A Review of the Nigerian Energy Industry

How Nigeria lost over $5bn NIPP contracts, equipment to foreign firms

power-transmitting-station08 October 2013, Lagos – As the federal government inaugurates projects under the National Integrated Power Project (NIPP), it has emerged that the country might have lost over $5billion NIPP contracts and equipment to foreign firms at a cost, which would have been more than enough to set up factories to manufacture the equipment within the shores of the country.


It was gathered that before the federal government embarked on NIPP in 2005, as an emergency intervention to address the unstable power situation, it introduced a policy that any expatriate firm bidding for project under the programme must have an indigenous partner participation of at least 25per cent.


This policy, it was learnt, was put in place before the Nigerian Content Law in the oil and gas industry, which was enacted in 2010.
Statistics obtained by THISDAY from the Electric Power Foundation of Nigeria, an association of the NIPP contractors revealed that 34 Nigerian consulting firms and 53 Nigerian contracting firms were involved in projects implementation; while 21 foreign consulting and contracting firms were involved with the required Nigerian participation.


The statistics, which was compiled by the Chairman of the NIPP contractors, Mr. Otis Anyaeji, did not indicate the value of the contracts executed by foreign firms and the cost of the equipment manufactured abroad, which together was estimated at over $5billion.


The statistics however showed that preliminary services were obtained from 24 Nigerian surveying consultants; 27 Nigerian Environmental Impact Assessment (EIA) consultants, and 9 Nigerian insurance firms.


Also a 100per cent Nigerian company, Rockson Engineering was constructing power plants under the NIPP, while as at August 2013, the average number of Nigerians employed directly and indirectly by the NIPP Project was about 4,000.
But due to the absence of a government policy that makes it mandatory for any company wishing to supply major equipment to Nigeria’s power projects to have in-country facilities for the manufacture of either whole equipment, or major components of such equipment, the equipment used were all procured directly from the original equipment manufacturers (OEM) abroad at a cost that was more than enough to set up factories to manufacture the equipment in-country.


“The opportunity of attendant benefits: massive job creation, technology transfer / skills acquisition was lost,” said the document.
The equipment used in the implementation of distribution projects under the NIPP include 19 pieces of 2.5MVA  33/11KV Injection Transformers procured from Turkey; India; Croacia and Italy; 209 pieces of 7.5MVA 33/11KVA Injection Transformers manufactured in Turkey; India; Croacia; Italy and China and 155 pieces of 15MVA Injection Transformers imported from Turkey; India; Croacia; Italy and China.


Others include, 190 sets of 9 panels of 11KV Indoor Switchgears manufactured in India, Turkey and China, of which 175 sets have been delivered; 1,220 pieces of 33kv Outdoor Circuit Breakers from India and Turkey; 18 sets of 9 panels of 33KV Indoor Switchbreakers; 1,730 pieces of 33kv Voltage Transformers from India; 3,593 pieces of 33kv Current Transformers from India and 295 sets of 5 panels 33kv Control/Relay Panels from Turkey and India.


Also, a total of 22,553 pieces of 25kV and 50 kV Completely Self Protected  (CSP) Transformers) were procured, with 24,805 of these coming from India, while 748 were procured from China.


The contractors recommended that a local content policy should be strengthened, to make it mandatory for any company bidding for any power project in Nigeria to have at least 50per cent local participation.
“This is very easily achievable, if the policy based finance approach, as practiced in Japan, is adopted,” said the document.


– This Day


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