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Towards Efficient Electricity Supply in Nigeria

Nigeria is gifted with large oil, gas, hydro and solar resources, and it has the capability to produce 12,522 MW of electric power from existing plants. The nation’s power sector is dominated by gas-fired thermal power generation, which accounted for over 80% of the total power generation in the country as of 2019. Nigeria has only generated an average of 4,000 megawatts, which is insufficient for a country of over 200 million people are still contending with epileptic power supply arising from low generation and transmission capacities and system collapse.

Access to electricity in Nigeria has worsened over the years. The country has been unable to meet demand because of its policies, regulations and management of operations. Its deficiency to provide adequate and reliable energy is well documented, specifically its impact on the economy. The installed national grid, power generation capacity grew from 8,000 MW to 13,000 MW between 2015 and 2020 while the distribution system had the capacity to evacuate 5,500 MW of power having grown from 4,500 MW in 2015. In 2018, electricity net generation in the country was 34.45 billion kilowatthours. It increased from 15.43 billion kilowatthours in 1999 to 34.45 billion kilowatthours in 2018 growing at an average annual rate of 5.00%. Electricity Production in Nigeria reached 8,089 GWh in Dec 2020, compared with 9,436 GWh in the previous quarter. Today, electricity generation capacity and level of energy consumed by end-users remained dismal in the country, standing between 4,000 megawatts and 2,000 MW post and pre-introduction of tariff. Across the network, transmission losses in Nigeria are high at an average of approximately 8%-10%, compared to the emerging countries’ benchmarks of 2%-6%.

The West African country currently supplies electricity to the Republic of Benin, Togo and Niger. It is important to note that the Nigerian power sector will require considerably more investment to achieve a dependable 24/7 power supply. In the last four months, Nigerian Electricity Supply Industry through the Service Based Tariff (SBT) may have succeeded in improving revenue collection by about N260b. Expert says while many consumers may have experienced a tariff increase, the same may not be said for improvement of service, stressing that mechanisms to monitor, which required initial consultation with consumers before the tariff increase may need to be enforced.

In spite of billions of dollars injected into the sector, challenges such as poor transmission network and incessant collapse of the national grid are in occurrence in Nigeria, despite the privatisation of 11 electricity distribution companies (DISCOs) and six generating companies (GENCOs) with the federal government retaining 100 per cent ownership of the Transmission Company of Nigeria (TCN). For instance, Lagos state with about the population of about 27-million people, receives an average of about 1,000 MW for no more than 12 hours daily. Generally, businesses in Nigeria lose about $29bn annually because of unreliable electricity and the country’s utilities get paid for only a half of the electricity they receive this is based on the World Bank report, though the government rejected the numbers in the report.

Inefficient metering remains a major downside to the success of power sector reforms in Nigeria. While some consumers avoid paying for power consumed through meter bypass, some other consumers are made to pay for what they have not consumed through estimated billing by DISCOs. Electric power is regulated by the Nigerian Electricity Regulatory Commission (NERC). The NERC report noted that only 4,234,759 (40.27%) of the total customer population of 10,516,090 were metered and only three out of 11 Electricity Distribution Companies in the country had metered more than 50% of electricity customers under their coverage areas as of 30 June 2020.

The Task of Greening the Nigerian Economy

In order to improve the electricity sector, the Nigerian government developed the Power Sector Recovery and Implementation Plan (PSRIP), which was prepared in consultation with the World Bank Group (WBG) and approved by the Federal Executive Council (FEC) on March 22, 2017. Others are Final issuance of the Mini-Grid Regulations 2016 adopted on May 24, 2017 by the NERC and the Ministerial declaration of eligible customers in the NESI in pursuant to Sections 27 and 100 of the Electricity Power Sector Reform Act on May 15, 2017.

Recently, power distribution declined by 27.5 per cent, representing an average hourly loss of 1,126 megawatts, totalling a daily distribution decline of 27,040 MWh. Data from the NERC showed that the national grid collapsed 12 times in 2018, 10 times in 2019, and five times in 2020.The Federal Government of Nigeria in recent times in conjunction with the Nigerian Electricity Supply Industry (NESI) and the independent regulatory body (NERC) has embarked on a series of undertakings aimed at rescuing the ailing power sector.

A NERC report outlining the performance of the electricity supply industry in the second quarter of 2020 indicate that the total electric energy generated was 8,734,927MWh – 1.4% more than the energy generated during the preceding quarter. Within the same quarter, the industry recorded a peak daily generation of 5,316 MW.The available plant generation units increased to 73 from the daily average of 66 units recorded in the preceding quarter. Although the increase in the available generation units in the second quarter of 2020 led to 1.4% increase in the total electric energy generated, the capacity utilisation rate fell by 8.16 percentage points during the said period.

Signing of the Implementation Agreement for Nigeria in Abuja. From left to right: Onyeche Tifase, CEO Siemens Nigeria, Alex A. Okoh, Director General of Bureau of Public Enterprises, Joe Kaeser, President and CEO of Siemens AG and Regine Hess, German deputy ambassador to Nigeria.

In order to develop the sector, in February 2021, Siemens Energy and the Nigerian Government signed a contract for the pre-engineering phase of the Presidential Power Initiative (PPI). Formerly known as the Nigeria Electrification Roadmap (NER), PPI is a three-phased project that includes increasing Nigeria’s electricity generation output five-fold, revamping the power distribution and transmission systems in a massive construction project that promotes local skills and sustainable technology. Expert says, even with an installed power generation capacity of ~14GW, there’s a less than 5GW of operational capacity in the nation’s grid, thereby putting the majority of the 200m population at the mercy of more expensive and polluting alternative generation sources.

On the 26th of April 2021, NERC released statement titled “Notice of Minor and Extraordinary Review of Tariffs for Electricity Transmission and Distribution Companies”, concluding the Extraordinary Tariff Review process for the 11 Electricity Distribution Companies (DISCOs). NERC said the reviews would put into consideration changes in inflation, foreign exchange, gas prices and available generation capacity. In contrast, the Minister of Power, Mr. Sale Mamman, earlier this month disclosed that there would be no major hike in electricity tariff, but failed to completely dismiss the statement released by NERC, giving Nigerians a 21-day feedback period before the increase in July. He acknowledges that the review planned by NERC is consistent with the Section 76 of the Electric Power Sector Reform Act (EPSRA) of 2005.

In addition, the Federal Executive Council had approved N3bn for the execution of six major electricity projects in the country to upgrade Nigeria’s electricity facilities and improve power supply across the country. In line with this, the Nigerian government is wrapping up the distribution of its initial one million meters (Phase 0) and would soon begin the distribution of the four million sponsored by CBN (Phase 2). These efforts will restore confidence and trust in the power sector as consumers of electricity would no longer be extorted through an estimated billing system that does not match consumption.

The Nigerian authorities should note that, performing a feasible and autonomous stress tests on the Generation, Distribution and Transmission capacities will establish an enabler to plan dynamically and develop the sector. More investment in transmission and distribution activities on the value chain can improve drastically, the state of power in the country. Meanwhile, renewable energy is expected to witness the substantial expansion in the Nigerian power EPC market owing to the encouraging government policies and upcoming renewable energy projects in the country. The Nigerian government has been calling for more private sector partnerships to increase renewable energy access in Nigeria in what they believe will assist in cutting energy bills. The result will drive the Nigerian power market.

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