Babalola says FG needs $5bn annually for optimum power supply
The Federal Government has said that for the country to achieve 10,000 megawatts of electricity that could fast-track economic growth, it needs to inject between $3 billion and $5 billion annually in five years into the power sector. It said that the country will need an average power generation of between 1,500 megawatts and 2,000 megawatts per annum within a period of five years to meet the power needs of its 150 million population. By this calculation, Nigeria is projected to have an additional 10,000 megawatts of electricity by 2015 if the project is adequately funded and the necessary hindrances addressed.
In an exclusive interview with our correspondent, Lanre Babalola, minister of power, said if the country intends to meet the 10,000 megawatts projection, the government would require an average of between $3 and $5 billion annually for generation, transmission and distribution to attain a growth rate of between 15 percent and 17 percent to meet the needs of the huge population.
Accordingly, Babalola said “If we are assuming a base of 10,000 megawatts, current capacity plus National Integrated Power Project (NIPP), generation, transmission and distribution will need to grow by average of 1,500 and 2000 megawatts per annum in the first five years and subsequent five years, respectively. The gross estimate for achieving this is between $3 billion and $5 billion per annum”.
Looking at power holistically, he said, “There are two ways of looking at it. We can use a statistic kWh per capita and say every Nigerian of the 150 million population should enjoy so much power or we can pin power supply on the back of economic growth and poverty alleviation and our national socio-economic aspirations-Millennium Development Goals (MDGs) or Vision 20: 2020. The latter forms the thrust of government’s drive, as the first is untargeted”. He lamented that the uncharted form of power generation in the past has been responsible for the power tragedy currently being experienced in the country, stressing that “it was what we used in the past that got us into this mess in the first instance”.
Explaining the growth indices, Babalola said “to be able to create wealth, jobs and get our people out of poverty trap, the economy needs to grow between 12 percent and 14 percent. This will require a 15 – 17 percent growth in power”. The minister stated that in the history of the country, “the Federal Government has never put up to $1 billion in the power sector in any one year safe for NIPP,” saying that the efforts of the present administration should be commended by Nigerians.
Babalola maintained that the only way out of the present shortfall in funding power projects in the country is through active participation of the private sector but added a caveat that only when a holistic reform is carried out in the sector would such funds freely flow into the sector.
“No matter how much government puts into power, without holistic reform, it will be impossible to sustain any marginal increase in power supply as we have seen in the last few years. “The implication of this is that we need to think out of the box to meeting this financing and investment shortfall. There is significant capital in the private sector in the form of equity finance or debt finance. For this capital to move into the power sector in Nigeria there must be improvement in the operational and financial performance of the sector and firm reassurances to the investors or financiers that their investment will be safe and attract reasonable returns. Being able to attract funding and investment to improve electricity supply is the primary reason for reform,” he said.
Explaining further Babalola said “for reform to succeed, there are a number of issues, ranging from industry structure, security of fuel supply, to inability to pay for power purchases and consumptions as at when due, inefficiency cost structures, improving energy accounting, governance, addressing huge legacy debts and liabilities, before the forces that continue to retard the growth and ability of the sector to supply adequate power to Nigerians”.
He noted that the “reluctance to embrace reform implies the willingness or readiness by some quarters to make sure we accept the supply of inadequate and unreliable electricity supply, and to forfeit our national aspirations of creating jobs, wealth and eradicating poverty”.
The minister, however, assured that “although reform did suffer some set back, it is being forced back to the top of the agenda” of government.