US$3 billion to be invested into the Nigerian power sector

ELECTRICTIY BULK POINT 750x3751 The investment is expected to boost power supply

Wed, 21 Apr 2021 Source: Donald Marshall, Contributor

Electricity generation is based primarily on demand (consumption). Demand is dependent on increase in population, industrialisation, infrastructure and increase in the streetlight class.

Nigeria, a West African country currently has an estimated population of 210,134,738 and ranks 7th on the global population table as of Friday 16th April, 2021 based on the latest United Nations data.

Projection indicates, an estimated population of 401,315,000 and will push the country to 3rd on the global population table.

Within the next 24 months, The Federal Government of Nigeria plans to spend $3 Billion on the energy sector and end the current electricity subsidies by December 2021. This will boost the energy sector massively as Nigeria seeks to tackle its dwindling power sector.

The investment will boost the power being wheeled by the Transmission Company of Nigeria (TCN) from a current 4,900MW to at least 7,000MW.

Will this increment be enough to sustain electricity demand by 2050?

Is the increase focusing on generation capacity or expansion of transmission and distribution infrastructure?

In an interaction during a webinar hosted by the Abuja Chamber of Commerce and Industry (ACCI), The Special Advisor on Infrastructure, Ahmad Zakari, said that, “following the $500 million loans the government secured from the World Bank earlier this year, it is expecting another facility from the African Development Bank (AfDB), saying that the gestures are a demonstration of confidence in the reforms being currently made in the sector”.

Over the past few weeks, another country in the West African Region has been experiencing electricity challenges because of transmission and distribution infrastructure upgrade. This has created a huge backlash to the Government and many feel now is not the time.

However, Nigeria has seen an opportunity to tighten the leaks in its revenue collection as a means to increase revenue collection.

Zakari explained: With this enhanced metering on the service-based tariff, we can see the Nigerian electricity supply industry generating over N100 billion in the near to mid-term. This is very impressive.”

Will other African countries use metering as a means to increase revenue collection efficiency?

Will there be a fund set aside solely for the improvement and expansion of electricity infrastructure?

Many will agree to this. Nevertheless, how many will be disciplined enough to not siphon or change the goal post set by the fund.

This is a rhetorical question.

There is no need to answer now when there is no fund with huge cash, whetting the appetite of fund managers.

The electricity market cuts across all sectors of the economy and moving forward, a lot should be done to meet the growing changes it comes with demand and global emission targets. This means cash to meet these changes should not be tempered with hence the idea of instilling a payment discipline in the locals

This according to Zakari said, “The hypothesis that we have is that if you enhance payment discipline through metering the population, revenue will go up. We have proven that,”

He later said that the current administration was focused on moving from the traditional way of funding subsidies or using the liquidity in the sector to fund consumption. Rather, he said, the subsidy budget would go into infrastructure that would ultimately lead to growth.

Will eliminating subsidy mean the poor will have to pay more?

Electricity price in Nigeria is high because enough is not being generated to meet demand.

Ideally, generating in excess of peak load means tariffs will be low. Generating 10 gigawatts of power, the tariff will be half of what it is now. Keeping the prices officially low is not the approach; increasing delivery power is the approach that will effectively get the same output, which is, making the citizen pay lower

“Nigerians and their businesses spend $14 billion annually on inefficient and expensive petrol or diesel-powered generators. This project will contribute significantly to the reduction of Nigeria’s power deficit, decrease air and noise pollution and reduce the cost of doing business,” says AfDB’s Senior Director for Nigeria, Ebrima Faal.

Will countries be more forward-thinking and invest massively in a more resilient electricity transmission system?

On 31st March, 2021, US President Biden unveiled his new infrastructure plan for the country titled, The “American Jobs Plan” which features a $100 Billion towards building a more resilient electric transmission system.

Looks like the way to go is to invest in infrastructure. However, many infrastructure is designed to moving economies to a net-zero generation system and also ensuring a reduction in the 51 billion ton of CO2 added to nature yearly.

Source: Donald Marshall, Contributor