Nigeria’s Achilles Heel
I tend to receive one or two guest submissions each week, most of which I pass on for various reasons. Either the submission isn’t topical enough, it has been republished multiple times elsewhere, I already have something scheduled, or it’s merely a front to generate traffic to a for-profit website that has nothing to do with energy.
This past week I received a submission that was original, well-written, and topical, although I had just published something. But I received the OK to wait until this week to publish it. The article was written by Elisabeth Wiebusch, a development consultant based out of New York who lived in Ghana for four years. She currently works on projects related to sustainability and energy in West Africa. I thought her article was educational, and because we spend most of the time talking about U.S. energy issues, I thought it would be a nice change of pace to shed light on the issues of another region of the world. So this week, Elisabeth discusses the challenges faced by Nigeria as they try to modernize their electricity grid.
Nigeria’s Achilles Heel
Africa’s most populous country will head to the polls on March 28th in the closest elections in Nigeria’s short democratic history. While security has dominated the electoral debate, Nigeria’s next president is set to face other pressing challenges. Nigeria surpassed South Africa and became the continent’s largest economy in 2014. But despite the economic growth achieved in the past decade, most of the country lacks the infrastructure to ensure development in the current environment of low commodity prices. Nigeria has one the worst electricity supplies in the world second only to India. No access to power hinders the country’s development in all sectors from education up to industrial production. Nigeria’s Achilles heel is therefore not Boko Haram but electricity, and if the next president won’t prioritize power generation the country risks stagnating economically in the coming years.
Nigeria produces around 4,000 megawatts for a population of over 170 million; with a similar population, Brazil generates 24 times as much. South Africa consumes 55% more energy per capita than Nigeria, where half of the population does not have access to power. Those who do have some access to electricity often experience long blackouts that can amount up to seven hours a day. Unreliable power supply leaves Nigerians with no other option than oil-based expensive generators- 60 million Nigerians rely on generators on which they spend an average of 3.5 trillion Nairas a year ($17.5 billion US dollars).
The power shortages constrain the daily livelihoods of Nigerians, from limiting children’s reading hours to creating food waste due to the lack of refrigeration. While Nigeria is one of the biggest telecommunications markets in Africa, many users have multiple mobile phones on different providers to make up for the constant disconnection of cell towers. Nigerians who can afford generators spend an estimate of $.40/kWh, one of the main expenses of the average household.
An unreliable energy supply reduces Nigeria’s competitiveness. Business owners and international companies hesitate to invest in Nigeria since the alternative power generation becomes an expensive fixed cost decreasing their profit margins in high-energy consuming activities such as manufacturing. Reliable grid power could boost Nigeria’s GDP by 14%. The current administration’s interest in diversifying the economy to break from Nigeria’s dependence on oil revenues has not been as successful as it could because there are many promising sectors that require constant electricity supply to be fully developed.
How did Nigeria get to this point? The poor state of the power grid is the result of many years without investments on infrastructure, poor maintenance record for the existing facilities and rampant corruption and graft. Following the oil boom, the state-owned electricity company has been seen as an uninteresting business for many administrations. Neglecting the necessary expansion of the power grid for so long while the population of the country has almost doubled in the past 30 years has made access to electricity the most problematic obstacle to Nigeria’s growth.
Goodluck Jonathan’s government made electricity one of the key axes of his Transformation Agenda, which aims at creating inclusive growth in Nigeria. Despite Nigeria’s vast wealth from the extractive industries, the government would not be able to reach its goal of 15,000 Megawatts by 2020 without support from the private sector. Given the poor management of the state-owned electricity company, Goodluck Jonathan’s administration took the logical decision to liberalize the sector to attract private investment and subsequently increase supply.
When Jonathan started his term, Nigeria generated 2500 Megawatts, after liberalizing the sector, power generation is now at its peak but still requires significant investments. The government is now investing $3.5bn of capital on expanding the national electricity grid and expects that private investment will help triple the current generation in 5 years. At the same time, the government is trying to diversify the country’s energy mix; renewable energy is becoming an attractive sector for many investors.
The public sector needs to play a pivotal role through establishing clear regulatory frameworks to attract private investment. A policy package to develop Nigeria’s energy supply needs to be in line with other policies including transportation, employment, and education. Over 70% of Nigeria’s power generation comes from gas-plants, as such there is a clear need for gas infrastructure and transmission capacity that has not yet been achieved in the past years. Moreover, the government must plan for long-term results; a challenge is to keep on investing in expanding the grid while also ensuring routine maintenance.
A tale of two policies
Six weeks before Nigeria’s recently rescheduled general election, the African Union has called for a regional force of 7,500 troops to stop the Boko Haram uprising. Former military dictator Gen. Muhammadu Buhari has centered most of his campaign on promising a tougher approach to Boko Haram. As a regional task force is being set up to help Nigeria defeat the terrorist organization, both candidates should start debating policy and move away from the restrictive rhetoric of “security.”
Nigeria’s developmental challenges can only be solved through well-thought policies. So far Jonathan’s Transformation Agenda seems to be working, making up for the years of poor policies. While the incumbent President’s popularity has been severely affected by Boko Haram’s rise in the North, his policy package has proven to be the most successful one Nigeria has seen in decades. Should Buhari defeat Jonathan, he will have to prove to its supporters that he can govern in Nigeria’s modern context through pertinent policies that go beyond his security agenda. Without a comprehensive policy package that makes electricity a key priority for the next administration, Nigeria could miss the pivotal moment to modernize and diversify its economy and become one of the top 20 economies in the world by 2030.
Link to Original Article: Nigeria’s Achilles Heel