Nigeria’s power sector seems to have a good problem. Power generation companies’ produce in excess of 2,000MW of what distribution companies have capacity to sell. Therefore the Federal Government is now wooing manufacturers to buy the excess power.
“For the records, and as a matter of fact, Nigeria’s Power Generating Companies are now able to produce 7,000 MW and the transmission company is able to transport all of it and is expanding its capacity daily,” Fashola says in remarks at a meeting with Manufacturers Association of Nigeria (MAN) on Tuesday, in Abuja.
Fashola further said, “The distribution companies have also increased their load taking capacity to 5,0000MW. However, this leaves a gap of 2,000MW of what you manufacturers will call unsold inventory.”
Recall last year, the minister declared eligible customer for which the Nigerian Electricity Regulatory Commission (NERC) has released guidelines. The regulation allows power users with the capacity of taking up to 2MW buy power directly from generation companies.
This overture to manufacturers is the result of DisCos refusal to take more power than they can convince customers to pay. DisCos are only able to settle about 30 percent of their market invoice thereby increasing liquidity constraints in the power sector. To assuage the losses in the value chain, the Federal Government made available a N701bn power assurance to gas suppliers.
But as more power plants are set to come on stream this year, the necessity to sell off the excess power becomes even more critical.
“This unsold and increasing inventory is what this meeting offers to manufacturers as your critical raw material to reduce the cost of production,” Fashola said in his pitch.
At the Franco Nigerian chamber of commerce and industry conference last year, Fashola said some of the projects expected to be delivered to include Azura Power in Edo state with 450MW capacity, Afam power plant in Rivers State with 240MW, a thermal power plant with 227MW capacity in Alaoji, Abia state, a 225 gas fired plant in Egbema, Imo state and a 215 MW dual fired Kaduna Power Plant.
Others are the 254MW capacity Gbarain power plant project, built by the Niger Delta Power Holding Company (NDPHC), 40MW Kashimbilla plant in Taraba state, 29MW Dadin Kowa hydro power plant in Gombe State. There is also a 10MW wind farm in Katsina, 30mw Gurara Hydro power plant in Niger State. The 700MW Zungeru hydro project is set to be completed in 2019.
When completed, these projects could ramp up Nigeria’s power generation from the current level of about 7,000MW to 9,000MW. It could also create more challenges for the country unless manufacturers, big residential schemes and other heavy users are persuaded to buy directly from power producers.
Fashola said there can be no better time to explore this option than when there is the inventory of unsold power, with the clear promise of more to come.
“The market must open to all willing buyers. This access to power, for manufacturing and production, is the big bridge towards diversification of the economy.
The minister said power was a factor preventing growth in the economy including such initiatives as such as Operation Feed the Nation and Green Revolution which has made it difficult to complete the cycle ‘either due to lack of infrastructure like power to support industries or the elixir of cheap petro-dollars that dim our focus.’
“Now that Agriculture is back on the right track, mining is raring to go into industrial production, road and rail infrastructure are being constructed, the Power infrastructure must lock into the mix.
“In spite of the spike in oil prices, we must complete this foundation for our Economic and Industrial liberation, by remaining focused. This is what the Buhari Administration seeks to achieve with the Economic Recovery and Growth Plan.
“This is the big boost for “Made in Nigeria.” As you gather today with our technical team, I urge you to be open, frank and, most importantly, be flexible. The negotiations may be tough, but please never walk away from the table,” Fashola said.