US interventions to drive $2.7bn investments into Nigeria’s power sector
Nigerian power sector is expected to see a significant increase in the inflow of investments, as current strategic interventions by the United States government in the nation’s energy sector, through its Power Africa initiative, are estimated to reach $2.7 billion.
This is according to Power Africa data obtained by BusinessDay through the United States Agency for International Development (USAID).
“Since Power Africa was launched, the US Trade and Development Agency (USTDA) has committed approximately $6.5 million in funding for 10 activities supporting Nigeria’s energy sector, which it says could leverage up to $2.7 billion in energy investments,” the data read in part.
Additionally, with a $50 million of financing, OPIC is helping Lumos Incorporated to pursue its deployment of rooftop solar panel kits to approximately 70,000 residential and small commercial customers in Nigeria, using a lease-to-own model, with “$1 billion now in project pipeline.”
Also, the Overseas Private Investment Corporation (OPIC) invested $50 million into Azura Edo on top of the $150 million invested by Power Africa’s private sector partner, American Capital energy.
With construction underway, the project is expected to add about 450 megawatts to Nigeria’s power grid by the end of 2018.
Currently, an estimated 95 million Nigerians, about or 55 percent of them, have no access to electricity, and those that are connected suffer from frequent and prolonged power outages.
Although Nigeria has 12.5 gigawatts of installed generation capacity, only 3,500 to 5,000 megawatts is typically available, and the annual consumption of electricity per capita is among the lowest in Africa, at less than 150 kilowatt/hour.
The lack of reliable and affordable supply impacts every facet of life in Nigeria, as businesses routinely cite the cost of electricity as the principal drain on their profitability and competitiveness.
By providing technical assistance to the Nigerian Bulk Electricity Trading (NBET) plc, Power Africa has helped Nigeria’s first private independent power producer (IPP), the Azura Edo project, to reach financial close in 2015.
More recently, Power Africa assisted the Nigerian government to finalise power purchase agreements (PPAs) for 14 utility scale solar IPPs totalling over 1,125 megawatts, with $1.5 billion worth of investment in nine states across the country.
There is also a $100 million capital expenditure enhancement facility to electricity generation and distribution companies (Gencos and Discos), with a corresponding $6.5 million in technical assistance and $1.5 million for limited commodity to turn around the Discos.
In partnership with General Electric, the US African Development Foundation and others, Power Africa has awarded nine grants worth $100,000 to entrepreneurs for innovative, off-grid projects in Nigeria.
These projects are projected to help Nigeria diversify its energy mix, while attracting further interest in the nation’s burgeoning solar market.
“The distribution sub-sector is the life line of the electricity industry, its financial health is critical for the sustenance of the power sector. Power Africa recognises this important role and that is why in 2016 we signed a memorandum of understanding to provide technical assistance and limited finance for commodity support to three pilot distribution companies,” Andrew Herscowitz, who is the US Power Africa coordinator, said.
The pilot, he said, is to prove the concept and to also show that the Discos could be turned around.
According to Herscowitz, “together we are focusing on making the utilities more efficient reduce losses, improve bill collection, and increase payment for electricity, and we have already seen inspiring results that will benefit both the Discos and the people they serve.”
Michael Harvey, who is the USAID mission director in Nigeria, said, “the work that the Abuja, Benin and Eko Discos have been undertaking shows that they can, and are, improving their commercial strength and helping to improve this acute problem.”