Analysis – What is going on with Nigeria’s power?

In the final week of the Goodluck Jonathan Administration, power generation in Nigeria fell to a record low of 1,320MW amidst a crippling month-long fuel scarcity that eventually caused vital businesses such as telecoms and banks to ration fuel and shut down services earlier than they should.

Power grows under Buhari – the body language conundrum
Weeks after President Buhari was sworn in, power generation and supply increased until it reached an all-time peak of 5,070MW in January 2016, a figure that was feted as the dawn of a new era in power generation in Nigeria. However, power supply today, a mere five weeks after this high, has dropped to the second lowest in the last 16 years, 1,580MW.

When a critical economic item like power fluctuates like this in a space of weeks, it speaks to one thing and one thing only – the fundamental issues are yet to be resolved and any highs that come should be seen as temporary reprieves at best and not attributable to the brilliant performance of stakeholders in the power supply value chain.

The fundamental issues

The APC manifesto rightly identifies the first of these issues. Quoting from the document:

Tackle issues of gas availability for power plants

Gas is a critical component in power generation in Nigeria and fundamental issues around pricing are yet to be dealt with. Another critical issue around gas supply is that of sabotage. A study of our power generation installations shows why fixing the issues around gas is such a big one. The chart below shows the energy source that fuels our power generation, actual, installed and potential.

Another question that should be asked is this: why have there been no upgrades to power plants in Nigeria since their completion? If Nigeria’s power plants had had upgrades based on their installed capacity, Nigeria could easily be generating 12,067MW by now. Below is a summary of what we currently generate against what we could be potentially generating.

Source: The Master Plan Study for Utilization of Solar Energy in the Federal Republic of Nigeria, Final Report, Volume 1, from February 2007.

According to The Master Plan Study for Utilization of Solar Energy in the Federal Republic of Nigeria, Final Report, Volume 1, which was published in February 2007, the Afam IV-V plant, has a installed capacity of 580MW. However, this plant has an available capacity of only 98MW. A plant that was completed in 1982. The question then becomes, why have we not met the installed capacity in 34 years? And why is the power generation from the plant now zero? This situation is repeated across all of Nigeria’s power plants. Shiroro, completed in 1989, generates only 350MW, but has an installed capacity of 600MW.

The lack of capacity utilisation is a big problem, as is the issue of relying on limited sources of fuel for power stations.

However, sabotage remains a huge issue. After the January high, there were two incidents of sabotage claimed by the newly rejuvenated Niger Delta militants groups. The resultant precipitous fall in gas supply to the Generating Companies (Gencos) were an important factor contributory to the drop in power generation. The Minister of Power will do well to revisit this campaign promise and ensure that these issues and others they must have identified while making the promise are resolved.

A second fundamental issue is the limitation of the current National Transmission Grid. In the power sector reforms which saw generation and distribution decentralized and privatized, transmission, which lies between the two was left as it was pre-reforms. Hence, irrespective of our generation capacity, the limit is actually placed on available power by transmission. It is recommended that the Buhari led administration should put the political will necessary behind the power sector reforms to liberalize transmission to increase capacity of the grid (currently at circa 5,200MW). Installed capacity for generation is about 6,000MW, while generating capacity stands at 5,465MW.

A third fundamental issue is pricing of power to the consumers. The Distribution Companies (Discos) have attempted to raise tariffs recently, supported by the National Electricity Regulatory Commission, NERC, and the Minister of Power. While the business case for raising the tariffs is valid, the concerns voiced by the consumers are equally valid.

An acceptance problem – Consumer buy-in
The main concerns are two pronged. The first is one around metering. The Discos are mandated to provide prepaid meters to their customers. However, the majority of the customers are yet to get their prepaid meters and are often served with bills that appear outrageous, are difficult to verify and which they have reason to believe are estimated and allocated to them without consideration of their actual consumption.

The second concern is a fallout of this. For those that have prepaid meters, while they also want steady power supply, they are at least confident their power units are only consumed when they actually have and consume power. Those who don’t however believe they are being forced to pay for darkness and demand that before any tariff increase, they have to get steady power supply.

On another hand, many subscribers are not happy with the amount of money they are spending servicing the prepaid metres. They complain that the money on the meter seems to disappear in no time. They are more comfortable with the old meters.

We do not know whether this is a genuine concern or just humans reacting to change. What we do know is with the prepaid meters many subscribers can no longer afford to cut corners like they did with the old meters. It is now impossible to avoid paying electricity bills for months, running into several thousands of naira like they used to.

In Akute, for instance, many landlords and tenants are refusing to have the new meters installed in their homes. Their main argument is that it seems like charges on the prepaid metres have been deliberately hiked by the Discos. We spoke to landlords in Shangisha, Ojodu, and Akute, all areas under the Ikeja Disco, and they confirmed that many were refusing prepaid meters.

Speaking with a staff of Ikeja Disco, we were informed that there are three reasons why many landlords do not want the prepaid meters:
i – Higher energy costs for them as the meters mean they can no longer get away with using light excessively.
ii – They are compelled to pay off their outstanding balances or negotiate payment.
iii – They simply don’t trust the meters.

The key to both consumer concerns is metering and both the power minister and NERC need to drive this point home to the Discos before they can then raise the tariffs to meet business realities.