FG Signifies Financial Commitment to Siemens Agreement


Friday, December 27, 2019 / 10:08 AM / by CSL Research / Header Image Credit: The Guardian                  

According to local media reports, the Federal Government has set aside the sum of N61bn for the Nigeria Electrification Road map to be developed in partnership with Germany-based Siemens AG. The amount provisioned for the Presidential Power Initiative is one of the key expenditures captured in the 2020-2022 Medium-Term Expenditure Framework but was not included in the 2020 budget.

We recall that on 22 July, Nigeria and power giant Siemens signed a power sector deal which would lead to the production of 25,000MW of electricity in the country by 2025. At the meeting between the presidency and the management of Siemens, the president set a goal of achieving 7,000MW and 11,000MW of reliable power supply by 2021 and 2023 respectively. The agreement was a fallout of Angela Merkel's visit to Nigeria in 2018 which led to the submission of the Nigerian Electrification Roadmap. Notably, the agreement incorporates fixing Nigeria's archaic transmission grid and distribution infrastructure.

Despite the privatisation exercise that was carried out in 2013, inadequate electricity supply remains a key challenge that has continued to plague economic activities in the country. The perennial problems plaguing the power sector ranging from infrastructure (generation & transmission facilities), absence of cost reflective tariffs and poor metering systems have remained largely unresolved. This year economic activities have been grounded following the collapse of the national transmission grid, an event that has featured in every quarter. Following the collapse of the national grid, distributing companies (Discos) have seen power allocation cut drastically while some got no power allocation.

Though we laud the agreement with Siemens as a major step towards reviving the nation's troubled electricity considering the focus of the project across the power value chain, we have concerns around Siemens' position in the power value chain given the huge investment the power giant will make. In view of the fact that the Transmission Company of Nigeria (TCN) is currently 100% owned by the government while the Gencos and Discos are privately controlled, we see a possibility of Siemens getting a stake in TCN. However, we are uncertain as to how that will work for the discos and gencos given that Siemen's huge investments may mean they have to relinquish control to them. Additionally, we note that the desire of government to maintain a stranglehold on the power sector in bid to regulate electricity tariffs remains a key risk.

There is no gainsaying that the epileptic power supply across the country has been a major barrier to economic activities, resulting in high cost of manufacturing goods locally and by extension the competitiveness of local producers when compared to their conterparts in other developing countries. Against this backdrop, we reiterate the need for improved power supply if the country is to transit to an industrial-based economy.

Proshare Nigeria Pvt. Ltd.

Related News - Power and Energy

  1. Siemens Agreement: Game Changer or Same Old Story?
  2. Electricity Tariff Hike Imminent
  3. Solving The Liquidity Crunch In The Nigerian Power Sector
  4. Wartsila Modular Block Solution to Modernise Power Generation in a Malian Gold Mine
  5. Power: Discos Remain The Weakest Link
  6. Fixing Nigeria's Power Problems Needs New Thinking - Wale Yusuff
  7. Transcorp Consortium Selected As Preferred Bidder For Afam Electricity Generation Company
  8. Is Bill Gates Right On Energy Investing?
  9. Experts Emphasize Need for Adequate Financing of the Power Sector
  10. Cleantech Is Coming Of Age
  11. Ikeja Electric Introduces E-Bills To Enhance Customer Experience
  12. Cost-reflective Electricity Tariffs Set To Take Effect in July 2020
  13. FG Mulls Repossession Of Discos

Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.
Related News