Nigeria’s deteriorating electricity sector: How the Federal Government’s projections failed

Looking back on 2022, there is little optimism for the electricity industry. The transmission, generating, and distribution subsectors have failed miserably in a cycle of stunted growth. The electricity industry has stagnated due to a lack of investment and management skill, much like Nigeria’s economy. The industrialization process and the power industry are interconnected. In fact, the development of enterprises, especially Small and Medium Enterprises, depends on a sufficient supply of power.

Nigeria’s 218 million people require a capacity of between 25,000 and 40,000 MW. Even yet, the available transmission and distribution infrastructure can only supply an average of 4,000MW to homes and businesses, despite the fact that there are already 12,522MW of installed producing capacity.

When he returned to government in 2015, President Muhammadu Buhari opened up new opportunities for the electricity business. However, as he gets ready to depart Aso Villa on May 29, 2023, the sector is still a source of shame.

Nigeria’s electricity sector has several problems due to underinvestment, out-of-date infrastructure, indebtedness, and inefficiency. Power shortages have rendered local goods uncompetitive in price, debilitated SMEs, and slowed the expansion of productive industries.

The goal of the Electric Power Sector Reform Act of 2005 and its successor, the Roadmap for Power Sector Reform of 2010, was to privatise the entire power sector, increase output to 40,000 MW by 2020, and draw the finest international firms into the market. Unfortunately, the high milestones have not been achieved due to the age-long degradation brought on by improper privatisation.

According to the World Bank, Nigeria has the poorest power access rates in the world in 2019 with 90 million people, trailing only Congo DR’s 70 million and Ethiopia’s 58 million. According to the International Monetary Fund, power outages cost Nigerian firms $29 billion a year.

Since the majority of Nigerians do not have access to energy around-the-clock, every strategy to save the country’s power industry has failed.

As a result, the country’s current power output is less than 3,800 MW, and its per-person electricity consumption is one of the lowest in the world at 136 KW/h. It is 4,270 KW/h in Libya, 616 KW/h in India, 2,944 KW/h in China, 4,803 KW/h in South Africa, and 8,307 KW/h in Singapore.

PulseNets outlines four key occurrences that had an influence on Nigeria’s power sector: the ongoing national grid failures, the issue involving the liquidation of electricity distribution companies, and the National Mass Metering Project, or NMMP, which was a failure.

National Grid Disintegrates

The time period under examination was characterised by frequent national grid failures. Nigeria’s electricity grid has failed roughly eight times by September of this year, according to the grid’s performance and different updates from DisCos, while the Nigerian Electricity Regulatory Commission, or NERC, still needed to gather data on system failure in 2022.

For instance, on September 25, 2022, the system’s power output dropped from over 3,700 MW to as little as 38 MW, causing a grid collapse.

Nigeria’s electricity grid had its sixth failure on July 20, 2022, and another grid breakdown was reported on June 13. The country’s electrical infrastructure failed twice in March (at which time TCN claimed to have recorded a peak of 5,615.40 MW) and twice more in April of this year.

2022 Electricity Bill

In order to further changes in the electricity industry, the Senate enacted the Electricity Bill 2022 in July. President Muhammadu Buhari has not yet signed the bill, though. The power committee’s chairman, senator Gabriel Suswam, stated that the goal of the bill was to give the sector the appropriate institutional and legal structure. He said that the Bill will balance out the inequities in Nigeria’s current transmission system.

DisCos’ Liquidation Crisis

The Nigerian power distribution businesses have seen ups and downs. The difficulties that DisCos face are typified by their high debt loads, weak financial standing, and lack of investment. However, the issue with distribution systems has persisted and continues to harm the business. Nigerians believed that the 2013 privatisation would open up new vistas, but the opposite is really true. Nine out of the eleven DisCos, according to Minister of Power Abubakar Aliyu, are about to declare bankruptcy. The Nigerian government was compelled by the situation, according to Aliyu’s additional disclosures, to order banks to locate qualified buyers for its 60% stake in the DisCos in Abuja, Kano, Kaduna, Benin, Ibadan, and Port Harcourt.

National Mass Metering project

Through the National Mass Metering Project, the Federal Government vowed to provide Nigerians free metres in 2022, although this goal has not yet been realised. Godwin Emefiele, the governor of the Central Bank of Nigeria, reported that the bank distributed N47.8 billion for around 865,956 metres throughout the nation. MAPs haven’t yet succeeded in giving Nigerians free metres, despite the execution of initiatives by DisCos and Meter Asset Providers.

Presidential Power Initiative-Siemen Project

The Nigerian government and Siemens, a German company, struck a €63 million agreement in 2019 to modernise the nation’s grid and reach 7,000 megawatts by 2021, 11,000 megawatts by 2023, and 25,000 megawatts by 2025.

The project was approved by the Federal Executive Council, or FEC, in December of last year with the intention of boosting the country’s power sector. However, the first target of achieving 7,000 MW by 2021 has been missed, and the targets of 11,000 MW and 25000 MW respectively for the years of 2023 and 2025 are obviously unachievable.

The delivery of ten morbid power transformers to be distributed throughout the nation had been announced by the Minister of Power, Abubakar Aliyu. However, Dr. Usman Mohammed, the former Managing Director of Transmission Company of Nigeria, TCN, revealed on Wednesday that the Siemen-FG deal cannot achieve 7000 MW.

Expert Response

Energy specialist Mr. Eleojo Joseph responded to Nigeria’s electricity performance in 2022 by calling the sector a total failure.

In order to address the problem of the national system collapsing, he said that the transmission of power in Nigeria should be localised.

“The power sector in 2022 is a colossal failure. We have never experienced this amount of national grid collapse in Nigeria. It was as if the national grid was a switch that got turned on and off. The Transmission Company of Nigeria should be disbanded, and electricity should be localized. We are wasting material and financial resources in running the TCN.

“Why are we struggling to generate more than 5,000Mw? The answer is simple. Mini and small electricity generating companies should be encouraged and given necessary financial assistance towards ramping up generation. Imagine a situation whereby 2,000 mini and small companies are generating from 200Mw to 2,000Mw across the length and breadth of Nigeria— using the sun, water, wind and other resources?

“Regarding distribution, let the Government revisit the privatization of the DISCOs one more time. Let competent organizations come on board, and the narrative will change drastically. See the telecommunication sector as a reference point. The DISCOs are doing what they like because NERC, as the regulating body, is not effective and efficient. The war will continue between consumers and DISCOs due to the dog-eat-dog situation between them. Why on earth should consumers buy poles, meters and transformers for DISCOs?

“On the whole, the Government should declare an emergency in the power sector and bring reputable international power generation and distribution companies to step into this critical sector. Without electricity, we are doomed as a nation.”

Also, he stated that “local manufacturers will continue to wallow in pain, and the economy will continue to nose-dive”.

In a similar vein, Dr. Usman Mohammed remarked that the nation’s electricity is the worst of today when analysing the power sector in an interview on Wednesday.

According to him, the Nigerian government’s billion naira involvement caused the industry to regress rather than advance.

He proposed that the improvements in Nigeria’s electricity industry be personally championed by whoever won the next election for president of Nigeria.

Additionally, he said that proper investment across the three subsectors of Transmission, Generation, and Distribution is the key to realising the full potential of the sectors.

Usman advised hiring a capable management team if the Nigerian power sector wants improvement in the ensuing years.

Nigerians do, in fact, expect that the nation would move in the right way in the future, regardless of the current state of the electricity sector.