estimates that this model could lead to cost savings of US$5-8 billion per year by enabling countries to import cheaper sources of electricity and increase access to affordable, reliable and modern energy, and reduce CO2 emission intensity.
Through the West Africa Power Pool (WAPP), a cooperation of 14 countries–Benin, Burkina Faso, Cote d’Ivoire, the Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Niger, Nigeria, Senegal, Sierra Leone, and Togo– with 27 national electricity utilities, has plans to develop an integrated regional power market.
“Currently WAPP is completing the physical interconnections to send power across borders. About 7 percent of the region’s electricity is already traded among the 10 already connected countries. It is anticipated that by early 2020s the most critical cross-border links will be in place, making it possible for electricity to flow throughout West Africa from countries with cheaper, cleaner and more abundant energy resources to those lacking them,” says the World Bank.

Africa is only beginning to articulate a trade policy.
On March 21, the African Continental Free Trade Area (CFTA) agreement was signed by 44 countries, committing them to remove tariffs on 90 percent of imports. This is expected to improve intra-regional trade which stands at 20 percent in Africa versus 62 percent between advanced economies.
“Compared with other regions of the world, trade between African countries is low because several countries export the same goods, unprocessed commodities, which preclude the need to trade with each other. But things are changing and intra-regional trade is expanding,” says Yvonne Mhango Sub-Saharan Africa Economist Renaissance Capital, in a note sent to BusinessDay.
According to the World Bank, integration of electricity grids will improve overall reliability and make electricity more affordable simply by allowing all countries to benefit from least-costly resources available in the region. It will also make power generation more sustainable by displacing base load oil-fired power generation with cleaner sources of electricity such as natural gas, solar, and hydropower.
However to achieve this, countries would contend with the complexity of the WAPP power market which creates new political and technical challenges that will need to be addressed.
“A well-functioning regional power market requires not only the right infrastructure, but also strong collaboration among policy makers, regulators, and utilities, at the national and regional level. It also calls for simultaneous policy, regulatory, and institutional steps. Trading institutions and stronger commercial arrangements will need to be developed further,” says the World Bank.

ISAAC ANYAOGU