Post date: May 10, 2013 10:51:58 AM
Despite being Africa's top energy producer with the world's seventh largest gas reserves, Nigeria produces and distributes only enough power for a few hours a day in the places that get it at all. Africa's 2nd biggest economy has had decades of blackouts. Nigeria's President Goodluck Jonathan recently signed deals, handing over state electricity assets to 15 bidding companies, a milestone in a privatization process meant to end decades of power blackouts
ABUJA, NIGERIA (MAY 08, 2013) (REUTERS) - In an unwanted daily routine lasting 6 years, Chuks Nwokedi works in his barber shop in Nigeria's capital, Abuja with his generator roaring on, attending to his customer not waiting for the lights to come back on.
Nigeria's President Goodluck Jonathan is trying to persuade Chuks and some 170 million other Nigerians that will soon change.Yet while his plan to privatise power is creeping forward, it is likely to take decades to end the chronic electricity shortages that are among the main barriers to investment and growth in Africa's second biggest economy and top oil producer.
Nwokedi says it has become a daily occurrence to purchase petrol for his generator, a worrisome situation that has affected the profits he makes.
"At least three litres of petrol can be consumed because of the size of the generator you understand. So but when you look at it, it maybe three litres of petrol involving three hundred naira but if you check it, if there is light for instance at least that three hundred naira (2 US dollars) is not something that you can say is just for today something that is continuous because there is no day that is assured of having complete light," he said.
Nigeria is in the process of breaking up the defunct state power company into 17 private generation and distribution companies and selling them for about 2.5 billion US dollars in total, as part of efforts to increase electricity output tenfold over the next seven years.
It might be its most advanced effort yet to end its perennial power shortfall, but progress has been so slow that President Jonathan's targets look far too optimistic.
Industry experts believe some improvements will be felt in two to three years.
If Nigeria gets the lights working it would reduce business costs by up to 40 percent, add 3 percent to GDP (Gross Domestic Product) and cut the mass unemployment that fuels unrest seen in oil theft in the south and a bloody Islamist insurgency in the north, economists say.
It could also spur a boom in labour intensive areas like manufacturing, food processing, textiles and pharmaceuticals, while opening up the opportunity for new low-cost service industries like the call centres that aided India's rise.
The 13 billion US dollars a year that Nigerians spend on diesel, most of which is imported, would be a bill of the past.
Power from generators costs more than twice as much as from the grid, something doctors at the Jolua hospital know all to well.
The hospital, which has been running for more than a decade spend a minimum of 25 US dollars for diesel on a weekly basis.
Doctor Oluwole Agbegidejim, proprietor of the hospital says they had to acquire two generators in order to have a back up for when either one is faulty.
"We need as a country, we need not just one Azurra IPP, we need a hundred. If we had a ….not just 450 megawatts but if we had 40,000 or 50,000 megawatts of newIPP generation capacity. We would still be one third of the way to achieving the same standard of electricity consumption as South Africa has today just for you to understand the scale of that, 450 megawatts 700 million dollars we need one hundred of those projects before the man on the street can really have that same sense of wellbeing that you have in a more advanced country where you can switch on the light and you know it's automatic, " Agbegidejim said.
A glitzy ceremony hosted by President Goodluck Jonathan two weeks ago celebrated the first payment by private companies which are taking over the unbundled state electricity firm and a deal by the World Bank to give an initial 145 million US dollars risk guarantee for gas supply.
A close look at the private companies which won bids shows a mix of oligarchs and influential figures connected to Nigeria's political elite, and some recognised technical partners like Siemens and Manila Electric.
This has raised some questions about the expected efficiency of the privatisation process and what it can deliver, but there are those who argue that effective business in Nigeria is impossible without political connections and patrons.
President Jonathan said the race will not be over until Nigerians can take electricity supply for granted.
"We are dealing in a very dedicated way with most overdue infrastructural and corporate problems and despite the challenges we are making steady progress each day towards lasting and permanent corrections. Nigerians must have electricity for domestic and industrial use and there is no turning back and there is no relenting," the President told dignitaries and power companies at the ceremony.
Electricity capacity had been in steady decline for a decade when Jonathan launched his reform plan in 2010, pledging Nigeria would boost generation from 3,000 megawatts to 10,000 megawatts by the end of this year, and 40,000 megawatts by 2020.
Generation has increased to around 4,000 megawatts but experts say there is zero hope of meeting government targets, while the scale of the task means power output will initially fall after the privatisation is completed at the end of this year.
Despite being Africa's top oil producer and holding the world's ninth largest gas reserves, Nigeria's power output is a tenth of South Africa's for a population three times the size.
"We need as a country, we need not just one Azurra IPP, we need a hundred. If we had a ….not just 450 megawatts but if we had 40,000 or 50,000 megawatts of newIPP generation capacity. We would still be one third of the way to achieving the same standard of electricity consumption as South Africa has today just for you to understand the scale of that, 450 megawatts 700 million dollars we need one hundred of those projects before the man on the street can really have that same sense of well-being that you have in a more advanced country where you can switch on the light and you know it's automatic," said David Ladipo, whose company Azura is investing to build a 450 megawatts plant.
Ladipo thinks electricity output could grow to 6,000 megawatts in the next two years and to 9,000 megawatts by 2020, before seeing a potential boom as post-privatisation investment kicks in.
One industry expert told Reuters Nigeria's potential demand is estimated to be as high as 140,000 megawatts and rising, so just keeping up with demand will be a huge challenge.
Even Ladipo's more modest projections, which several other industry experts broadly agreed with, face hurdles.
Privatisation is months behind schedule and government is struggling to get the funding it needs for crucial transmission and gas supply infrastructure.
Powerful labour unions are blocking attempts to pay off 40,000 state electricity workers.
Nigeria says it has found 340 billion naira (2.1 billion US dollars) to pay off the workers, but they remain reluctant to leave.
The African Development Bank is providing 150 million US dollars to aid with transmission and some of a 1 billion US dollars debut Eurobond would help with upgrades.
But in Nigeria, just making the money available does not always mean it will be used wisely.
Some 40 billion US dollars has gone into several power reform drives in the last 20 years, industry experts say, much of it wasted.
Still, there remains optimism that wrestling power out of government hands will eventually lead to progress.