Report dampens Buhari’s energy reform ambitions

President Mohammadu Buhari.

President Mohammadu Buhari.

Oscarline Onwuemenyi,
with agency reports

13 July 2015, Sweetcrude, Abuja – The Nigerian government’s ambitions for improving electricity supplies are “not remotely realistic”, a report by experts advising the presidency says, an early blow to one of President Muhammadu Buhari’s most important reform promises.

Chronic power shortages are one of the biggest constraints on investment and growth in the country. Fixing the problem was one of the key battlegrounds during campaigning ahead of a presidential election Buhari won in March.

Recall that President Buhari and his opponent Goodluck Jonathan both promised to massively increase power supplies, building on a relatively successful $2.5 billion partial privatisation in 2013.

Buhari’s All Progressives Congress pledged in its manifesto to increase supplies from 3,600 megawatts (MW) currently to 20,000 MW within four years and 50,000 MW within ten years, which would meet the demands of Nigeria’s 170 million people.

However, reaching 20,000 MW by 2020 is “not even remotely realistic” and “setting unrealistic targets dilutes discipline”, according to a 54-page report entitled “The Energy Blueprint” obtained by Reuters.

A spokesman for Buhari said he had not seen the report, which is being produced for the government by power industry experts, but he said the government’s energy policy was still being put together.

Asked whether the government would adopt the targets in the manifesto, Femi Adesina said: “We need to wait until the policy on energy has been unfolded.”

According to the report, Nigeria could produce 6,500 MW by 2020, which would mean matching India’s supply growth of 7 percent.

This could rise to 8,500 MW if Nigeria could equal China’s 14 percent electricity output growth.

Even these targets will require quick action on multiple reforms and billions of dollars of investment, it said.

President Buhari has inherited a problem that has plagued Nigerian governments for decades and the promises he made for power improvements were more modest than his predecessor.

Despite holding the world’s seventh largest gas reserves, Nigeria produces less than a tenth of the amount of electricity South Africa provides for a population a third of the size.

Solving the problem would likely reduce business costs by up to 40 percent and push growth in Africa’s biggest oil producer well into double-digits, experts say.

There is potential for Nigeria to attract tens of billions of dollars of investment into the power sector given the huge unmet demand from industry and the public, the report says.

Respected companies such as Siemens and Manila Electric have already invested in privatised assets and energy majors including Shell, Exxon Mobil and Italy’s ENI are willing to supply ample gas supplies, if government sets competitive prices.

To attract all the investment required, however, government must free up credit to unlock gas supplies, reduce pipeline sabotage, end political interference in the private sector and install top management teams.

The dilapidated transmission network, connecting power stations to local distributors, will require $2.3 billion a year for a decade to expand grid-access. This can only be achieved by partial or full privatisation, the report says.

The report recommends simplifying the seven ministries with policy-making powers that could impact the power programme, something that appears to fit into Buhari’s broader plans to streamline government and cut costs.

Some $40 billion has gone into several power reform drives in the last 20 years, industry experts say, much of it wasted.

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