Nigeria Continues Power Development, Despite Toxic Conditions

Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Despite being the self-proclaimed "largest economy in Africa," Nigeria continues to develop its Power Industry under a toxic mix of uncoordinated regulation, legislation and corruption. Power on the grid has dropped below the modest targets set for 2014.

For related information, see April 29, 2014, article - Nigeria Promises Additional Power Amid Supply Chaos.

General Electric (NYSE:GE) (Fairfield, Connecticut), with its substantial power investments in Africa, and the U.S. government, through President Barack Obama's "Power Africa" initiative, have a direct interest in the growth of Nigerian power.

For more information, see July 2, 2013, article - Obama Launches $7 Billion 'Power Africa' to Boost African Power Market.

In June, electricity output fell by 10.5% from May to 3,400 megawatts (MW), and forecasts report that this situation will not change in any major way for the rest of the year. Gas shortages and an inadequate transmission structure are among the reasons cited for this trend in a nation of 180 million people.

Nigeria's electricity market continues to operate under a set of controversial government rules, with the situation worsened by an inadequate transmission infrastructure. The National Electricity Regulatory Council (NERC) is reportedly finalizing plans on the modus operandi of the Transitional Electricity Market (TEM), according to its report, "Monthly Economic News and Views" (MENV).

Earlier in the year, the government issued a power target of 5,000 MW for the end of 2014, but the distribution companies' lack of coordination and implementation is compounding available power losses. Tariffs set by NERC are not cost-effective in a scenario where supply and the number of customers are low.

If the TEM is not in place, the delay in the independent power producers' (IPPs) privatization process could inhibit investors' confidence in the power sector. The chronic deterioration of security in northern Nigeria and the non-passage of the Petroleum Industry Bill (PIB) also are blocking progress.

Sam Amadi, chairman of NERC, said that the commission had worked on measures to ensure that a good number of operators in the power sector are ready and willing to move into TEM within its yet-to-be-determined period. He added that NERC plans to ensure that the electricity market moves into TEM strongly enough to confront challenges that could threaten its efficiency.

"TEM is a big elephant in the room, some people don't want it now, others want it now, some will lose while some will gain," Amadi said. "But the NERC's approach to TEM is not driven by rhetoric or politics. It simply means that we have to unlock the market and contracts, and if there are shortfalls people have to carry their can."

If TEM is brought in before NERC is ready, the shortage will be huge and the market could be undermined, he said.

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