75 million Nigerian lack access to electricity – BCG

Oscarline Onwuemenyi
13 April 2016, Sweetcrude, Abuja – The Boston Consulting Group (BCG), a global management consulting firm and the world’s leading advisor on business strategy has said that no fewer than 44% or about 75 million Nigerians lack access to electricity, well below the average of 80% for all three comparison groups.

*Electricity distribution sub-station.

*Electricity distribution sub-station.

BCG stated this in a report entitled “Unlocking Nigeria’s Potential- The Path to Well-Being.”

It noted that, “Nigeria is rich in natural resources and boasts a large, young, ambitious, and entrepreneurial population. Harnessed properly, those advantages could usher in a period of sustained economic growth and increased well-being for the people of Nigeria.

“But amid short-term economic pressures, the country must move quickly to address several critical challenges in order to prosper over the long term.”

The group noted that Nigeria’s anemic infrastructure is in many ways the country’s greatest challenge, impeding progress in multiple areas. The value of Nigeria’s infrastructure stock is about 35% of GDP, compared with an average of about 70% for large economies.

It added that Nigeria’s poor infrastructure has major ripple effects, noting that, “Improvements in this area would have an immense impact on education, health, and the economy, and thus on the well-being of citizens. The value of Nigeria’s infrastructure is about 35% of GDP, compared with an average of about 70% for large economies.

“The country has major deficits in its electricity grid, road network, and supply. The state of the country’s infrastructure stems in part from a system with multiple flaws, such as overlapping responsibilities among government ministries and inadequate enforcement of regulations and agreements related to projects.”

It further observed that a key reason for the shortfall is that Nigeria invested just $664 per capita (adjusted for purchasing-power parity) in infrastructure annually from 2009 to 2013, or 3% of GDP, compared with an average of $3,060, or 5% of GDP, for the countries in the comparison groups for which data was available, adding that without decisive intervention, that gap is likely to widen.

The consulting group stated that the Nigerian power system has the capacity to generate more than 10,000 megawatts, but because of problems such as aging equipment and an inadequate transmission network, the actual output in this country of 170 million people is only 4,000 to 5,000 megawatts.

According to the BCG report, the list of gaping infrastructure holes is long and varied. “Consider basic access to power. Only 56% of Nigerians have access to electricity, well below the average of 80% for all three comparison groups. Power outages are widespread, and three-quarters of companies report that the lack of reliable energy is a major constraint.

“The Nigerian power system has the capacity to generate more than 10,000 megawatts, but
because of problems such as aging equipment and an inadequate transmission network, the actual output in this country of 170 million people is only 4,000 to 5,000 megawatts. (Expensive, private diesel generators partially fill the gap, providing about 40% of the electricity consumed in Nigeria.)

“Compare this with another developing oil-rich country, Trinidad and Tobago, where 1,600 megawatts are generated for a population of just 1.4 million, or South Africa, which generates 50,000 megawatts for a population of about 50 million.”

According to BCG, the recent power-privatization efforts have been less than successful owing to a host of issues, including the ability of some people to access power without paying, the poor transmission infrastructure, difficulties among some power plants in accessing reliable gas supplies, and tariffs that don’t cover costs.

“Nigeria must address major gaps, from the power generation, transmission and distribution network, to roads and railway, sanitation systems, and technology infrastructure.

“These issues have major ripple effects, including impact on health and on the country’s ability to diversify its economy, expand its pool of tradable goods, and create badly needed jobs,’’ it stated.

The group noted that to understand where Nigeria stands today and where it must go, it used the Boston Consulting Group’s Sustainable Economic Development Assessment (SEDA), a powerful diagnostic tool designed to provide government leaders with a perspective on the well-being of citizens, including how effectively their countries convert wealth, as measured by income levels, into well-being.

“Our analysis reveals that the Nigerian government must address significant deficits in five areas: governance, civil society, infrastructure, education, and health. Disciplined action in those areas will set the country on the path to inclusive growth, prosperity,” it noted.

Studies show that Nigeria will need to invest about $3 trillion in infrastructure over the next 30 years—an amount that would consume nearly 20% of current GDP annually. Consequently, outside investment will be critical.

BCG further noted that to attract private investment, Nigeria should take the following steps including establishing a central body that is empowered to oversee and direct the life cycle of infrastructure investments; identifying ten high-priority projects; conducting an international road show to line up private funding for those projects; ensuring flawless execution of the projects, from construction through operation, and strengthen enforcement capabilities, especially of project-related tariffs and agreements;

“Nigeria must leverage the momentum created by successful projects to launch a sustained infrastructure-building drive,” the report stated.

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