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The failing power sector in Nigeria: Why FG’s projections were wrong

A retrospective look at the power industry suggests gloomy prospects as 2022 draws to a close. From the transmission, generation, and distribution subsectors, it has been a vicious cycle of stunted growth and failure. The power sector, like Nigeria’s economy, has been unable to advance due to a lack of investment and managerial competence. Industrialization and the power industry are intertwined. In fact, neither can function without the other; Businesses, particularly Small and Medium-Sized Enterprises (SMEs), can only grow if there is enough electricity available.

Nigeria’s 218 million inhabitants will require a capacity of between 25,000 and 40,000 megawatts. Nevertheless, the installed generating power capacity is approximately 12,522 MW at the moment, and the infrastructure for transmission and distribution can only deliver 4,000 MW to homes and businesses on average.

President Muhammadu Buhari, on his resumption of office in 2015, delivered a restored vista for the power area; However, the industry continues to be a playground of embarrassment as he prepares to leave Aso Villa on May 29, 2023.

The power sector in Nigeria faces multiple challenges, including inadequate investment, out-of-date infrastructure, debt, and inefficiencies. Power outages have crippled small and medium-sized businesses (SMEs), slowed the expansion of productive industries, and made the prices of local goods uncompetitive.

The Electric Power Sector Reform Act of 2005 and the Roadmap for Power Sector Reform 2010 that followed aimed to completely privatize the power industry, increase output to 40,000 MW by 2020, attract investment, and bring the best players from around the world into the market. Regrettably, the lofty milestones have been missed as a result of the long-term decline brought on by poor privatization management.

According to the World Bank, by 2019, 90 million Nigerians lacked access to electricity, the highest figure in the world, surpassing Ethiopia’s 58 million and 70 million, respectively. According to the International Monetary Fund, power outages cost Nigerian businesses approximately $29 billion annually.

The majority of Nigerians do not have access to electricity round-the-clock, so every effort to save the power sector has failed.

Thus, flow power age remains underneath 3,800MW, and the per capita power use is 136 KW/h, one of the world’s most minimal. It is 4,270 KW/h in Libya; 616 KW/h in India; 2,944 KW/h in China; South Africa, 4,803 KW/h; and 8,307 KW/h in Singapore.

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The Daily Post highlights four significant occurrences that had an impact on Nigeria’s power sector: The National Mass Metering Project, or NMMP, which was unsuccessful, the recurrent breakdowns of the national grid, the liquidity crisis affecting electricity distribution companies, and

Public Lattice Breakdowns

Relentless public network breakdowns defaced the period under audit. The grid’s performance and various updates from DisCos demonstrated that Nigeria’s power grid had collapsed approximately eight times by September of this year, despite the fact that the Nigerian Electricity Regulatory Commission, or NERC, still required data on system collapse in 2022.

For instance, on September 25, 2022, the grid collapsed when the system’s power generation fell from more than 3,700 MW to as little as 38 MW.

The sixth power grid failure in Nigeria occurred on July 20, 2022, and another grid failure was reported on June 13. In March, when TCN reported a peak of 5,615.40 MW, the nation’s power system failed twice, and twice more in April of this year.

Electricity Bill of 2022 The Electricity Bill of 2022 was approved by the Senate in July to accelerate power sector reforms; notwithstanding, President Muhammadu Buhari is yet to consent to the Bill. Representative Gabriel Suswam, Director Board of trustees on power, said the Bill looked to give an optimal lawful and institutional structure for the business. In addition, he stated that the Bill would balance out Nigeria’s existing transmission infrastructure.

DisCos’ Liquidation Crisis In Nigeria, power distribution companies have experienced ups and downs. DisCos face challenges in the form of excessive debt, a poor balance sheet, and a lack of investment. However, the subsector has continued to be impacted by the issue of distribution infrastructures. Upon privatization in 2013, Nigerians figured the improvement would proclaim another vista, yet the opposite is the situation. Abubakar Aliyu, the minister of power, stated that nine of the eleven DisCos are in danger of going bankrupt. In addition, Aliyu stated that the circumstance had compelled the Nigerian government to instruct banks to locate serious investors who would be interested in purchasing its 60% stake in the Abuja, Kano, Kaduna, Benin, Ibadan, and Portharcourt DisCos.

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The National Mass Metering Project was a promise made by the Federal Government in 2022 to provide free meters to Nigerians. However, this has not yet been accomplished. Godwin Emefiele, the governor of the Central Bank of Nigeria, stated that the bank distributed N47.8 billion for approximately 865,956 meters across the country. However, MAPs have yet to achieve the anticipated outcomes of providing Nigerians with free meters despite the implementation of projects by DisCos and Meter Asset Providers.

Nigeria’s Electricity Road Map Agreement with Siemens, a German company, was signed in 2019 with the intention of modernizing the nation’s national grid and achieving 7,000 megawatts by 2021, 11,000 megawatts by 2023, and 25,000 megawatts by 2025. This agreement is part of Nigeria’s Presidential Power Initiative and the Siemens Project.

The project was approved by the Federal Executive Council, or FEC, in December of last year with the intention of improving the nation’s power sector; in any case, the main objective of accomplishing 7,000 MW by 2021 has been missed, while the 2023 and 2025 years’ objectives of 11,000 MW and 25000 MW separately are clearly out of reach.

Dr. Usman Mohammed, a former Managing Director of the Transmission Company of Nigeria, TCN, disclosed on Wednesday that the Siemen-FG deal cannot achieve 7000 MW. The Minister of Power, Abubakar Aliyu, had announced the delivery of the ten morbid power transformers to be located throughout the country.

Expert Reaction In response to the performance of Nigeria’s electricity in 2022, Mr. Eleojo Joseph, an energy expert, stated that the industry had been a massive failure.

He revealed that in order to address the problem of the national grid failing, electricity transmission in Nigeria should be localized.

“In 2022, the power sector is a massive failure.” Nigeria has never experienced a national grid failure of this magnitude. The national grid was like a switch that could be turned on and off. Electricity should be distributed locally and the Nigerian Transmission Company should be wound up. We are squandering material and monetary assets in running the TCN.

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“Why are we having trouble producing more than 5,000 Mw? The response is easy. In order to increase production, small and medium-sized electricity generators should be encouraged and given the necessary financial support. Imagine a scenario in which 2,000 micro and small businesses use the sun, water, wind, and other resources to generate between 200 and 2,000 megawatts across the entirety of Nigeria.

Let the government revisit the privatization of DISCOs in relation to distribution once more. If competent organizations are allowed to join, the narrative will drastically shift. Consider the telecom industry as a point of reference. Because NERC is ineffective and inefficient as the regulating body, the DISCOs are doing whatever they want. Due to their dog-eat-dog relationship, customers and DISCOs will continue to fight. Why on earth should consumers purchase DISCO-specific poles, meters, and transformers?

“In general, the government ought to declare a power sector emergency and recruit reputable international power generation and distribution companies to enter this vital industry. As a nation, we are doomed without electricity.

Furthermore, he asserted, “local manufacturers will continue to wallow in pain, and the economy will continue to nose-dive.”

In a similar vein, when Dr. Usman Mohammed broke down the power sector in an interview on Wednesday, he stated that the nation’s power is the worst it has ever been.

He claimed that the Nigerian government’s billion-naira intervention caused the sector to regress rather than advance.

He suggested that the next president of Nigeria, whoever wins the election, should personally advocate for power sector reforms in Nigeria.

In addition, he stated that adequate investment in the three subsectors is the key to unlocking the sectors’ potential: Generation, Transmission, and Distribution

According to Usman, if the Nigerian power sector wishes for change in the coming years, it should hire a competent managerial team.

For sure, regardless of the bearing of the power business today, Nigerians trust that the nation will head on the correct way from here on out.

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