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No Rapid Growth With these Power Shortages

Power & Energy	1026 VIEWS
Power & Energy
1026 VIEWS

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Wednesday, November 04, 2020 / 09:35 AM / by FBNQuest Research / Header Image Credit: Nigeria Sun

Power shortages remain a prominent infrastructure gap in Nigeria. Substantial expansion in quantity, quality and access to infrastructure services, especially electricity, is fundamental to rapid and sustained economic growth, as well as poverty reduction.

According to the federal ministry of power, Nigeria's installed grid power generation capacity has grown from 8,000MW to 13,000MW. However, the distribution capacity is 5,000MW. For businesses located in Nigeria, self-generation places pressure on operating expenses. Household wallets are also significantly affected by the same expense.

Nigerians spend an estimated US$14bn a year on purchasing and fuelling small-scale generators.

Based on the electricity generation statistics released by the Association of Power Generation Companies (APGC), the power sector recorded a generation capacity loss of N243bn from January to October this year. The loss is primarily due to gas supply and grid infrastructure challenges.

According to the Transmission Company of Nigeria, the power sector recorded national peak generation of 5,520MW on 30 October.

Prior to the Covid-19 pandemic the power sector had many issues: the virus has only made them more glaring. The impact of the pandemic is most felt by electricity distribution companies in terms of the inability of customers to pay their bills.

Due to the closure or scale-down in operations, there is reduced energy consumption by commercial and industrial customers, who cross-subsidize the power industry with their higher tariff. However, there is increased energy demand for residential consumption.

We understand that the FGN plans to inject N198bn into various capital projects in the power sector across Nigeria in 2021. This was disclosed in the 2021 appropriation bill.

The breakdown shows that the Nigerian Electricity Regulatory Commission plans to invest N294m on capital projects, and the Nigerian Electricity Management Services Agency an additional N441m.

Meanwhile, the allocation for the total overheads of the entire ministry and its agencies is N1.16bn.

There are growing opportunities with off-grid, particularly within the rural economy via electrification. Solar can provide relatively affordable energy for rural communities. Additionally, it complements the rapid development of small-scale industries.

Industry sources suggest that standalone solar home systems and mini-grids could provide modern energy access to over 88 million Nigerians by 2030. This would ease pressure on generator set expenses for businesses and households.