In the tenuous dance with electricity challenges, Nigeria teeters on the brink, despite looming doom for homes and industries. In this report, Kingsley Jeremiah unravels the intricate implications, casting the spotlight on the ramifications for both Nigeria and other West African countries
In October, Nigeria’s Vice President Kashim Shettima, who also serves as Chairman of the Board of Directors of Niger Delta Power Holding Company (NDPHC) sat with manufacturers at the Agbara Industrial Zone in Ogun State to discuss how the zone could be electrified.
For decades, businesses operating in the Agbara industrial cluster did not utilise energy from the national grid. For these manufacturers, energy costs account for over 50 percent of their operating expenses. As the energy prices escalate, some of them account for the over 95 manufacturing companies, which the Manufacturers Association of Nigeria (MAN) said were shutting down production yearly.
While these manufacturers are looking for ways to get reliable and affordable electricity, they are not thinking about the national manufacturers because the grid is not reliable. Statistics of electricity consumption patterns from the Nigerians Electricity Regulatory Commission (NERC) showed that household consumers on the grid stand at about 80 percent while industrial customers stand at about 20 percent. In an ideal country, the consumption pattern should be the other way.
In Nigeria, most manufacturers and corporate businesses don’t trust the grid. Ade Ogundeyin is one of such people. Ogundeyin, who runs a steel mill where military and personal vehicles are fortified in the Sagamu area of Ogun State, cannot stand the epileptic state of the Nigerian national grid.
According to him, constant power outages create a lot of problems for his machines leading to losses, including loss of man-hours. The situation got so bad that at some point Ogundeyin was forced to go off the national grid and deploy an off-grid solution for his electricity needs, which is also detrimental to the environment, and a direct testament to the fact that the ease of doing business in the country has remained a major problem for investors.
Increasingly, some heavy-duty manufacturers/electricity consumers with sensitive equipment have already gone off-grid in a bid to power critical operations without damage to their machinery, while others, including some serviced by Kaduna Electricity Distribution Company and other DisCos, are seriously considering alternative power sources.
At the Kudenda Industrial Area in Kaduna, a paint factory had been at loggerheads with the Kaduna Electricity Distribution Company over the reliability status of the grid.
Despite the rising electricity, the company’s machines are shutting down forcefully over reoccurring grid collapses.
“The grid is not reliable. We are incurring more losses when we plan production around the grid system,” Usman Zanga told The Guardian.
Transmission lines, grid system unstable 10 years after privatisation
THE 2013 unbundling and partial privatisation of the nation’s power sector aimed to create a competitive market, attracting private investment, enhancing sector management, boosting power generation, and ensuring a reliable and cost-efficient power supply.
The reform broke the value chain into three. The generation segment is controlled by the private sector, while the distribution segment is partially controlled by the private sector with a 40 percent share in each of the eleven distribution companies left in the hand of the government.
The transmission segment is controlled by the government and remains the weakest link wheeling between 3,000 megawatts and 4,000MW when the generation capacity stands at 13,000 megawatts.
After eight years, progress has been limited. Installed capacity for power generation, transmission network expansion, and the rollout of pre-paid meters have seen only marginal improvements.
On the downside, operational generation capacity has considerably dropped, cost recovery for electricity production remains poor, and revenue continues to decline significantly.
On December 11, at about 1.00 pm, Nigeria’s electricity grid experienced a system collapse cutting down electricity from 4,032.80 megawatts at about 12.00 pm to 43 megawatts at 1.00 pm and a meagre 303 megawatts at about 5:00 pm.
This is not new. On September 14 this year, barely six hours after throwing the country into darkness, Nigeria’s electricity grid collapsed at about 6:41 am. While the system initially collapsed at 12:40 AM midnight and was in the process of restoration, the grid operated from Osogbo in Osun State went down again at 6:41 AM, crashing to 1.60 megawatts. The grid, which was restored to about 273 megawatts at about 4 AM went up to 598:50 megawatts before crashing to 1.60MW as of 7 AM.
By the last count, the country has experienced a national grid collapse 134 times in the last years, a development that experts say is one of the cardinal reasons that the sector has failed to perform since the privatisation.
Unlike many other countries, Nigeria operates a single grid, and anytime the system collapses, the entire country is thrown into darkness. On average, it takes about nine hours to restore power since the system is restored gradually.
Although the Federal Government-owned TCN describes the situation as a normal global occurrence, the collapse of power supply, every time it occurs, comes with a huge economic loss for consumers, especially commercial entities.
The World Economic Forum’s data that measured grid-related performance under the Energy Architecture Performance Index (EAPI) for 2017, however, ranked Nigeria 110 among 127 countries. Interestingly, African countries such as Congo, Namibia, Ghana, South Africa, Cameroon, Kenya, Zambia, Botswana, and Sudan were ranked far better in terms of system performance, than Nigeria.
Data from the TCN indicate that from November 1, 2013, to December 2022, the number of recorded total grid failures was 84, while the grid partially collapsed 43 times.
In 2013, the country recorded 24 power system collapses. The collapse stood at 13 in 2014; 10 times in 2015, and 28 times in 2016, while it was reduced to 24 in 2017, and 13 times in 2018.
The year 2019 saw 11, and in 2020, there were four grid collapses. In 2021, the grid collapsed eight times. In 2022, it disappointed consumers about four times.
More Loans Going Into The Grid, Transmission Infrastructure Yet No Significant Improvement
The World Bank, African Development Bank (AfDB), Japan, France Development Agency, and other financiers lent Nigeria over $7.5 billion under the administration of former President Muhammadu Buhari to improve the weak wheeling capacity of the transmission network and the grid.
Aside from the $2.3 billion Siemens deal, which was targeted at improving transmission infrastructure, Nigeria had taken a $486 million loan from the World Bank under the Nigeria Electricity Transmission Project (NETAP).
Japan extended a $242.4 million loan to the Federal Government for the implementation of the Lagos and Ogun Power Transmission System Improvement Project, just as the House of Representatives in 2017 disclosed that foreign loan to the Transmission Company of Nigeria totaled $1.5bn, with a separate $500m loan being negotiated with the Islamic Development Bank.
Recall that the Islamic Development Bank (IsDB) last year approved a total financing of $1.8 billion for Nigeria with the electricity loan expected to be a part of it.
Former Minister of Finance, Zainab Ahmed, had, in 2020, said the Federal Government requested another $3 billion World Bank loan to finance the transmission network. The fund was provided in four tranches of $750 million each.
The African Development Bank (AfDB), in 2019, approved a $210 million loan for the upgrade of the electricity transmission and distribution network.In the North, particularly in Adamawa, Bauchi, Borno, Gombe, Plateau, Taraba, and Yobe as well as the Kafanchan area in Kaduna State, the Transmission Company of Nigeria (TCN) listed 38 projects funded by facilities from the World Bank, Federal Government budget, TCN-generated revenue and Presidential Power Initiative (PPI). The PPI is being funded through the Siemens deal. Nine of the projects are reportedly completed.
In the Kaduna region of TCN, which interfaces with Kaduna Electricity Distribution Company (KAEDCO) and Kano Electricity Distribution Company (KEDCO) through the 132/33kV Funtua Substation, the company listed 36 projects across Kaduna, Zamfara, and Kebbi states, and a part of Niamey in Niger Republic. Five of the projects are reportedly completed. The projects are being funded with loans from the France Development Agency, the World Bank, AfDB, and revenue from the agency.
In the Kano Region Transmission Company of Nigeria (TCN), which covers some states in the North West North East and some part of International line Niger Republic namely, Kano State, Katsina State, Jigawa State, some parts of Bauchi State, and international line Gazaoua(Niger Republic), there are 30 uncompleted projects and five completed projects.
The Abuja Region of Transmission Company of Nigeria (TCN) covers Abuja, Nasarawa, Kogi, parts of Edo, Niger and Kaduna States has 12 projects, six are completed, and six are uncompleted.
The Shiroro Region of Transmission Company of Nigeria (TCN) covers two states, Niger State in the North Central and Kebbi State in North West. The region interfaces with three Distribution Companies (Discos): Abuja Electricity Distribution Company (AEDC), Ibadan Electricity Distribution Company (IBDEC) and Kaduna Electricity Distribution Company (KEDC). There are 24 projects in this region. One is ongoing, three are proposed and 20 are completed according to a data sheet from TCN.
In the Osogbo region, there are 34 projects, eight are completed and 26 are ongoing. In the Lagos region, there are 30 projects, 10 are completed while 20 are ongoing. In the Enugu region, there are 28 projects, eight are completed, 20 are ongoing. In the Port-Harcourt region, there are 17; four have been completed and 13 ongoing projects.
Weak management, poor project execution, political considerations and corruption
EARLIER this year, during a tour to the projects in Abuja, the transmission substation being constructed in Dawaki had a success story. The Chinese contractors appeared to be on track. The project was delivered around when The Guardian visited the site and at that point, the Abuja Electricity Distribution Company had done their part and people within the environment were already enjoying the benefits of the project.
But the situation in Lugbe was different. Although the project was awarded about the same time, General Electric which was constructing the project was just mobilising people to site and there was no sign of progress except for the few equipment on site.
In the Apo axis where there are two projects, the first one by the GraceVile church in Apo was nearing completion but the second one in Efab Estate after the Apo Mechanic was way behind execution.
Sadly, the one by the state is expected to energise the smaller project by the GraceVile church. By implication, the project even if completed may not deliver supply unless the bigger one is completed. While the Managing Director of TCN, Sule Abdulaziz was mad at the contractors both at Lugbe and Apo, side comments from some of his staff showed that the company had a hand in the project executive.
On the surface, TCN blames vandalism, encroachment on transmission Right of Way (RoW), and soil excavation close to transmission tower bases as major challenges to the project. But most stakeholders insisted widespread corruption, political considerations, non-alignment of the infrastructure, and the inability of the distribution companies to increase their off-taking capacity, among other factors as the bottlenecks on the kind-heartedness of the lenders.
Most projects are not sited at a place that would be commercially viable in a market most of the distribution companies are unable to recover their revenue.
Most of the officials of the company and the sector are also accused of corruption, as payments to contract are stalled unless the officials take out their share.
A consultant at Nextier Group, Femi Omisanjo, said the sector seems to have jettisoned all the frameworks, rules, codes and regulations (developed for the sector at the pre-privatisation stage), adding that the move left the market in sub-optimal pricing and uncertainty in pricing, misallocation of transmission capacity and chronic indebtedness of some participants without any retribution.
According to him, while wholesale markets are supposed to act as a signal source for new investment and increase efficiency, the case in the Nigeria Power Sector is different as investments are mostly haphazard without recourse to any efficiency and financial viability.
Energy expert at the University of Ibadan, Prof. Adeola Adenikinju, said the huge investments in the electricity sector, including transmission, have not delivered significant improvements and reliable electricity supply, stressing that there is a need for a planned, balanced investment in the sector.
Adenikinju said: “It is surprising that the World Bank and other development partners are part of these investments that have delivered, at best, marginal improvements in delivered electricity to consumers. I still believe that a wholesome review of the sector, including the privatisation contracts, is necessary to revive the sector.”
Energy expert at PWC, Habeeb Jaiyeola, said calls for alignment of all investments in the power sector is required to ensure value for money and effective output of the initiatives.
According to him, the investment must fit into the business plans of the GenCos, TCN and DisCos who are the eventual beneficiaries and have the responsibility to use these interventions effectively in order to yield positive results for the power sector.
“Diverse solutions in the sector will continue to encourage competition and performance improvement from the sector players. A combination of ongrid and offgrid solutions will encourage this competition and continuous improvement. This will be further boosted by a fully deregulated sector where the forces of demand and supply are allowed to thrive and encourage future investments, while reducing government interventions,” he noted.
Stranded Capacity persists
THE challenges facing Nigerian Electricity Supply Industry (NESI) is leading to stranded power in a country where businesses are shutting down over lack of supply.
The Association of Power Generation Companies (APGC) said 42,160.87 mega watts (MW) of electricity out of the 88,566.43MW generated by power generation companies (GenCos) yearly is stranded.
The APGC statistics for last year showed that in January, of the GenCos’ output of 7,689.04MW, only 3,733.01MW was used, while an average of 3,956.03MW was stranded.
In February, available generation stood at 7,584.46MW, while 4,001.33MW was used and 3,583.13MW stranded. Similarly, the generated power for March stood at 7,306.39M, with 4,097.62MW consumed while 3,208.77MW was stranded.
The story did not change all through the rest of the year, through to the last quarter, where 7,691.37MW was generated in October, 3,810.74MW distributed and 3,880.63MW wasted. Same with November’s 7,238.12MW with only 4,093.76 utilised, and 3,144.37 stranded. In December, when power is at optimum demand due to year-end holidays, generation dropped to around 5,207.57MW, with 4,162.47MW utilised on the average while 1,045.10MW was stranded, all padding the cost burn by operators in the industry.
Stranded Capacity persists
THE challenges facing the Nigerian Electricity Supply Industry (NESI) is leading to stranded power in a country where businesses are shutting down over lack of supply. The Association of Power Generation Companies (APGC) said 42,160.87 mega watts (MW) of electricity out of the 88,566.43MW generated by power generation companies (GenCOs) yearly is stranded.
The APGC statistics for last year showed that in January, of the GenCos’ output of 7,689.04MW, only 3,733.01MW was used, while an average of 3,956.03MW was stranded.
In February, available generation stood at 7,584.46MW, while 4,001.33MW was used and 3,583.13MW stranded. Similarly, the generated power for March stood at 7,306.39M, with 4,097.62MW consumed while 3,208.77MW was stranded.
The story did not change all through the rest of the year, through to the last quarter, where 7,691.37MW was generated in October, 3,810.74MW distributed and 3,880.63MW wasted. Same with November’s 7,238.12MW with only 4,093.76 utilised, and 3,144.37 stranded.
In December, when power is at optimum demand due to year-end holidays, generation dropped to around 5,207.57MW, with 4,162.47MW utilised on the average while 1,045.10MW was stranded, all padding the cost burn by operators in the industry.
More factories exiting Nigeria, others shutting down as alternative energy soars
IN the second quarter of this year, manufacturers experienced a 17.3 per cent increase in the costs of production and distribution. Capacity utilization dropped by 5.6 per cent, the volume of production contracted by 6.1 per cent, manufacturing investment decreased by 5.6 per cent, employment fell by 5.7 per cent, sales volume plunged by 6.3 per cent, and the cost of shipping rose by 14.3 per cent.
The MAN’s Confidence Index for the second quarter identified the high cost of energy as the primary challenge facing manufacturing in the country, compounded by issues such as high credit costs, lack of loanable funds, multiple taxes, charges, levies, inconsistent tax policies for local producers and importers, raw material unavailability, delays in receiving imported raw materials, high raw material costs, forex scarcity, high exchange rates, and poor forex allocation.
Manufacturers have spent nearly N1 trillion on alternative energy sources in the last seven years. They spent N129 billion in 2016; N117.38 billion in 2017; N93.11 billion in 2018; N61.38 billion in 2019; N81.91 billion in 2020; N71.22 billion in 2021 and N144.3 billion in 2022.
On average, 95 manufacturing companies shut down yearly. GlaxoSmithKline Plc being the latest casualty, resulting in over 4,451 job losses yearly in the manufacturing sector alone. Factory output value also dropped to N2.68 trillion in the first quarter of 2022 from N3.73 trillion in the first quarter of the previous year.
Vandalism poses a new threat
ON the midnight of December 22, this year, Boko Haram bombed two 330KV towers at the Damaturu area of Adamawa State. This is no longer new and it is not connected to insurgency in that North East alone.
On April 8, 2022, at about 6.30pm, the nation was plunged into darkness as the grid collapsed. Days later, the TCN linked the development to the vandalism of a transmission Tower number 104 at Oku-Iboku in Akwa Ibom State, along the 330 kilovolts (kV) Ikot Ekpene to Odukpani transmission line.
In March 2022, it was discovered that the 330kV Sapele to Benin transmission line tripped off after a series of attacks affected some towers under it.
A tower on the 132kV Enugu to Benue transmission line was hacked, posing a risk of collapse. A suspected vandal was electrocuted in the incident, requiring authorities to address the issue.
Near Osogbo, Osun state, vandals caused a project delay by hacking and toppling two towers on the new 330kV Osogbo to Akure power transmission line using welding machines.
In Ogun State, three transmission towers collapsed on the 132kV Papalanto/Ojere double-circuit transmission line due to vandalism, leading to a power outage in Abeokuta and its surroundings. Despite the challenge, authorities successfully repaired the damage, restoring bulk power to the affected area.
During this period, at least five vandalism incidents were reported, including one in Oku-Iboku (Akwa Ibom State), which affected both Akwa Ibom and Cross River, resulting in the shutdown of the Odukpani NIPP Generation Company (GenCo) with a capacity of over 400MW since April.
More Trouble For West African Countries, Nigeria’s Energy Export Potential
MOST generation companies and stakeholders are seeing Nigeria as a key enabler in solving the electricity challenges in Africa, due to the abundance of energy sources in the country, but transmission infrastructure poses a great challenge along with the rising security risk.
Currently, governments of Nigeria, Togo, Burkina Faso and the Niger Republic are working on execution of a planned $570 million transmission line, which runs across the four countries.
Also called the North Core project, it entails a 330 kV transmission line spanning from Birnin Kebbi (Nigeria) to Ouagadougou (Burkina Faso) via Zabori (Niger) and Niamey (Niger), with a T-off to Malanville (Benin). The project covers approximately 853 km of lines and includes the construction of five associated substations.
Like the West African Power Pool, the West African Power Transmission Corridor is 2,000 km line along the coast connecting with the existing Ghana-Nigeria line with a capacity of 1,000 MW. The line is to link Guinea, Guinea Bissau, Gambia, Sierra Leone, Liberia, Côte d’Ivoire and Ghana.
The corridor is expected to facilitate the creation of an integrated West African power market, resulting in lower energy costs and enhanced energy security. By diminishing the requirement for reserve capacity in the current power systems, the project aims to generate savings on investment costs.
Being a part of the ECOWAS Master Plan for the Development of Regional Power Generation and Transmission Infrastructure which also includes the Côte d’Ivoire -Liberia Interconnection project, which is an approximately 650 km of 225 kV transmission line, addressing market related challenges, security concerns, diplomatic concerns in the face of military coups and sanctions among others remain critical.
Multinational Companies Exiting Nigeria, Others Shutting Down As Alternative Energy Soars
IN the second quarter of this year, manufacturers experienced a 17.3 per cent increase in the costs of production and distribution. Capacity utilisation dropped by 5.6 per cent, the volume of production contracted by 6.1 per cent, manufacturing investment decreased by 5.6 per cent, employment fell by 5.7 per cent, sales volume plunged by 6.3 per cent, and the cost of shipping rose by 14.3 per cent.
The MAN’s Confidence Index for the second quarter identified the high cost of energy as the primary challenge facing manufacturing in the country, compounded by issues such as high credit costs, lack of loanable funds, multiple taxes, charges, levies, inconsistent tax policies for local producers and importers, raw material unavailability, delays in receiving imported raw materials, high raw material costs, forex scarcity, high exchange rates, and poor forex allocation.
Manufacturers have spent nearly N1 trillion on alternative energy sources in the last seven years. They spent N129 billion in 2016; N117.38 billion in 2017; N93.11 billion in 2018; N61.38 billion in 2019; N81.91 billion in 2020; N71.22 billion in 2021 and N144.3 billion in 2022. On average, 95 manufacturing companies shut down yearly. GlaxoSmithKline Plc being the latest casualty, resulting in over 4,451 job losses yearly in the manufacturing sector alone. Factory output value also dropped to N2.68 trillion in the first quarter of 2022 from N3.73 trillion in the first quarter of the previous year.
In the last three years, Nigeria Employers’ Consultative Association (NECA) said the nation has lost over 15 foreign businesses to unfavourable environments. Apart from this, NECA said over 20,000 workers had either divested or partially closed operations.
With dire consequences not only for organised businesses, but also for labour, government revenue and households, global brand, Procter & Gamble (P&G) and GlaxoSmithKline are latest on this list.
Possible Solutions
TO enhance operations, TCN’s efficiency and attitude should align more with the private sector, given the potential cascading effects of disruptions on the entire system.
Unbundling The TCN Into Two Entities And Allow Concession Of The Segment Is Critical
NIGERIA must consider liberalising the sector, encouraging private sector participation, and addressing management issues within TCN to fully leverage the potential of its engineers.
Private investment and effective management can propel projects, ultimately advancing Nigeria’s power sector. Community engagement and protection of the critical power infrastructure is needed.
The Guardian
