Nigeria has about 13GigaWatt (GW) of electricity generating capacity, a transmission capacity of 5GW and distribution that hovers between 3.5 and 4.2GW. Currently, natural gas accounts for more than 80% of Nigeria’s generating fuel needs. About 30% increase in available generation is possible if the gas constraints are resolved.
Natural gas is set to become the leading fossil fuel by 2030 and is expected to replace oil by 2040. Nigeria ranks as the 8th largest country in terms of gas reserves and 13th largest producer of the commodity.
The electricity sector provides the natural edge for the demand-supply imbalance and there should be sites that can support the embedded generation goals of the Distribution Companies (DISCOs). In Nigeria, there are approximately equal volumes of both associated and non-associated gas, with the latter appearing in small-to medium and sometimes, stranded fields.
The appropriate and prompt implementation of swop arrangements, a reinforced commercial framework, the aggressive pursuit of the Gas Master Plan, Government backed instruments and regulation, will culminate in a more robust sector. Vandalism of gas pipelines and transmission infrastructure, which are major pitfalls in the power industry also have to be addressed.
The speedy execution and delivery of a number of on-going infrastructure projects is inevitable. The supply, processing, transportation and distribution challenges in the gas sector need to be handled for optimal performance. Gas prices should not be subjected to a subsidy, thereby politicising it. Its price should be determined by global trends and market forces. It is commendable that some policies and regulations have resulted in the resolution of a number of challenges. The forerunners in the generation sub-sector are also extolled for their ingenuity, resulting in considerable independence in that subsector.
More than 50% of distributed power is consumed free-of-charge. In other words, less than half of customers pay for electricity usage. Power must be realistically priced because it is only through cost-reflective tariffs that the cost of generation will be recovered and investments made in new large-scale generation and transmission projects.
Distribution and transmission capacities must significantly increase to warrant further gas supplies. The DISCOs particularly need to improve their own networks in preparation for the probable resolution of the bureaucracy in generation.
If that bureaucracy is broken today, the DISCOs cannot take up all the available power. The Petroleum Industry Bill (PIB) is still a contentious document because the promoters of the bill want it to tackle all the inconsistencies in the oil and gas sector. Bureaucracy and troublesome business processes must be jettisoned; investor-friendly policies and incentives together with appropriate transport laws and competent regulation have to be created and/or enforced so as to reassure entrants to invest in the power sector and to prove that the creation of an enabling environment is not theory.
A continuity machinery and adherence to contracts cannot be dispensed with. Policy inconsistency must be eschewed, paving way for clarity and certainty.
Private sector financing will provide the infrastructure required for the transformation of the transmission subsector. The emergence of mini and micro grids, co-existing alongside the large grids, should be encouraged.
Population growth, impelled by the emergence of megacities, will have a profound effect on Nigeria’s power sector. The scale of investments needed in the sector is illustrated by the rule of thumb for industrialized nations that approximately every one million people require 1,000 MW of electricity.
Climate change, revealing itself as water scarcity, will affect hydroelectricity in future. There are gaping holes created by the skill-scarcity and reactive policies in harnessing dormant resources that can aid power generation.
Unraveling technologies in the power sector will assume a lot of prominence in the coming years. Cross-border electricity flows and regional power integration will surface in the coming years.
Power companies will be better positioned to contain losses if they utilise efficient risk and capital management techniques, plus proficient customer service – consumer interactive websites and other Information Communication Technology (ICT)interactive tools.
Nigerians must realize that power will not automatically improve solely because of privatization; but that it will get better when large-scale capital investments, which are presently hindered by lack of funding, are made.