Friday, August 21, 2020 / 11:40 AM / by CSL Research / Header Image Credit: Tehran Times
According to a statement credited to the General Manager of Public Affairs at the Transmission Company of Nigeria (TCN), the Nigerian power industry achieved an all-time high power generation of 5,420.30MW on 18 August. This broke the record of power generation set earlier on August 1. However, according to reports in local online media, Punch Nigeria, power generation has since declined to 3,356MW as at August 20. This was as the number of idle power plants grew to 11 out of the nation's 27 power plants.
Nigeria's epileptic power supply continues as a result of the country's decrepit power infrastructure. According to the TCN, Nigeria's peak power demand is forecast at 28,290MW, installed generation capacity stands at 12,910.40MW while transmission wheeling capacity stands at 8,100MW. Based on the peak power generation of 5,420.30MW, the nation's power plants operate at a peak capacity utilisation of 42.0% while peak generation only satisfies 19.2% of forecast peak demand without factoring Aggregate Technical & Commercial (AT&T) losses. Factoring AT&T losses would see actual power supply dip significantly below generation.
We recall the the generation and distribution segments of the power sector value chain were privatised in 2013 with the aim of generating private investments to improve the quality of electricity supply in Nigeria. However, nearly 7 years after the privatisation, no considerable improvement has been made. The sector remains plagued by long standing issues such as inadequate metering, lack of cost reflective tariffs, and decrepit transmission and distribution infrastructure across the value chain. These challenges have ultimately led to significant liquidity squeeze, which has hindered new investments in the sector.
As part of efforts to revamp and generate investments in the power sector, the Federal government signed an agreement with Siemens AG in July 2019 which provides a blue print on improving power generation and fixing the archaic transmission and distribution infrastructure in the sector. The Federal government has made an initial commitment of N8.6bn in the transaction. However, the nature of the deal remains unclear particularly on the position and ownership control of Siemens in the power sector value chain.
That said, we think the Siemens AG deal could be a gamechanger for the power sector with a target stable power supply of 7,000MW and 11,000MW by 2021 and 2023 respectively. This would be a significant improvement from the current highly volatile peaks and troughs of current level of supply. Nevertheless, we think the ultimate gamechanger would be in driving widespread metering and adjusting electricity tariffs to reflect the cost of generating power. These would enable players in the sector recoup investments and improve the long term sustainability of the sector.