Culled—Proshare

May 13, 2020

By FBNQuest Research                                                                                  

Power shortages in Nigeria significantly impede growth and development. Industry sources suggest that the lack of access to reliable electricity costs Nigeria an estimated US$29bn per year. According to the Transmission Company of Nigeria, poor gas supply to power stations has persisted. This reduces, in turn, the electricity transmitted to the eleven distribution companies and by extension to consumers across the country. Businesses suffer an average monthly power outage of 239 hours (equivalent to about two weeks). Furthermore, self-generation places pressure on household pockets. Nigerians spend an estimated US$14bn a year on small-scale generators.                                                                                                        

According to a survey carried out by a reputable indigenous polling agency, households with access to on-grid electricity had an average power supply of only 9.6 hours a day in Q3 2019.

Last month, due to gas supply and grid infrastructure challenges the power industry recorded a loss of N57bn. However, when compared with the corresponding period of 2019, the loss due to the same constraints was higher, at N70bn.

According to the advisory power team within the Office of the Vice President, on 07 May the average energy sent out was 4,441 megawatts (MW). However, 2,993MW was unable to be generated for consumption. This resulted in an estimated loss of N1.9bn for the industry. Although the NNPC recently resolved to supply gas to generation companies (GENCOs), the shortages still persist.

There are vast opportunities for off-grid alternatives, particularly within the rural economy via electrification that can support agricultural output from farms as well as light manufacturing activities.  Solar can provide relatively affordable energy for rural communities across Nigeria. Additionally, it complements the rapid development of small-scale industries.

We understand that the Rural Electrification Agency (REA), acting in partnership with the African Development Bank, recently made available a US$200m development fund to ramp up solar home systems and mini-grid projects to connect at least 105,000 households to energy supply.

Furthermore, in an attempt to combat the Covid-19 pandemic, the REA has deployed solar hybrid mini-grids to isolation centers and public health laboratories in Abuja, Lagos and Ogun states. There are plans to provide same in other states.

The private sector has supported efforts to combat the ongoing pandemic. One energy-related example is an off-grid energy impact investing company that is providing a N180m Covid-19 solar relief package to four renewable energy companies. The renewable companies are expected to provide solar power for emergency health centers.

Although Nigeria has an energy policy which emphasises renewable energy development, an implementation strategy is needed to facilitate the meaningful growth of renewables in the country’s energy mix.