Nigeria invests N5trn in 2,500MW power

LAGOS- The Federal Government in a bid to curtail the epileptic power situation in the country has spent about N5 trillion ($31.45 billion) from 1999 till date. But it has only been able to increase the country’s electricity generating capacity by about 2,500 mega watts over the last 14 years.

This is a far cry compared to its peers — South Africa and Brazil. Brazil recorded an investment of $58 billion in its power sector between 1994 and 2008, while it currently produces about 100,000MW of electricity. South Africa on the other hand, currently produces about 40,000MW of electricity, with plans to invest additional $37 billion over the next couple of years to triple current capacity.

Investments in power since 1999 Between 1999 and 2013, Federal Government’s budgetary provisions for power stood at N2.8 trillion of which over N2.326 trillion went into the National Integrated Power Projects, NIPP and various power intervention projects.
Specifically, yearly allocations as contained in statistics from the Budget.

Geregu power plantHowever, these appropriations do not include investments by state governments, who have since been co-opted to intervene in their localities to improve the power supply situation, as according to the Nigerian Constitution, Power is exclusively the preserve of the Federal Government.

Recalled that the House of Representatives in 2008, confirmed that the Federal Government approved the sum of N2.544 trillion ($16 billion) for the power sector between 1999 and 2007, which led to a public outcry, as there was hardly anything to show for it, as the lights got dimmer instead of brighter.

The uproar led to further investigations in which it was discovered that only able to disburse N2.067 trillion ($13 billion) was disbursed in the eight year period, representing more than 81 percent funding.

Also, a Presidential Review Panel on the National Integrated Power Project, NIPP, in a presentation to the National Economic Council, NEC, in 2009, revealed that as at 2007, the NIPP got N1.627 trillion, plus the N318 billion Federal Government’s counterpart funding for the Mambilla Hydro Power project, and N222.6 billion ($1.4 billion) for additional nine turbines.

The panel however revealed that only N489.72 billion ($3.08 billion) was funded and scrutinised with advance payment guarantees from first class Nigerian banks and Letters of Credits issued by the Central Bank of Nigeria, CBN. It also stated that over N238.5 billion ($1.5 billion) of the sum was still in the custody of the banks as at then.

In addition, Mr. James Olotu, Managing Director/Chief Executive Officer, Niger Delta Power Holding Company, NDPHC, last year disclosed that the Federal Government is spending N1.26 trillion on 10 National Integrated Power Projects across the country.

He said about N492.4 billion ($3.12 billion) was budgeted for the first phase of the project, which started in 2006 and ended in 2007. This allocation covered seven power projects, while N920 billion ($5.82 billion) was budgeted to be utilized in the second phase starting from 2007. Olotu further disclosed that the funds were kept in the custody of JP Morgan and the Central Bank of Nigeria, CBN, while N882.4 billion had been disbursed to the NDPHC till date.

According to him, four of the projects had been completed, while six others are at various stages of completion. He said; “In totality, Nigerians have contributed $8 billion to build 10 power generation plants, which after completion, will give a total of 4,774MW.

“We are also building substations, transmission and distribution lines, as well as gas pipelines to ensure that the plants get gas when they are completed.”

He listed the completed projects as:
– Omotosho in Ondo State – 451MW
– Alaoji, Abia State – 1,074MW
– Sapele, Delta State – 451MW
– Olorunsogo, Ogun State – 750MW

Those close to completion are:
– Ihovbor power project in Edo State – 451MW
– Geregu, Kogi State – 434MW
– Egbema, Imo State – 338MW
– Gbarain, Bayelsa State – 225MW
– Omoku, Rivers State – 225MW
– Calabar, Cross River State – 561MW

Concerns over funds’ utilization
Despite the huge budgetary provisions, the House of Representatives’ Committee on Power still expressed concern over the poor utilization of funds appropriated for the sector.

Mr. Patrick Ikhariale, the Committee Chairman disclosed that whereas the sum of N75 billion was appropriated less than half or N34.7 billion or 46 percent was released to the Ministry of Finance, while only N19.7 billion (56 percent) was utilized by the Ministry of Power.

He argued that this implies that the Ministry did not require as much funding as it demanded, especially as it lacked the capacity to implement its capital budget.

This contrasts sharply with constant claims by the ministry that the country required at least $10 billion annually for 10 years to get power right.

2,500MW added since 1999
Despite these huge investments, Nigeria has only been able to increase its electricity generating capacity from about 2,000MW in 1999 to about 4,500MW as at today.

There appears to be no end in sight to the sufferings of Nigerians as power supply remains epileptic at an average of between three to four hours daily.

Equally, industries, particularly the small and medium scale, SME sub-sect have closed shop on account of lack electricity to power their operations. Even businesses in operation record their highest operating costs from electricity, as many invest in multiple generating sets to run their tools.

Commenting on the funds allocated to the power sector and its impact on power generation, Mr. Michael Olawale-Cole, President and Chairman of Council of the Nigerian Institute of Management, expressed concern that despite the huge allocation to the sector over the years, power generation is yet to record significant improvement.

He said, “Government’s sundry attempts at generating adequate power for the nation in the recent past have ended disastrously what with the scandals of monumental misappropriation of funds that trailed the various NIPPs across the country.

“There is no guarantee that the situation is going to change for the better in the near future,” adding that “the country seems to be at crossroads with the issue of power generation at the moment.”

He argued that “Once the issue of power generation and distribution is resolved, the nation’s firm match to greatness will be guaranteed.”

Underscoring how critical power is to economic growth, Prof. Rahamon Bello, Vice Chancellor, University of Lagos, lamented that in spite of the abundant energy resources in the country and significant government investments in the sector over the last ten years, electricity supply remains a serious challenge to Nigeria’s socio-economic development.

He said majority of Nigeria’s power infrastructure were built in the 1970s and 1980s and due to a freeze in investment in the sector, lack of maintenance and adequate expansion of the facilities over the years, Nigeria had to contend with epileptic and erratic power supply.

According to him, as at today, less than 50 per cent of Nigeria’s population has access to the national grid due to inadequate transmission and distribution networks.

Impact of power on economic development
Steady power is essential for national development, especially as it positively influences socio economic activities as well as the living standard of citizens.

In addition, ageing and poorly maintained infrastructure, weak network configuration and overloaded transformers, result in frequent system collapse, high transmission and distribution losses among others.

Analysts are of the view that lack of access to electric power, and modern energy in general, also has a negative effect on productivity and has limited the economic opportunities available to developing countries including Nigeria.

This, they said, is compounded by the poor state of existing infrastructure, which creates the dual challenge of finding resources for maintenance of existing facilities and also to build new power plants.

They contend that improving access to modern energy is a necessary condition for boosting growth and reducing poverty in not only Nigeria but Africa in general.

In comparison to other countries, Nigeria’s installed capacity is grossly inadequate. As at 2010, only about 3,700 megawatts was available for a population of 140 million people due to various reasons including gas supply constraints, inadequate maintenance of equipment that stems from procurement constraints, dearth of skilled maintenance personnel and the dependence on imports of parts and foreign experts to carry out repairs and overhauls.

Bello, who is a Professor of Chemical Engineering, noted that in 2000, power generation capacity was as low as 1,500MW, due, mainly to lack of investment in maintenance and expansion programmes on existing power plants.

Way forward
Even as the implementation of the Power Sector Reform Programme is well advanced, Bello called for appropriate commercial framework to support private investments to the sector.

He maintained that to proceed with the reform programme, it is necessary to develop a comprehensive action plan to holistically implement the programme as encapsulated in the Electric Power Sector Reform Act, EPSRA, 2005

He further advocated for a feasible incentive scheme backed by policy to encourage private sector investment in generation and distribution.

“Financial institutions and market systems that will support power procurement between generation companies and distribution companies should be put in place. Empowerment should be given to the office of the market operator to commence shadow trading,” Bello added.

On his part, Olawale-Cole said, “It is a common knowledge that Nigeria has been backward in the areas of successful start-up businesses, Small and Medium Enterprises (SMEs) and industrialisation generally which are the core catalysts for real national development due to poor power generation.

“Many companies have continued to operate at just break-even point and below installed capacity while the ones that cannot cope under the harsh operating climate occasioned by ever-mounting overhead costs have since closed shop or relocated to smaller neighbouring countries where there is steadier power supply.”

He also reiterated that security is key to future investments in the economy, while calling on the citizenry to support government’s efforts in order to move the country to the next level.

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