NIGERIA Invest in 2012-13 - Newsdesk Media

Although efforts to bring electricity to the
whole of Nigeria have been slow to materialise
so far, the sheer force of development looks set
to change things. As Robin Pagnamenta finds
out, the benefits of successfully creating a
national grid could be enormous
Nigeria’s plentiful supplies of oil and gas
have made it Africa’s energy superpower, with
an economy set to outpace India and Brazil
this year with growth of more than
eight per cent. But dreams of a brighter
future for the country, which has the world’s seventh largest
gas reserves and is one of the biggest emerging markets
globally, remain hobbled by a striking irony.
Nigeria’s chronic lack of electricity is an obstacle to more
balanced growth and an understandable source of concern
among investors. “Almost nobody gets continuous supply from
the grid,” says Chris Pooley, an energy consultant at
engineering group Ramboll, who is advising Nigeria’s
government on how to improve the situation. Decades of
underinvestment have left more than 60 per cent of the
nation’s 167 million people without a grid connection.
During the last 20 years of the 20th century, the
country’s nationalised power company built no new power
stations at all, while maintaining what is left – a mixture of
rusting gas and hydroelectric power stations, many of which
were built 40 or more years ago – has become a daily struggle.
In 2010, the Nigerian system collapsed almost weekly, each
time taking one to two days to restore full supply.
Issues and opportunities
But even for those households and businesses lucky enough to
have a connection, power supplies are at best erratic, with
shortages 60 per cent of the time. In total, Africa’s most
populous nation currently produces 4,000 megawatts of
electricity – ten times less than South Africa, a country with
one third as many people, and roughly equivalent to the amount
of energy used by the area around Tokyo’s Narita airport.
This lack of reliable power has become the source
of a variety of problems, sharply pushing up the cost
of doing business in the country and acting as a drag
on inward investment.
About 60 million Nigerians are forced to rely on
generators and fork out $13 billion a year refuelling them with
costly diesel. “It’s bad for business and bad for the country.
ENERGY 117
Every hotel, every significant business has a generator – it’s
essential,” says Liz Donnelly, who runs the Nigeria programme
at London-based foreign-affairs think tank Chatham House.
She points to Nigeria’s tiny manufacturing sector – just
four per cent of GDP – as one consequence of the situation.
“Bigger companies can afford it, but for small business it
makes life very difficult.”
Donnelly believes that overhauling the power industry is
one of the biggest national priorities, but also thinks it
represents an opportunity to catapult Nigeria’s economy into a
different league. “Power-sector reform is absolutely crucial,”
she says. “Reliable power would enable small businesses to
develop and increase economic activity... It really could be
transformational for Nigeria’s economy.”
But it’s not just businesses that are suffering. In a
country where the majority of citizens live on less than $2 a
day, the shortages also prevent many of Nigeria’s poorest
people from improving their own lives – by using electric light
to read or study at night. Access to water pumps, mobile
phones and the internet is also restricted.
“In terms of security, energy is very important, too.
There is a huge youth bulge in Nigeria and a need to
create jobs,” adds Donnelly.
So it comes as no surprise that President Goodluck
Jonathan’s government has made tackling Nigeria’s energy
problems a major national priority.
Ambitious plans
This year, the administration will try to breathe new life into
the industry by completing the break-up of Nigeria’s state
electricity company – Power Holding Company of Nigeria
(PHCN). In an ambitious programme that is hoped to pump
cash into the industry on an unprecedented scale, six power
stations and 11 electricity distribution firms will be spun off to
private companies in the next few months.
They will operate them independently under the
oversight of a transmission company and a bulk trader, which
will remain in state control.
Under the plans, first unveiled in 2010 and which are
being supported by the World Bank, the government hopes to
boost Nigeria’s generating capacity to 5,000 megawatts by the
end of this year and 6,000 megawatts by 2013.
To truly meet the needs of its 150 million people,
the nation’s generating capacity will ultimately have to
increase tenfold – to 40,000 megawatts – a level that
will require massive investment of an estimated
$100 billion over the next decade.
INvEst IN NIGERIA 2012-13