There's no end in sight to the daily blackouts that the
government says are costing Africa's largest economy about $100 billion a year
in missed potential and that President Muhammadu Buhari calls a "national
shame." Gas shortages, pipeline vandalism, inadequate funding,
unprofitable prices and corruption mean fixing the electricity cuts two years
after a partial sale of state power companies to private investors won't be
easy.
Generated output has never risen above 5,000 megawatts,
which is about a third of peak demand, and if it did the state- owned
transmission system can't deliver any more than that before it starts breaking
down. South Africa, with a less than a third of Nigeria's population of about
180 million, has nine times more installed capacity and it too is grappling
with blackouts.
Nigeria, Africa's biggest oil producer, ranked the worst of
189 countries after Bangladesh and Madagascar on the ease of getting electricity
connected to businesses, costing almost 7 percent of lost sales each month,
according to a 2015 World Bank Doing Business report.
The power bottleneck comes on top of a slump in oil prices
and currency that are threatening Nigeria's role as a destination for
investors. Economic growth slowed to 2.4 percent on an annual basis in the
second quarter from 6.5 percent a year earlier.
About two-thirds of Nigeria's people have no access to
electricity, and at the current plant commissioning rate, supply will barely
meet 9,500 megawatts by 2020, according to a 2014 World Bank project document.
Demand is expected to increase 10 percent each year. Buhari's party promised
before he won power in March's election to generate 40,000 megawatts within
four to eight years.
For years the industry's poor performance has spawned jokes
about the former state electricity company's name. Nigerians called the
National Electric Power Authority "Never Expect Power Always," and
when its name was changed to the Power Holding Company of Nigeria a decade ago,
they mocked it as the "Problem Has Changed Name."
Hopes that the power situation would improve after former
President Goodluck Jonathan partially sold off 15 state generation and
distribution companies for more than $3 billion to private investors two years
ago have been dashed.
The buyers included locally owned companies such as Forte
Oil, Sahara Group and Transnational Corp. of Nigeria, along with foreign
technical partners such as Korea Electric Power Corp.
They found the companies they bought weren't financially
viable, and the distribution firms mounted with debt started hemorrhaging cash.
Last year, "the financial flows in the sector came close to collapse,''
Britain's Department for International Development said in a December 2014
report.
"There wasn't much due diligence done" because
strikes during the sale period blocked access to the utilities, said Dolapo
Kukoyi, a partner at Lagos-based Detail Commercial Solicitors, which advised
investors looking to buy the distribution companies. "People basically
bought blind -- this was across the board."
Nigeria's central bank designed a 213 billion-naira ($1.1
billion) bailout package to cover revenue shortfalls and help the companies
meet debt-service obligations on bank loans of almost 500 billion naira.
The power industry still requires as much as $20 billion of
investment in the next six years, according to Benjamin Dikki, the
director-general of the Bureau of Public Enterprises, which led the sales.
Even after the sales, bribery of electricity workers by some
diesel generator and fuel suppliers to organize household and business
blackouts in order to boost sales is continuing.
Diesel generation costs 30
cents to 50 cents per kilowatt-hour, compared with the average grid tariff of
13 cents, according to the World Bank. Timothy Oyedeji, a spokesman for the
Power Ministry, didn't answer two calls and a text message seeking comment.
The generation companies have battled with chronic gas
shortages used by 70 percent of the plants, despite Nigeria holding Africa's
biggest reserves of more than 180 trillion cubic feet. From December to June,
rampant pipeline attacks reached levels last recorded at the peak of a 2006 to
2009 militant insurgency in the oil producing Niger River. They've slowed since
then.
Government-set tariffs have also hampered the distribution
companies. Just before the elections, the regulator banned them from charging
consumers for losses caused by billing mistakes, effectively cutting the tariff
by more than half in some areas. This caused most of the distribution utilities
to declare force majeure, claiming they couldn't pay for their power supply.
Up the chain, generating companies say they haven't received
payments from state-owned Nigerian Bulk Electricity Trading, which acts as a
middle man between them and the distribution companies.
And because the distribution utilities haven't paid about 20
billion naira owed since February, payments to the power plants have slowed,
said Rumundaka Wonodi, chief executive officer of NBET in Abuja.
While NBET has enough cash to make the market payments for
five months, the money is there to cover breakdowns and the company doesn't
want to deplete the funds without the agreement of the power minister, Wonodi
said. Problem is, Buhari hasn't filled that position more than three months
after taking office.
The generation companies are also feeling the pinch. The
30-year-old Egbin plant in Lagos, which is owned by Sahara and Korea
Electricity, is owed almost 44 billion naira for December to June, along with
22 billion naira of past debt costs.
"We've never broken even in 2 1/2 years," Egbin
Chief Executive Office Dallas Peavey Jr. said in an interview at the plant.
"If it wasn't for Sahara to be quite honest we would have shut down about
three months ago.''
The national grid is another bottleneck. It needs about $40
million a year just for maintenance, compared with the $1 million now allocated
by the government, Peavey said. Nigeria's aggregate technical, commercial and
collection losses are 35 percent of total generation, according to the World
Bank.
Buhari said last month that he recognized that transmission
was a greater problem than generation and his administration was taking action
to boost supply.
curled from the Chicago Tribune
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