A Review of the Nigerian Energy Industry

The power sector and the incoming Buhari administration

14 April 2015, Lagos – These are solemn times in  Nigeria. Nigerians want their national government to succeed but we are uncertain as to whether the government would have the will and the capacity to succeed. Hence, there has been a flurry of suggestions addressed to President-elect Buhari.

Power2The All Progressives Congress, APC, has included the construction and operation of small power plants in its manifesto. In the first place, the generating equipment to be provided at these power plants should be able to use as fuel both diesel and natural gas if the APC manifesto is to have immediate impact.

Availability of gas for the various power plants across Nigeria would take several years to accomplish. In the second place, capital funds for these power plants should be put together as joint ventures that would include a power plant operator, the members of the communities which the power plant would serve, the local electricity distribution company, the government and with the loan finance kept to a barest minimum not exceeding 25% of the total funds required.

The act of limiting loan capital on projects would make the projects readily feasible given the high interest rates in Nigeria. Power purchase agreements between the power plant owners and the local electricity distribution company could be an area of difficulty. The power plant should make a profit and the local communities would want to pay competitive rates for the power supplied. The involvement of the power consumers as shareholders in the power plant venture would make it easier to resolve some of the difficulties encountered in putting together a power purchase agreement.

The Lagos State Government, LASG, has been able to implement a number of Independent Power Plants, IPPs, which are exclusively for the use of the LASG. Recently, Governor Fashola stated that the IPP on the Marina in Lagos would be expected to provide the power for the operations of the rail service between the Marina and Okokomaiko on the Lagos to Badagry expressway.

This IPP currently serves the Lagos General Hospital, the Island Maternity Hospital, the High Court and Magistrate Court Complexes at Igbosere. The incoming Federal Government can, as a first project, get the Central Bank of Nigeria and the Bank of Industry to lead a consortium that would build another power plant on Lagos Island. Other members of the consortium should include the Nigerian Stock Exchange, First Bank, Union Bank, United Bank for Africa, Wema Bank, Shell Petroleum Development Company, and other companies on the Broad Street – Marina axis. The consortium would partner with a power plant operator and the Eko Electricity Distribution Company.

The Escravos to Lagos gas pipeline was built initially to supply natural gas to what is now Egbin Power Plc. The pipeline has been transformed into the West African Gas pipeline by its extension through Otta in Ogun State, Badagry in Lagos State and in a subsea pipeline to Ghana. From time to time, there have been reports of the vandalisation of the Escravos to Lagos pipeline and with these reports there have been drops in the power available in the national grid.

The power plants at Egbin Power Plc can use low pour fuel oil as an alternative to natural gas. We should, as a strategic step, ensure Egbin Power Plc is working at full capacity all the time and we should adopt the low pour fuel oil for use at Egbin all the time. Whatever gas is available on the Escravos to Lagos pipeline could be put to use at the other power stations at Omotosho and Olorunsogo and at various industries.


– Vanguard

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