A Review of the Nigerian Energy Industry

Power takes centre stage as Lagos hosts 7th Economic Summit

Gov Fashola, Lagos State
Gov Fashola of Lagos

22 March 2014, Lagos – Although adequate and constant supply of electric power is the engine of socio-economic growth elsewhere, the perennial inadequacy of power and sometimes its lack in Nigeria has remained the bane of industrial, commercial and social infrastructure development including domestic sphere in our clime. Roland Ogbonnaya reports that while citizens’ hope is waning due to failed promises by government to give them stable power supply; the Lagos State Government is leading a fresh challenge that can provide the critical rescue path for the nation’s power sector as its bi-annual economic summit begins

On the average, electric power generation in Nigeria over the past one decade has fluctuated between 2,628MW and 4,200MW at its peak. Due to the seemly intractable epileptic power generation, not a few industrial and manufacturing concerns have either closed down or moved their operations to neighbouring countries like Ghana. Tens of hundreds of small and medium enterprises have also followed suit while hundreds of artisans have left their original trades for other less productive activities.

Apart from the mass job losses that followed low activity in the production sectors of the Nigerian economy, the rate of youth unemployment has also gone higher due to the inability of the service industries to absorb them as the production sectors would have done.

The power situation in the country has received some level of interventions from government and the private sector though, the efforts are, however still a far cry. But, in search of a lasting solution, and in a strategic move to attract investment into the economy of Lagos, the State Government is raising a new hope for an efficient power system in Nigeria through the bi-annual Lagos Economic Summit popularly called Ehingbeti, which has been devoted to power issues lately, especially from the sixth edition held in April 2012.

Thus, in a bid to consolidate the positive impact achieved by the summit two years ago, the Lagos Economic Summit Group (LESG), a body of public-private sector operators which organises Ehingbeti, has announced that this year’s Ehingbeti also would focus on power and deliberate on its multiplier effects on other key sectors of the economy of the state such as agriculture, transportation and housing, to mention a few.

In light of this, it is expected that the provision of power infrastructure and other essential facilities that can accelerate the growth and development of the state will receive a huge boost as issues bordering on power, for the second consecutive time, take the centre stage at this year’s Lagos Economic Summit, holding from April 8 to 10, 2014. The theme of the summit is ‘Powering the Lagos Economy: Real Opportunities, Endless Possibilities.’

For the Lagos State Government, giving priority attention to power infrastructure at this critical time underlines the commitment of the Fashola administration to strategic economic planning and partnership as catalysts for sustainable economic growth for the state.
The Commissioner for Economic Planning and Budget and Co-Chairman of LESG, Mr. Ben Akabueze explains that Lagos is strategic to the Nigerian socio-economic development and due to its huge population, which he noted is increasing rapidly, an efficient power system remains essential. He added that when the power sector is developed, it would naturally cause a chain of positive reactions in every sphere of the Lagos economy on one hand and Nigeria in general.

The commissioner further said that aligned to the global economic development strategy, the seventh Lagos Economic Summit would feature an array of international and local investors, financiers and policy makers who would be discussing the huge investment opportunities offered by the current gap between the power demand and supply in the state.  They include two former Presidents – Mikheil Saakashvili of Georgia and Pedro Pires of Cape Verde respectively; foremost industrialist and President of Dangote Group, Alhaji Aliko Dangote; and former Minister of Power, Prof. Barth Nnaji; Chairman, Nigerian Electricity Regulatory Commission (NERC), Dr. Sam Amadi; Commissioner, Market Competition and Rates, NERC, Mr.Eyo Ekpo; Group Executive Director (Gas and Power), Nigeria National Petroleum Corporation (NNPC), Dr. David Ige; Dean, Faculty of Environmental Science, University of Lagos, Prof. Olumide Olusanya; and Lagos State Commissioner for Energy and Mineral Resources, Engr. Taofiq Tijani are among the speakers and panelists.

Others are Chairman, Falcon Petroleum Ltd, Mr. Chima Ibeneche; Chairman, West Power and Gas, Mr. Charles Momoh; Managing Director, Niger Delta Power Holding Company, Mr. James Olotu; Managing Director, ASO Savings and Loans, Mr. Hasssan Usman; Principal Partner, Mckinsey, Nigeria, Mr. Scott Desmarais; Managing Director/CEO, Oando Gas Power, Mr. Bolaji Osusanya; Senior Vice President, Gas and Power, CAMAC, Mr. Fisoye Delano; Country Manager, International Finance Corporation (IFC), Mr. Solomon Adegbie-Quaynor; former Partner, Lazard, Mr. Ken Costa;  Managing Director, Consolidated Solutions Ltd., Mr. Abiodun Adeoye; General Manager, Lagos State Electricity Board (LSEB), Mrs. Damilola Ogunbiyi and Managing Director, Lagos Metropolitan Area Transport Authority (LAMATA), Dr. Dayo Mobereola.

It would be recalled that the state government has at various times revealed that a meagre 1,000MW of electric power was being supplied to the state from the national grid whereas the power demand of the state is above 10,000MW. Citing the outcome of a recently conducted power audit which involved over 13,000 residential, commercial and industrial locations in the state, Governor Babatunde Fashola has said on many occasions that there is a serious shortfall in the electric power demand-supply chain in the state.
A total of over 17,000 power generating sets were also discovered in the locations audited implying that every location has at least one generating set. This avoidable practice of self-power generation has led to a total consumption of approximately 162,000 litres of diesel a day resulting in 178lbs of CO2 being emitted per household per day in Lagos. This just goes to further necessitates the need for discussion and actions that will drive positive change in the sector.

While maintaining that the audit revealed that only one-tenth of the electric power need of the state is currently being met, he however added that the situation also offers a huge investment opportunity for perceptive investors and financiers. Speaking during the inauguration of the second phase (expansion) of the Island Power Plant, for instance, he said, ‘‘a snap shot of the state wide energy audit reveals that only a little above 1,000MW of electricity demand by Lagosians is being met by national grid resulting in every location audited having at least one generator issue.’’

The investment opportunities in the Lagos power sector by implication, therefore, means that there is still a Greenfield for discerning investors and financiers. According to available statistics, 850MW or 25 per cent of power generated in the country is allocated to the state which translates to about 10 per cent of the state’s energy demand. Figures also show that homes in Lagos State alone require 7,241MW while another 2,350MW is required to power commercial activities in the state. Besides, 660MW is needed to power industries within the state.

Imagine the possibilities in diverse aspects…embedded power generation demand of 10,251 MW coupled with the expansion and upgrade of distribution network, equipment sale/vendor financing, smart grid technology and gas supply. It is also note-worthy to mention investment opportunities in the production of meters with one million additional meters already required by consumers by 2015. What of the opportunities in oil and gas exploration and off-shore following the discovery of oil in the state?
Speaking on the importance of power, the Commissioner for Energy and Mineral Resources Mr. Taofiq Tijani said, ‘‘the various initiatives in the power sector by the Lagos State Government demonstrate the creativity by our government to provide more realistic solutions to the epileptic power problem in Nigeria.’’

He said as Nigerians and indeed stakeholders may be aware, Lagos is the only state in Nigeria with a Ministry of Energy and Mineral Resources and arguably the only state with the most aggressive energy development agenda in the country. In the last few years, he said, the state government has embarked on several energy-related projects most of which are outcomes of resolutions from previous Lagos State Economic Summits.

Facts from the state Ministry of Economic Planning and Budget reveal that as at 2013, the state government has implemented 100 out of the 119 resolutions reached in past summits. For the 2012 summit alone, 28 out of 33 resolutions have been implemented while the remaining five are ongoing. The completion of three Independent Power Plants (IPPs) – Akute Power Plant, Island Power Plant and Alausa Plant and ongoing construction two IPPs at Lekki and Ikeja GRA are examples of those resolutions that have been implemented.

Ehingbeti provides the state a platform for sustained growth while its major goal is to provide cross-fertilization of ideas with a view to accelerating rapid and sustained economic growth in the state.

The LESG has assured participants and stakeholders alike that this year’s summit would provide them a platform to get a better sense of the challenges and issues in the power sector while government would also get good input for planning and have a better understanding of how changes and policy can enable good economic growth. It is indeed a fertile ground for Investors who will get the opportunity to receive insights on the real opportunities deep seated in the needs of the state in power, agriculture, transportation, housing, health, education, judiciary and general security of life and property.




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