In its renewed bid to revamp the ailing power sector, the federal government and a Chinese company recently signed a Memorandum of Understanding (MoU) in Beijing, China, that would inject about $463 million into the sector. The money would be used to improve power distribution lines in Nigeria, as well as increase power supply to families and businesses nationwide. The Chinese Exim Bank will finance the deal, which contains both offshore and onshore components.
Besides, it will upgrade the distribution lines infrastructure under Lot Three of the Public-Private Initiative (PPI). This encompasses regions served by Jos, Kano, Abuja and Kaduna distribution companies (Discos). A separate MoU was also signed in China between the Transmission Company of Nigeria (TCN) and China Civil Engineering Construction Corporation (CCECC) to build a power sector super-grid in Nigeria.
All of these deals, according to the Minister of Power, Bayo Adelabu, are steps by the President Bola Tinubu administration to make the power sector efficient. These plans are coming against the recent disclosure by the minister that the federal government is set to review the power deal signed by the Muhammadu Buhari government with Siemens. The review has become necessary because of the prevailing economic conditions. The company also failed to increase power supply in Nigeria from the current 4,000mw to 25,000mw envisaged by 2025.
However, Siemens had fulfilled part of the agreement, which involved the importation of mobile stations and transformers. This might have increased the capacity of TCN to distribute power supply by 1,300mw. It is disheartening that the power sector has not been revamped despite huge investments in the sector. It is sad that power supply across the country is abysmally low. Such a situation undermines investment and development.
This has resulted in many manufacturing companies relocating to other neighbouring countries where power supply is stable. Data from the Manufacturers Association of Nigeria (MAN) revealed that over 300 manufacturing companies shut down operations in the last few years. The current high cost of diesel and fuel has worsened the plight of business owners in the country.
Diesel and petrol-powered generators provide about 25,000MW, while the national grid accounts for about 4,000MW. This is far less than what is needed for economic growth and development. Research has shown that generators are the most polluting sources of electricity generation, with many health hazards. According to recent statistics, business owners have spent about $14 billion on generators purchase.
Frequent grid collapse accounts for over two per cent loss of the nation’s Gross Domestic Product (GDP). The 2020 Ease of Doing Business report showed that 47 per cent of Nigerians lack access to electricity supply. This is a major drawback to the contribution of the private sector to the economy. Also, most of the MSMEs have identified unreliable electricity as a major challenge to their businesses.
A recent survey of Small and Medium Enterprises (SMEs) revealed that business owners are willing to switch to renewable energy if they receive the right incentives. Statistics from the Nigeria Electricity Regulatory Commission(NERC) show that in one year , electricity consumers paid N750billion as tariff, while the national grid suffered system collapse estimated at more than 50 times every year, in the last three years. Cost-reflective tariff has not been applied. Instead, tariff is based on estimated billings.
According to a recent World Bank report, due to poor power supply in Nigeria, businesses have lost in excess of N96.4trillion in the last 10 years, at a yearly estimate of $29billion. Another World Bank report shows that only 56.5 per cent of Nigerians or 110 million have no access to electricity. We hope that the MoU will improve power supply across the country and at the same time stimulate economic growth. It is sad that while South Africa generates over 45,000mw, Nigeria, the largest economy in Africa based on GDP, is generating under 4,500mw. Obviously, this cannot enhance economic development.
It is regrettable that the power sector Reform Act 2005, which resulted in the unbundling of the Power Holding Company of Nigeria (PHCN) in November 2013 into 18 companies, six Gencos and 12 Discos, has done little to improve the power supply needs of the country. A nation like Nigeria, endowed with vast gas, hydro and solar resources with the potential to generate over 12,000mw from existing power plants is grappling with perennial power supply shortage. Therefore, we urge the Tinubu administration to frontally address the challenges of the power sector. There will be no meaningful economic development without stable power supply.