Since its inception in 2012, the National Sovereign Investment Authority (NSIA) has focused on enhancing the development of five key infrastructural sectors. They include; agriculture, healthcare, motorways, real estate and power. According to NETI’s recent report as of 2016, NSIA had made a capital contribution of $1,277, 653 in agriculture, N16,111,308 on the second Niger bridge and about N3,000,000,000 on Nigeria equity and shares. While the majority of its investments have been on agriculture, healthcare, motorways and real estate, no investment has been made in power infrastructure despite the strategic importance of power to Nigeria’s economy.
In an interview with the Managing Director, NSIA, Uche Orji, conducted by PREMIUM TIMES earlier this year, the MD justified NSIA’s reason for not investing in the power infrastructure. According to the MD, the power sector is a difficult sector to invest in because of its lack of legally conducive and regulatory environment. However, as true as the MD’s opinion might be, especially with the non-aligned interests of the various stakeholders; policymakers, regulators, operators, investors and consumers, the Nigeria government through the NSIA has not effectively explored investment in other means of generating electricity other than the national grid.
Development of infrastructure in the health and agricultural sector without commensurate development of the power sector will only make these sectors inefficient and more expensive to operate. A cancer centre or diagnostic centre will require an affordable and reliable means of generating electricity for the operation of the buildings and sophisticated machines they would house. Experience with existing hospitals and health care centres has shown that relying on diesel/petrol powered generators is not cost effective in the long run.
Likewise for agriculture, processing of farm produce especially perishable ones will require electricity to power most processing machines in order to save the cost of running fuel on diesel generators or of transporting the raw produce to the urban centre for processing before they perish.
Furthermore, harnessing the great potential of readily available renewable energy sources in rural areas will help to mitigate the rapid growth of urban areas. When the government provides infrastructure such as energy in rural areas, it helps to decongest overpopulation in urban areas. This allows existing infrastructures in urban centres to serve the existing population without them being overstretched.
An overview of the Nigeria power sector
Nigeria ranks second worst in the global electricity access deficit chart according to the World Bank statistics despite the United States Agency for International Development’s (USAID) assessment of installed electricity capacity to be about 12,522MW.
In the Nigeria Power Baseline Report 2015, Nigeria’s per capita power consumption was ranked as one of the lowest in Africa and globally with a rate of 151kwh. The peak electricity generated in 2018 dropped by 3.3% from the 5222.3MW recorded in 2017.
The power sector performance report of the presidential task force on power, in September 2018 noted that the power sector witnessed a power loss of 107,340MW with about N51.519 billion monetary value due to insufficient gas supply, distribution and transmission infrastructure. Also, as of 29 October 2018, the number of idle power plants had increased from seven to 15, as a result of gas limitations, resulting in a revenue shortfall of 52.45 billion in October.
According to NERC’s analysis, gas supply and infrastructure creates 64% of the gap between the actual generation capacity and installed capacity to be bridged in Nigeria. This is evident in the fall of the grid generated power from 5000MW in 2017 to 3000MW June 2018 when six gas generation plants were shut down.
According to the Power Sector Recovery Program (PSRP) initiated by the government of Nigeria in collaboration with the World Bank in 2017, Nigeria requires about US$7.5 billion funding which is expected to increase by 20% annually, to clear the financial deficit of the power sector. As generated capacity reduces and revenues shrink through the loss of generated power, various programs are still being launched to achieve the needed reforms in the power sector.
The Way Forward
The government of Nigeria had projected that by the year 2020, 26.6GW of additional power supply will be required to meet demand, from a mixture of thermal, gas, coal and renewable energy, and this requires an investment of up to $4 billion. The implementation of the Renewable Energy Master Plan (REMP) drawn by the Nigerian Government in 2006, to increase the supply of renewable electricity from 13% to 36% by 2030 has been put to a standstill.
The stall in the implementation of the REMP was due to the unwillingness of the government to financially support the program after a Memorandum of Understanding (MOU) was signed through a power purchase agreement between 14 solar power project firms and the Nigeria Bulk Electricity Trader. The expected value of this agreement was an additional 1.1GW of generated electricity to the country’s generation capacity.
While the existing transmission lines might not be robust enough to accommodate this generated capacity if actually implemented, the capacity can be broken down into smaller solar power plants to power rural communities that are off grid, especially those in the North with estimated high peak sunshine hours. Thus, NSIA through its infrastructure fund can invest in this type of power infrastructure project that would not require a lot of stakeholders like the national grid. Furthermore, other renewable energy sources like onshore and offshore wind resources can be explored in small scale.
The renewable energy division of the NNPC held a promising project of expanding the automotive biofuel industry by exploiting biomass material like sugarcane and cassava. However, this project has been stalled due to lack of appropriate equity finance, legislative framework and biofuel policy, the NSIA can invest in revitalizing this project from its large pool of funds to generate electricity on a small scale.
Since the power reforms of the Government of Nigeria allows for the off-grid sale of generated power, NSIA’s investment in developing off-grid micro-plants from renewable sources can be used to generate electricity that would be sold to end-users.
With only 36% of rural areas in Nigeria having access to electricity, sufficient electrification of these areas through small scale renewable energy plants will help decongest the urban areas that are experiencing very fast urbanization rate with limited infrastructure. Successful electrification of these rural areas will also open up them up for more local and foreign investments.