- The exchange rate N/$, transmission loss factor, generation cost, transmission and admin cost have contributed to Nigeria’s lack of constant Electricity.
- The country faces a gas shortage for power generation primarily due to incorrect pricing and unpaid debts to gas producers.
Nigeria continues to grapple with the challenge of providing reliable electricity to its citizens in 2024. Multiple factors contribute to this persistent issue, ranging from economic variables to infrastructural deficiencies and systemic inefficiencies.
The economic environment in Nigeria significantly impacts the electricity sector. Key factors such as the Naira-to-Dollar exchange rate, generation and transmission costs, wholesale gas prices, and gas transportation tariffs play crucial roles.
Forex
Fluctuations in the exchange rate affect the cost of importing necessary equipment and materials, while high generation and transmission costs, coupled with inefficient administrative expenses, further strain the system.
Transmission and monitoring issues
The Transmission Company of Nigeria (TCN) faces numerous challenges that hinder the efficient delivery of electricity. The transmission infrastructure lacks reactive power, low megavolt-ampere (MVA) capacity, ageing systems, and funding constraints.
General mismanagement and the absence of a robust Supervisory Control and Data Acquisition (SCADA) system exacerbate these issues, leading to frequent power outages and unreliable service.
The poor condition of many power-generating units hampered electricity generation. Numerous turbines require extensive repairs or significant capital expenditures to be resuscitated.
Underinvestment
On the distribution side, the sector is plagued by underinvestment in infrastructure, right-of-way issues, low metering coverage, and capacity constraints due to inadequate generation. Both technical and non-technical losses are substantial, posing significant investment risks.
Vandalism issues
Another critical issue is the vandalism of high-voltage transmission infrastructure. The destruction of these vital assets disrupts the power supply and incurs high repair costs, further straining the fragile system. High-profile cases of vandalism highlight the urgent need for enhanced security measures to protect the infrastructure.
Gas supply issues
A major hindrance to reliable power supply in Nigeria is the gas shortage for power generation. This shortage is primarily due to incorrect pricing mechanisms and significant unpaid debts to gas producers.
The Federal Government has announced plans to address these debts, including a commitment to pay NGN 130 billion from the Gas Stabilisation Fund to settle part of the NGN 1.3 trillion owed to gas suppliers in the Nigerian Electricity Supply Industry (NESI). This payment is divided into legacy and current debts, with future royalties and income exchanges expected to cover the legacy debts.
To address the gas supply issue, the government, under President Bola Tinubu, has inaugurated three major gas projects: the expanded AHL Gas Processing Plant, the ANOH Gas Processing Plant, and the 23.3-kilometre ANOH to Obiafu-Obrikom-Oben (OB3) Custody Transfer Metering Station Gas Pipeline.
These projects, located in southeastern Nigeria, aim to boost the domestic gas supply by 500 million standard cubic feet per day (MMscf), a 25% increase. This boost is essential for enhancing electricity generation and supporting gas-dependent industries, driving industrial growth and job creation.
Ageing infrastructure
Nigeria’s power sector suffers from a significant infrastructure deficit across the generation, transmission, and distribution segments. Obsolete and deteriorating equipment hampers the efficient electricity supply, contributing to a liquidity crisis that deters investment.
Substantial investment is required to improve the power supply, including replacing outdated equipment, establishing new power plants, repairing pipelines, and installing boosters and compressors to maintain adequate pressure.
Resolving the problems
The Nigerian Electricity Regulatory Commission (NERC) has taken steps to address some of these challenges. For instance, a mandate has been issued to the System Operator (SO) within the TCN to limit power supply to neighbouring countries such as Benin, Niger, and Togo.
This restriction ensures that a larger portion of generated electricity remains within Nigeria to meet domestic demand. According to NERC’s ‘Interim Order on Transmission System Dispatch Operations, Cross-border Supply and Related Matters,’ power delivery to neighbouring countries is capped at six per cent of the total grid electricity, enhancing power availability for Nigerian consumers.
Additionally, NERC has deregulated meter prices under the Meter Asset Provider (MAP) scheme to foster competition and transparency. This move allows customers to acquire meters from MAP permit holders at competitive market prices, potentially improving metering coverage and reducing losses.
In conclusion, Nigeria’s persistent lack of reliable electricity is a complex issue from economic challenges, infrastructural deficits, systemic inefficiencies, and security concerns. While the government has initiated several projects and policy measures to address these issues, significant investment and comprehensive reforms are crucial for achieving a stable and reliable power supply.
If effectively implemented, the ongoing efforts could pave the way for a more sustainable and reliable electricity sector in Nigeria, fostering economic growth and improving the quality of life for its citizens.