Friday, February 02, 2018 /09:24 AM /FBNQuest
Nigeria to achieve a smooth industrial take-off, power shortages need to be
addressed as they remain a primary challenge for businesses across the country.
We understand that at least 40% of most manufacturers’ operating costs is
allocated to self-generation of energy. Additionally, it gulps a considerable
amount from household pockets. Based on our estimates, if “full power” was
attained and made routinely available to businesses and households, it could
add two percentage points to annual growth.
The FGN estimates national energy demand at
20,550 megawatts (MW). However, the generation capacity from the national grid
is only 7,993MW. Based on the most recent data from the federal ministry of
power, works and housing, peak generation was 4,765MW on Monday (this week).
Its lowest generation on the same day was 3,653MW.
There has been growing interest around off-grid
solutions. Official thinking on power now includes developing alternative
energy sources. Based on data from the Rural Electrification Agency,
utilisation of mini-grids and solar PV systems would cost US$9.2bn/year
compared with the current estimate of US$14bn/year from self-generation via
Through the Nigerian Energy Support
Programme (a EUR25m technical assistance programme launched to promote
investments in renewable energy), the FGN, in collaboration with the EU, will
commence the construction of solar-powered mini-grids to improve electricity
supply to residents of five states, namely: Ogun, Niger, Plateau, Sokoto and
Cross River. Already, an 80 kilo watt peak (kWp) solar mini-grid has been
completed in Sokoto State and is expected to benefit at least 4,000 residents
within the state.
We also note that there has been some
forward movement in hydro-power. The construction of the 3,050MW Mambilla
hydroelectric plant is expected to kick off this year; the financing was
disclosed in August 2017, with Chinese lenders committing to 85% of the total
project cost. The plant will be built by the China Civil Engineering
Corporation over a five-year period. Once completed, this should result in
improved productivity from SMEs.
The FGN recently issued its first sovereign
green bond to raise N10.7bn. The issue was well received by investors, with an
oversubscription of N101m. It is to be project-tied in collaboration with
the federal ministry of the environment; renewable energy projects are to be
Given that gas pipelines and assets are
susceptible to attacks, the FGN’s steps towards diversifying the country’s
energy sources are laudable. We note that the FGN targets 30% of national
energy to come from renewables by 2030.