57 Years after independence: It is 4,600MW power for 180 million Nigerians

Sulaimon Olanrewaju reports that 57 years after independence and trillions of Naira sunk into power generation, Nigerians still await uninterrupted power supply as only 4,600mw of the 6,600 generated is distributed to 180million citizens.

Historical overview

ELECTRICITY generation started in Nigeria in 1896 when the first power plant was built in Lagos. However, it was not until 1929 when the Nigeria Electricity Supply Company (NESCO) was established as an electric utility company that the phenomenon spread as the Public Works Department (PWD) was empowered to build plants in different parts of the country. This resulted in the construction of a hydroelectric power station at Kuru near Jos, among others. Electricity supply at this time was mainly for government offices, quarters as well as for the very influential people in the country.

However, there was a twist in 1951 when the Electricity Corporation of Nigeria (ECN) was established as it had the directive to facilitate adequate supply of electricity to as many Nigerians as were willing to have and able to pay for it. The first 132KV line was constructed in 1962, linking Ijora Power Station to Ibadan Power Station. The establishment of the Niger Dams Authority (NDA) in 1962 with a mandate to develop the hydropower potential of the country was the real breakthrough in power generation and transmission. However, ECN and NDA were merged in 1972 to form the National Electric Power Authority (NEPA). In 1998, NEPA ceased to have an exclusive monopoly over electricity generation, transmission, distribution and sales as the government amended the Electricity and NEPA Acts to accommodate private sector participation in the sector. However, not much changed in spite of the amendment to the Act.

Real reform in the sector started in 2001 when the Olusegun Obasanjo administration came up with the National Electric Power Policy. This eventually resulted in the enactment of the Electric Power Sector Reform (EPSR) Act in 2005. The Nigerian Electricity Regulatory Commission (NERC) was established as an independent regulatory body for the electricity industry in Nigeria. In addition, the Power Holding Company of Nigeria (PHCN) was formed as a transitional corporation that comprises of the 18 successor companies (6 generation companies, 11 distribution companies and 1 transmission company) created from NEPA.

The Goodluck Jonathan administration established the Nigerian Bulk Electricity Trading Plc (NBET) in 2010 as a credible off-taker of electric power from generation companies. By November 2013, the privatisation of all generation and distribution companies was completed with the Federal Government retaining the ownership of the transmission company. The privatisation of the 11th distribution company was completed in November 2014.

The Jonathan administration also set up the Presidential Action Committee on Power (PACP), which was chaired by the president and consisted of the vice-president and a number of ministers who played a key role in reforming the sector. The PACP provided high-level oversight of the implementation of electric power sector reform.

The Muhammadu Buhari administration came up with the Power Sector Recovery Programme, which is targeted at improving  the performance of distribution companies, transmission companies and the entire value chain to create more viable private-driven power sector.

According to Mr Babatunde Fashola, Minister of Power, Works and Housing, the essence of the programme is to simplify and reduce the cash deficits that have accumulated, making the Discos viable, accountable and responsive to customers, ensuring stability of the grid and expansion of the grid and transparency and communication within the sector, and also putting in place processes for the payment of ministries, departments and agencies’ debts and how to improve sector governance.

 

Challenges

The 1970s and 1980s are regarded as the golden era of electricity supply in the country. This was because though many rural communities were not connected to the national grid, there was ample supply of electricity to connected areas with downtime being very few and far between. However, since the 1990s, there has been a consistent decline in electricity supply in the country. This stems from the fact that for over two decades, the power sector was subjected to neglect. The power plants were crippled, especially as the hydro-power plants in Kainji, Jebba and Shiroro had a drop in generation sequel to age and obsolete equipment. This was worsened by the failure of the government to add a single power plant to the existing ones despite the rising population and increased demands for electricity. Demand for electricity has grown at the rate of 8.2 per cent per annum since 1984 against the Gross Domestic Product growth of between three and five per cent. Thus, electricity supply continued to depreciate to the extent that generation level dropped by as low as 1,500 megawatts in 2000. However, despite the resolve of the government to improve power generation through injection of funds since 2001, there has not been any marked improvement.

The privatization of distribution and generation companies has not resulted in any departure from the past. The problem that the country had with NESCO, ECN, NDA, NEPA and PHCN are not different from the ones Nigerians have been battling since the advent of the privatized Discos and Gencos.

Highlighting the problem with the electricity supply in Nigeria, Professor Adeola Adenikinju of the Department of Economics, University of Ibadan, in an inaugural lecture delivered in April 2017, noted that, “Nigeria has invested significant amounts of resources on electricity development. However, its growth over the years has remained uneven, and the commitments of successive governments to ‘light up’ the country varied significantly, leading to a yawning gap between electricity production and electricity demand. The cumulative effect has been the very low quality and quantity of electricity that is available for the economic and social transformation of the country. Less than 50 per cent of Nigerians have access to grid supply of electricity.”

According to him, Nigeria is hugely endowed with energy resources, both renewable and non-renewable, adding that the country’s  proven oil reserve is estimated at 38bilion  barrels and at the current production-reserve ration, can last for another 40 years.

He also noted that there is a proven gas reserve of 187 trillion cubic feet (TCF) with a possible value of 600 TCF.

He said further, “In oil equivalent, this is about 30 billion and 1032 billion barrels of oil respectively. The 187 TCF is sufficient to power 60,000 MW power plants continuously for 100 years, 40,000MW plants for 150 years and 20,000MW for 301 years. Hence, the gas resource endowments of this country, if properly utilized for electricity supply, have the potential to turn Nigeria into a country with uninterrupted electricity supply which can meet the needs of several generations of Nigerians.”

The don, however, observed that maximum electricity generation from the grid in Nigeria up till November 2016 was about 4.6Gigawatts (GW) from an installed capacity of 12GW. He noted that the lack of adequate supply of gas had contributed to the significant volatility in electricity supply that often ranges between a minimum of 1.5 GW and a maximum of 4.6GW.

He also stated that out of the 12.5GW installed electricity capacity, 68.8 per cent is not being utilized, 30.2 per cent is operational and only 15.2 per cent is distributed to final users.

He added that when the technical losses along the value chain of nearly 8 per cent is factored in, “then delivered electricity from the grid to a country of about 180 million people is barely the equivalent of what medium-sized cities in advanced countries generate and consume. In fact, this is equivalent of to 25 watts per person per year, barely enough for one electricity bulb per person.”

Speaking in a similar vein, Dr Ade Ilugbo, an economist, said one of the major problems of the sector is the huge debts owed the operators by the government, the private sector and private citizens. “The sector is owed so much that it should ordinarily be difficult for the operators to do good business.”

He added that many Nigerians have not been able to move away from the past when the sector was fully run by government. “We have to learn that when services are rendered, payment should be made. When government, businesses and individuals owe Discos, how are they supposed to raise revenue that should be invested in the business?” he asked.

He also noted that the government should have done due diligence to ensure that those who bought the distribution and generation companies are those with both technical competence and the wherewithal to do what is required to improve electricity generation and distribution in the country.

Speaking further on the problems, he said, “Electricity generation in Nigeria is characterised by a poorly-motivated workforce, vandalism and theft of cables and other vital equipment, accidental destruction of distribution lines, illegal connections and resultant over-loading of distribution lines. These have been responsible for unannounced load shedding, prolonged and intermittent outages. You can’t change all of these all of a sudden even if you have access to all the funds you need. This explains why in spite of the huge amounts of money sunk into the sector, Nigerians are still deprived of regular electricity supply.

“Nigeria is a vast country. So, replacing the damaged cables and other equipment will take a long time. It is not even a matter of not having the resources; locating those vandalised cables will be a serious challenge.”

Also speaking on the matter, an electrical engineer, Mr Alphonsus Ebule, said, “One of the major factors responsible for the seeming slowness in getting as much improvement in electricity generation as we would have wanted is the old practice of building large centralised plants designed to transmit electricity. Nobody does that anymore. That has been the practice in the country since the 1960s; unfortunately that is what still obtains largely till date. In other climes, they have moved beyond that. What they deploy now is distributive generation. Power is generated in small units when and where it is needed. There is a serious problem in transmitting power over a long distance. The world has moved away from that but that is what we still use.

“We do not need a national grid; what we need are small plants meant to serve specified areas. With that it would be much easier to manage power generation and transmission.” Ebule added that transmission lines were poorly maintained and frequently vandalised, which resulted in transmission losses of over 25 per cent of electricity produced.

According to him, “Until the nation is ready to invest massively over a period of time in the sector, at least a quarter of what is generated would be lost in transmission. If we claim to generate 5,000MW now, the reality is that we cannot really enjoy up to 4,000 MW. So, if you ask me, I will say there is no point increasing generation until the transmission end is well sorted out and taken care of.”

He observed that it is awkward that electricity generated from any part of the country would first have to be put in the national grid before being distributed in the area. “There is no way some of the generated power would not be lost in the process. The best thing is to find a way by which generated power could be used directly by the areas that generated it without routing it through the national grid.”

This view is corroborated by Dr Sam Amadi, former Chairman of Nigeria Electricity Regulatory Commission (NERC), who said, “Nigeria loses 40 to 50 per cent of the power it generates during transmission and if Nigeria were to generate an extra 1,000 megawatts today, it has no way of transmitting the extra megawatts because the current transmission lines are not adequate.”

One other identified factor militating against progress in the sector is the inadequate supply of gas to large power plants, which the government is building. For instance, the Calabar Power Station in Cross River State has the capacity to generate 625MW but it also requires 175MMcfd and a 107-km offshore and land gas pipeline for it to come on stream.

The story is not much different from that of Egbema Power Station in Imo State which has the capacity to generate 375MW but requires 100 MMcfd and a 26-km stretch of gas pipeline. The Gbarain Power Station in Bayelsa State can generate 250 MW but it would require 70 MMfcd for its turbine and this would require a gas pipeline of about five kilometers.

 

Effects of irregular power supply

Electricity is vital to development. It is the key to improved social and economic well-being just as it is crucial to industrialisation and wealth creation. It is also the door to employment opportunities to the teeming unemployed Nigerian youths. The nation’s quest of becoming one of the 20 most developed countries in the world would remain a pipedream unless it finds the key to an appreciable improvement in power generation and transmission.

Consequent upon the epileptic nature of electricity supply in the country, many industrial outfits have resorted to generating their own power. A conservative estimation of power generated by households and industrial outfits from petrol and diesel generators is put it at 2500MW. This has resulted in the cost of doing business within the country being very high. The effect of this is that locally produced goods in Nigeria are more expensive than imported ones. Thus, made in Nigeria goods are abandoned by Nigerians for cheaper imported ones. What’s more, there is nowhere outside the country where Nigerian manufacturers can sell their products because of high cost of production. With this, many of them have been forced to close their plants, while a number of them now import foreign products to sell locally. Some multinationals have relocated their operations to other countries. With that development, economic growth propelled by the real sector has slowed down, employment is stalled and poverty has spread. This becomes apparent against the backdrop of the paltry contribution of the manufacturing sector to the Gross Domestic Product. Compared with the 35 per cent in Thailand, 34 per cent in China, 30 per cent in Malaysia and 28 per cent in Indonesia, it is evident that the contribution of the sector to the nation’s economic growth gives a cause for concern. Even the small and medium-scale enterprises sub-sector, which is the heart of employment opportunity creation, is anaemic as a result of epileptic power supply. Entrepreneurship is at its lowest ebb ever in the country. Many artisans who require electricity supply to eke out a living have been thrown out of business and are forced to seek a quick way out of the quagmire by becoming commercial motorcycle riders.

It goes without saying that solving the electricity problem is a sure way of putting the nation on the pathway to greatness.

 

Government efforts

Since the days of President Olusegun Obasanjo, the Federal Government has been making efforts to improve on power generation and supply. The first step taken by the Obasanjo administration was in 1999 when the National Council on Privatisation (NCP) set up the Electric Power Sector Implementation Committee (EPIC) for the purpose of undertaking a comprehensive study of the power industry. EPIC came up with the national policy on electric power and a draft electric power sector reform bill. These formed the basis of a draft bill sent to the National Assembly by the NCP in 2002. The bill was passed in 2005.

The major components of the Electric Power Sector Reform Act were restructuring of existing utility, liberalisation and privatisation, as well as reinforcement of existing infrastructure through National Integrated Power Projects (NIPPs) and other government interventions. With the Act came the creation of the PHCN to assume the assets, liabilities and employees of NEPA, unbundling of PHCN into successor companies and ensuring greater operational autonomy, development of an efficient electricity market, privatisation of successor companies and establishment of the Nigeria Electricity Regulatory Commission (NERC).

However, despite the huge sums of money sunk into the reform of the sector and the building of power plants, the change of government in 2007 stalled the progress in the sector. Some of the decisions made sequel to the Act were reversed, it was not until President Goodluck Jonathan assumed office that activities targeted at improving the sector resumed.

The first step the administration took towards getting the reform back on track was to launch the Roadmap for Power Sector Reform in August 2010. This was followed with the re-instatement of the NERC and the inauguration of the board of the Nigerian Bulk Electricity Trading Plc, which is supposed to assure investors in the sector that whatever power they generated would be purchased and paid for.

The government also embarked on the privatisation of its thermal generation stations and power distribution companies with the aim of creating an electricity market that would lead to a more efficient electricity supply industry and a more vibrant power sector. However, the efforts did not result in regular electricity supply.

The Muhammadu Buhari administration has also taken some steps to stem the irregularity of power supply in the country. When Gencos and gas companies were confronted with difficulty in sourcing foreign exchange for their transactions, it launched the N701bn Payment Assurance Programme. This was to help generating companies to continue in business despite the difficulty they were having.

The government has also been able to rally the support of international bodies for the power sector. On the sidelines of the Spring Meetings of the World Bank and IMF in April 2017, the World Bank Group pledged that “a full range of instruments will be deployed to help the Nigerian government mobilise investments directly from the private sector and through private sector guarantees.”

The World Bank, represented by its Senior Director for Energy and Extractive Industries, Riccardo Puliti, noted that “controlling the cost of electricity supply is a critical element of the recovery program that will require close attention to prioritising investments based on least cost power development investment planning principles.”

Similarly, the Global Director for Infrastructure and Natural Resources at the International Finance Corporation, Bernard Sheahan, while promising the support of IFC, said “a turnaround of the power sector will require the expertise and financing of the private sector.”

In spite of these efforts and assurances, Nigerians, who still spend a huge portion of their resources on generating electricity on their own, cannot but keep wondering when these promises will find fulfillment and electricity supply will become available to energise the economy and improve individual lives.

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