29 March 2015
Special Report
Nigerian elections: Electricity supply key issue

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Special Report

Nigerian elections: Electricity supply key issue










Lack of electricity undermines Nigerian president's re-election bid

Reuters

Last Updated: 27 March 2015|08:02 GMT

Nigeria's electricity shortages persist and the underperformance is a major political issue.

 

Nigerian president Goodluck Jonathan's election campaign has trumpeted his reform of the power sector as a crowning achievement. But electricity shortages persist and the underperformance is a major political issue.

 

Jonathan took the bold step in 2013 of selling parts of the moribund state electricity firm and says the privatisation has bourne fruit. "Power supply in many parts of the country has improved to a consistent level of 15 hours a day," a presidential website says.

 

That is not the experience of most Nigerians, and the opposition has given him little credit, focusing instead on $16 billion allocated to improving power under previous president Olusegun Obasanjo that has yielded no tangible improvements.

 

Saturday's vote between Jonathan's People's Democratic Party (PDP) and former junta leader Muhammadu Buhari is expected to be the closest since the end of military rule in 1999 and could see the PDP and Jonathan lose power.

 

Both leaders have made a point of saying voters should look at their achievements and policy goals, putting the electricity issue at centre stage in Africa's top energy producer.

 

The wealthy and businesses can afford generators and market places buzz with their sound, but the average Nigerian suffers no light or water for days at a time, since the pumps stop working if the electricity is out for a long period.

 

The only place in the capital that never seems to blink is the Transcorp Hilton, the unofficial centre of politics.

 

Nigeria has a population of 170 million but an installed capacity that fluctuates between around 6,000 to just over 7,000 MW depending on which plant turbines are down, according to a daily report by the transmission company. South Africa's capacity is almost seven times greater for a population less than a third as big.

 

PRE-ELECTION PRICE CUT

 

Six new power plants have been built and another four are in the works, but output remains woeful as the plants do not get sufficient supplies of natural gas and the transmission lines cannot handle the power.

 

"The most serious constraints that were impeding power supply improvement are still there: gas and transmission and they are still in the government's hands," said World Bank energy specialist Muhammad Wakil.

 

"The privatization was successful but the reform agenda hasnít been achieved ... nothing has changed on gas."

 

Since privatisation, the amount of power produced has stagnated at around half total capacity. It has not topped a 2012 peak of 4,500 MW as the grid battles "gas constraints", plant outages and tripped circuits, according to the transmission company's report, which showed just 3,346 MW were sent out to consumers on March 23.

 

The government also blames gas pipeline vandalism.

 

Older plants, privatised two years ago, are in dire need of an upgrade but the fledgling generating firms lack the cash as distributors struggle with non-paying consumers and sophisticated theft. In some cases, they pay only 40 per cent of the monthly bill.

 

The funding situation is likely to worsen after a shock 50 per cent tariff cut two weeks ahead of the polls.

 

DOLLAR RISK

 

The regulator's decision to slash tariffs has broken the trust with investors, occurring outside the agreed schedule in a five-year tariff freeze intended to help the sector settle.

 

The central bank stepped in with a $213 billion ($1 billion) loan in September to keep the system afloat and allow the power firms to access credit, but more will be needed as the oil price slump continues to pressure Nigeria's currency.

 

"Electricity companies took dollar denominated loans," said Yinka Balogun, a central bank adviser. "They are import-dependent for equipment so they have currency exposure."

 

The power plants rely on gas for 80 per cent of their energy but have no say over the gas sector, which is handled by the state oil company whose primary focus is the far more lucrative crude sector.

 

Gas prices were raised to a level closer to a US gas benchmark last year to incentivise investment, but an equally big problem is a lack of gas pipelines.

 

Bolaji Osunsanya, head of the Nigerian Gas Association, said the economic climate and grid constraints meant gas would only be available to power 9,000 MW by 2020. It takes 4-5 years to build a gas pipeline and 8,500 km were needed, he added.

 

The government has also still not decided how to offload the monopoly grid operator, the Transmission Company of Nigeria (TCN), whose dilapidated condition is likely to send a shiver down the spine of even the hardiest private investor.

 

"They have an investment plan to spend $1 billion a year over an 8 year period," the World Bank's Wakil said. "They have quite an ambitious plan to increase capacity to 20 gigawatts. It's unlikely that they will get all the funding."



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