Electricity outages stifle growth in Nigeria amid plans to revive power sector

By Charles Abuede

• Nigerians spend $14bn fuelling small-scale generators annually

As a thought out solution to mitigate the gnashing of teeth by many consumers on Nigeria’s estimated electricity billing conundrum, along with low power supply across the country, the Presidency, under the Presidential Mass Metering initiative, made funds available for power distribution companies (DisCos) to roll out over seven million meters to an estimated 30 million consumers at no cost, with the deployments beginning in Lagos, Kano, Abuja and Kaduna states.

Due to the closure or scale-down in operations as a result of the COVID-19 pandemic, there is reduced energy consumption by commercial and industrial customers, who cross-subsidize the power industry with their higher tariff. However, there is an increased energy demand for residential consumption.

Power shortages have remained a prominent part of Nigeria’s infrastructure gap to residential, commercial and industrial consumers in the country.  But the substantial expansion in quantity, quality and access to infrastructure services, especially electricity, is fundamental to rapid and sustained economic growth, as well as poverty reduction. Consequently, statistics show that Nigerians spend an estimated $14 billion annually on purchasing and fuelling small-scale generators.

According to the federal ministry of power, Nigeria’s installed grid power generation capacity has grown from 8,000MW to 13,000MW. However, the distribution capacity is still 5,000MW. For businesses located in Nigeria, self-generation of electricity places pressure on operating expenses and consumer wallets are also significantly affected by the same expense.

Based on the electricity generation statistics released by the Association of Power Generation Companies (APGC), the power sector recorded a generation capacity loss of N243 billion from January to October in the year 2020. The loss is primarily due to challenges experienced in gas supply and grid infrastructure.

However the challenges, the Transmission Company of Nigeria (TCN) also revealed that the power sector recorded a national peak generation of 5,520MW as at the end of October.

Prior to the Covid-19 pandemic, the power sector had many issues, of which the virus has only made more glaring. Thus, the pang of the pandemic was most felt by the electricity distribution companies (DisCos) in terms of customers’ inability to pay their bills. Moreover, the federal government of Nigeria, as disclosed in the 2021 appropriation bill, has plans to inject N198 billion into various capital projects in the power sector across Nigeria in 2021.

The breakdown of the allocation for capital projects shows that the Nigerian Electricity Regulatory Commission (NERC) plans to invest N294 million on capital projects, and the Nigerian Electricity Management Services Agency (NEMSA) an additional N441 million. Meanwhile, the allocation for the total overheads of the entire ministry and its agencies stands at N1.16 billion.

There are growing opportunities with off-grid, particularly within the rural economy via electrification.  Solar can provide relatively affordable energy for rural communities. Additionally, it complements the rapid development of small-scale industries.

Meanwhile, industry sources suggest that standalone solar home systems and mini-grids could provide modern energy access to over 88 million Nigerians by 2030. This could ease pressure on generator set expenses for businesses and households.