NEPA!
NEPA was created in 1972 to run the entire power sector single-handedly, some sort of monopoly.
We all know how that went.
By 1999, only 19 of the country’s 72 generational plants were operational. 90 million people in darkness.
This led to the creation of PHCN in 2012, which again didn’t go too well.
Then in 2014, the sector got unbundled.
We now have generation companies (Gencos), transmission companies (Trancos), and Distribution companies (Discos)
Gencos were partly privatized, Transmission remained government-controlled which Discos were totally privatized.
Discos are companies like IKEDC, AEDC, IEDC, etc.
These are companies consumers deal directly with.
Contracts are very crucial in the electricity market.
Ideally, there ought to be contracts between all parties.
Contracts between Gencos and gas suppliers, the TranCo and Gencos, Gencos and Discos, TranCos and Discos.
Everyone gets one.
In case you didn’t know, Nigeria generates around 81% of its electricity from natural gas, the remaining 19% from Kainji Dam and other hydro sources
Back to contracts, for example, Discos enter Power Purchase Agreements (PPA) with Gencos.
This agreement is meant to require Discos to pay for the entire generation capacity of Gencos.
If a Genco produces 1000 MW (MegaWatts) of electricity and the Disco uses 700 MW, the Disco will pay for 1000 MW.
This is because the generator was bought and maintained by the Disco
But, since the sector got privatized in 2014, the contract has yet to come into effect for unknown reasons.
Discos, therefore, have no incentive to supply the number of people demanded by Nigerians.
This coupled with the poor payment habit of Nigerians creates a bad situation.
Nigeria only generates less than 40% of the total generation capacity available. 13 GW capacity but only 5 GW is available
This is why only 60% of Nigerians have access to the national grid.
The power supply is even unreliable.
This is why Nigerians spent over $500m between 2015 & 2019 to import generators.
Our neighbors, on the other hand, the creators of the second-best jollof rice in the world have achieved an 84% electrification rate.
Not without issues though, their tariffs are more expensive (no subsidies), excess supply, and a lil bit of debt
Again, Nigeria has electricity tariffs subsidies.
Around N1.7 trillion was spent on electricity tariff subsides between 2015 and 2019.
Like I said before, subsidies help the rich more than the poor. It also creates corruption…
We could copy our neighbors by removing subsidies to attract external funding from the World Bank and others.
Or develop other electricity sources like solar and wind power.
Concerning solar energy, there is a company called Blue Camel.
Blue Camel has existed for over 14 years and has been quite successful in its endeavors.
It faced a lot of issues starting with the problem of convincing state governments to use solar-powered street lights.
State governments had previously purchased solar-powered street lights but they didn’t work well because the people procuring them didn’t have good knowledge of solar energy.
Blue Camel was able to get through this by installing free sample street lights. It was ultimately successful as state governors signed contracts with them.
Another issue was the removal of solar components from tax-exempt items in 2018 by the Nigerian Customs Service.
The reason was the “Buy Naira to Grow Naira” agenda. They felt solar components could be produced in Nigeria.
This made it more expensive to import solar panels
Solar systems prices soared by 25%. This is why installing solar panels in homes are so expensive.
Blue Camel clients are majorly governments, corporations, and some residential areas like estates.
Another energy source is wind.
Wind turbines are more efficient than solar panels. They convert 60% of wind energy to electricity whereas solar energy converts just 20%
Although, it is more expensive and the wind is less predictable than the sun.
Yeah, there is a wind farm in Nigeria.
There is a 10 MW wind farm in Katsina state.
The wind speeds in the north are much higher than in the south.
The project was initially awarded in 2009 to Vergnet, a French company.
Things were going smoothly until the chief engineer got kidnapped. He later escaped by himself after one year.
As you would expect, the firm left Nigeria.
There were other issues the firm faced such as vandalism, insecurity, and forex illiquidity.
They couldn’t get dollars when needed because of the CBN’s FX policy. This also affected Blue Camel.
The wind farm is still operational but not at full capacity. A local operator runs it.
This is the state of the power sector of Nigeria.
Removing electricity tariffs subsidies and developing other renewable energy sources would go a long way to increase our electrification rate.
Manufacturers report they spend 38% of their operating expenses on electricity. They obviously pass down this cost to consumers leading to an increase in prices.
This leads to more inflation which affects the general economy.
Ultimately, fixing electricity will be a good step towards boosting economic growth.
