Nigerian Government Approves $5.4 Billion for National Independent Power Projects Program

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Researched by Industrial Info Resources (Sugar Land, Texas)--In an effort to revive Nigeria's power sector, the federal government has sanctioned $5.4 billion for power projects as part of the National Independent Power Projects (NIPP) initiative. The funding will resuscitate several stalled power projects and expedite the commissioning of ongoing projects to meet the country's power generation capacity target of 6,000 megawatts (MW) by the end of 2009. The program is expected to contribute 4,000 MW of additional power generation capacity by the end of 2009 and 10,000 MW by 2010.

Projects include the 563-MW Calabar power station on the Cross River, the 225-MW Gbarain project in Bayelsa, the 450-MW Sapele power station in Delta, and the 338-MW Egema power plant in Imo. The 112.5-MW Olo'sogo and Omoku power projects will also be part of the funding.

In order to fund the projects in the power sector, the government plans to utilize the oil reserve revenues accrued as a result of the differential in international oil prices and Nigeria's budgeted oil rates, the Revenue Mobilization Allocation and Fiscal Commission (Abuja, Nigeria) announced recently. The commission is a government agency that manages federal revenues. Last month, Nigeria, which is the world's eight largest oil exporter, accrued savings of $13.5 billion from oil price differentials.

However, within weeks after the announcement, a federal agency indicated that the state governments might have to provide for the NIPP investments in their regions independently. This led to concerns about the federal government's intention to proceed with the initiative. It was further reported that the funds of $5.4 billion earmarked for NIPP would be used for the 2011 election campaign. However, the government has dismissed the reports, saying that it is committed to developing power projects as part of the initiative.

The power scenario in Nigeria is plagued by years of neglect, mismanagement and corruption. The government is deliberating on a power committee report that brought to light a $13 billion scam. The investment, which was allegedly made between 1999 and 2007 on NIPP, has not resulted in any new power plants or the development of new projects. The report has also demanded judicial action against 21 eminent Nigerians, 36 companies and 17 contractors for their role in the scandal. NIPP is considered to be one of the country's largest projects, with 600 proposed sites and 270 contracts for the construction of power plants and electricity transmission infrastructure.

Nigeria, which has a population of 140 million people, is facing acute power shortages. Households do not have power supply for weeks, while industrial production is also adversely affected by the power deficit. To bridge the demand-supply gap, the government is also exploring the options of hydroelectric and gas-based power plants. The Power Minister Riliwan Babalola said that in order to generate 6,000 MW of power by the end of the year, the country needs about 1 billion standard cubic feet per day of gas. The power sector currently receives 400-500 standard cubic feet per day of gas.

However, Babalola said that with the commissioning of major gas projects, including the AFAM-VI promoted by Shell Petroleum Development Company (Lagos, Nigeria), the feedstock scenario will improve. Nigeria also has several dams that have the potential to generate electricity but have not been linked to the energy grid for more than two decades. A survey of these dams is also under way to assess their feasibility for harnessing hydropower.

Major oil and gas companies are also stepping in to develop power plants in the country. Some of these projects include the 225-MW Ubie/Gbaran power project, the 430-MW Riversand project promoted by Total E&P Nigeria (Lagos), the 480-MW Okpai power plant being developed by Nigerian Agip Oil Company (Lagos), and the 650-MW AFAM-VI combined-cycle power plant being developed by Shell Petroleum Development Company in Okoloma.

Nigeria's economy is dependent on oil production and exports. The country has proven oil reserves of 36.22 billion tons of oil and produces 2.5 million-3.3 million barrels per day of oil, which accounts for 95% of the country's foreign exchange earnings, 30% of the national gross domestic product, and 80% of the federal revenues. Nigeria plans to increase its oil production to 4 million barrels per day by 2010.

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