Consumer Energy Report is now Energy Trends Insider -- Read More »

By Robert Rapier on Feb 24, 2015 with 11 responses

Nigeria’s Achilles Heel

Tags:

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

by

Elisabeth Wiebusch

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

(Follow Robert Rapier on TwitterLinkedIn, or Facebook.)

  1. By Forrest on February 25, 2015 at 9:17 am

    The challenges to Nigeria much like all developing nations. Nigeria enjoys much petrol wealth, but that will make them a target for corruption starting with Islamic terrorist that all seem to gather around oil wealth. The nations first priority should always fight corruption. This will stabilize the economy and attract investment capital. Independent (not government run) citizen education the second priority. Another high priority for federal power its to ensure education and information is independent, but meets quality and diversity standards. To that end, best to separate information gathering and analyst away from broadcast companies. Better for them to purchase content from independent and diverse business competitors that compete on quality, accuracy, and value. This would keep your country out of trouble, much like the U.S. is suffering currently. What Elisabeth posts, all of this needs to improve with coordinated effort and keep citizenship in the loop. The hardest most dangerous aspect is the balancing act to keep politicians that are attracted by fame and fortune to act like Chaves. To utilize tools of the socialist trade to inflame and divide a country upon wealth generation. To encourage uninformed public and under educated public to vote for quick results and easy solutions. International corporation wealth is very adept to working with tyrants and those seeking power at expense of countries future. The priority of good leadership should always be to empower small business and maximize wealth generation of public from ground up. Because the country has tribal history, best to make sure all parties are represented and have a steak in progress. Keep the Christian heritage and principles influence, but make sure to keep religious leadership out of the governing actions. Good to decide now as Islam has a nasty habit of filling void, if your are going to be a Christian nation and follow precepts of that religion. Natural gas should be your energy source. NG pipeline infrastructure the priority. The grid and low cost power will follow. Good to move most of the need to private sector as they have more talent and ability for cost effectiveness and urgency without the usual burden of crony politicians. Your country appears ripe for microgrid power and GE fuel cell generator operating on NG. Metro areas utilize cogen NG turbine power generators. Export all your oil if market is attractive. Don’t position your economy to be reliant on the resource revenue. That will mean you will have to get pitchforks out when politicians start talking sweet. Better to leave the resource in the ground at these prices. Maybe a refinery project for future riches? Unfortunately, you will have to work with international corporations for oil wealth. Just keep close tabs on their political operations and make sure you get top dollar sales. Good to make them compete with each other on which company is best for country.

    [link]      
  2. By Russ Finley on February 26, 2015 at 11:42 pm

    Interesting article. I was unaware that Nigeria’s economy has grown so much. That’s very hopeful.

    [link]      
    • By Optimist on February 27, 2015 at 4:54 pm

      I guess we’ll find out how much of that growth is tied to $100/bbl…

      [link]      
      • By Russ Finley on March 3, 2015 at 11:22 pm

        …it may be back to $100 before we get a chance to find out.

        [link]      
        • By Optimist on March 4, 2015 at 10:55 am

          Indeed: the angry conspiracy theorists are already popping out of the woodwork…

          [link]      
          • By Forrest on March 4, 2015 at 5:29 pm

            Current estimates of U.S. crude dropping to $20 per barrel. Exxon-Mobil cutting R&D (don’t forget crude oil is forever on the R&D mission and utilization of tax payer costs/incentives of such). They’re at 80 year record of storage, almost out. Meanwhile oil supply chain must keep on pumping to pay bills. Not good. Not good for alternative fuel either. Might I add that the nation at one time had high need for efficient transportation in which railroad magnate Vanderbilt came to the rescue. Problem was success. The roaring 20′s of good economic times followed with oversupply of railroad services. Crude oil revenue per railroad transport dried up per the invention of railroad. Stock market and layoffs crashed the economy. Just saying!

            [link]      
            • By Optimist on March 4, 2015 at 5:37 pm

              Please show who is estimating $20/bbl!

              Exxon-Mobil is making a business decision, based on their interpretation of the current risk-reward. It’s their money.

              If the tax payers wish to no longer encourage business investment, it is for congress to consider the matter (Don’t count on having a decision within the next two or three decades). It would be a brave call, since investors may chose to invest in more business-friendly locations. Just FYI.

              Doubt that oversupply of railroads caused the Depression.

              Keep smoking those forrest products: you do keep us entertained…

              [link]      
            • By Forrest on March 5, 2015 at 7:20 am

              Business news reported analysis of oil oversupply per historic records and loss of value, yesterday. This was with news of Exxon pulling out capital for R&D as price of oil for next two years will be tanked. They expect eventual increase in production levels. Yes, over building of RR had pushed a recession into depression. They were huge employers at the time with much financial resources and investments. The business sector ruined. Prior to that they attempted a collusion within the industry to force Standard oil to pay more for freight as the company had immense transportation costs and worked competition against each other to achieve ridiculous low rates. Standard oil instead invented the pipeline to transport product. All this sounds a little like what oil now is experiencing and attempting. Guess they didn’t learn from RR corruption and bad results.

              [link]      
  3. By Optimist on February 27, 2015 at 4:53 pm

    FWIW, this sounds all to familiar. The South African electric power utility, Eskom, the largest electric power producer in Africa (44,000 MW installed capacity) has become a synonym for load-shedding. An embarrassing tale of affirmative action leading to incredible incompetence. The uninhibited corruption of the current South African president, Jacob Zuma, doesn’t help, obviously.

    Partly as a result South Africa has a tremendous problem with unemployment: the official estimate stands at ~25%, steady since around 2010. In reality, unemployment is much higher as a large part of the work force is uneducated and spend their careers in the informal sector, where they are excluded from the data.

    Where Nigeria extracts oil, South Africa extracts gold, platinum and other minerals. Other than that, the stories are very similar…

    [link]      
  4. By Dipchip on February 28, 2015 at 11:25 am

    USA uses about 1500 watts per capita continuous. Production 4,260,400 GWh/anum.

    China uses about 516 watts per capita continuous. Production 5,649,500 GWh/anum.

    Nigeria uses about 18 watts per capita continuous. Production 25,695 GWh/anum.

    Pop US 320 Mil, China 1,250 Mil, Nigeria 170 Mil DATA from 2011

    [link]      
  5. By Forrest on March 1, 2015 at 7:23 am

    The achilles heel is government. This power base is corrupt, greedy, and powerful. Corruption exists as way of life and well ingrained as normal business practice. The wealth generators are only concerned for the moment as the country has a long history of instability. The productive class is solving problems for their own comforts and wealth accumulation. The lower class is just about hopelessly intertwined with politics as they are easily snookered, lack education, and moral character in which they would eventually pull themselves up by bootstraps. IOWs they sit around making the best of miserable life and gleaning as much as possible from the crumbs. This lifestyle is common within poor whom lack the necessary ingredients to propel wealth accumulation at any scale. This lifestyle easily manipulated by politicians whom stroke their class envy, racial biases, jealousies, and hate emotions to forever handicap their mindsets to easy solutions such as socialism wherein investing in more government will cripple any opportunity to ever gain wealth. The power grid is just a symptom of a bigger problem. Appears Chevron has immense power and only looking for individuals to write oil check to. Shame. So, again fighting corruption at all levels, mostly government since this power makes the rest all possible. Independent education with Christian foundation a very powerful tonic for poor’s plight. Whence the populace and poor can develop intelligence, skills, and high moral character they will soon experience obstacles fall away as they are no longer susceptible to phony politicians offering sweet easy solutions and pointing finger at everyone else as the problem. Oil wealth per Alaska standards could be utilized as citizen monthly stipend for the countries natural resource. Fighting government corruption is always the key to improving the poor as well as finding ways and motivations to get them to self improve from ground up. To avoid the temptation of blaming other per leftists delight.

    [link]      
Register or log in now to save your comments and get priority moderation!