Nigeria – A nation in darkness – Hector Igbikiowubo (Vanguard)

1 Comment » May 26th, 2008 posted by // Categories: Energy Development Project



 

VANGUARD

Nigeria: A nation in darkness

Written by Hector Igbikiowubo   

Tuesday, 27 May 2008

 

ONE year down the road, management of power generation under the administration of President Umaru Yar’Adua has dropped to an all-time low, registering an average 1,630 Megawatts (Mw) output from Power Holding Company of Nigeria (PHCN), the state run power utility.

 By May 29, 2007, when the President was sworn in, average power generation was in the region of 2,800 Mw.

In the last one year, average residential expenditure (an estimated 60 million residents use generators of varying sizes) on fuelling power generators has climbed to an all time high of N1.56 trillion (about $13.35 billion) per annum and similar level of expenditure on private power generation has characterised the affairs of industrial and commercial power consumers. Early last year, independent checks recorded about half the figures outlined above.

Recently, Mr. Steven Dimitriyer, the Senior Private Sector Specialist at the World Bank said Nigeria experienced the worst electricity crisis among its contemporaries —a description which underscores the nightmarish circumstances surrounding power generation, supply and distribution in the country.

“Electricity crisis is the most important infrastructure bottleneck in Nigeria today… All types of firms experience power outages and 85 of them own generators,” he said.

Owing to government’s inability to provide power supply, major roads and streets in capital cities across the country remain pitch dark at night, heightening the spectre of crime and vehicular accidents; some hospitals are forced to carry out medical operations on patients with the aid of kerosene lanterns and candles; medical laboratories cannot conduct certain culture tests and this portends dire consequences for health care delivery; more homes now store petrol indoors for use on generators, heightening the risk of fire accidents; pupils and students have been given added incentive not to read at night since they have to resort to use of lanterns and candles; industrial output has dropped abysmally low and artisans whose businesses depend on power supply availability have been forced to embark on a long and unwelcome holiday.

In the last one year also, government has failed to meet its contractual obligations to contractors handling power projects across the country under the guise it is carrying out stock-taking or conducting one probe or the other. While this serves as a major disincentive to investment, ranking government personnel ironically still embarks on foreign trips, purportedly in search of foreign investors.

Meanwhile, one year after President Yar’Adua’s assumption of office, Nigerians are still awaiting fulfillment of election promises regarding the declaration of a state of emergency in the sector.
In the last one year, gas lines supplying feed-stock to thermal power stations of the PHCN have been repeatedly vandalised by militants and aggrieved community youths in the Niger Delta, limiting the power generation capacity of the PHCN.

Indeed, the largest power plant in the country, Egbin Thermal Power Station, with a rated power generation capacity of 1,320Mw has been producing an average 300Mw in the last one year, recording an abysmal 60Mw in the last week of April, 2008.

Similarly, gas supply to the 414Mw Geregu Thermal Power Station in Kogi State, the 335Mw Papalanto Thermal Power Station in Ogun State, the 335Mw Omotosho Thermal Power Station in Ondo State has been largely cut off owing to acts of vandalism – an indication, government’s attempts (if any), at addressing the Niger Delta crisis has failed to yield the desired results.   

Residential Consumers

It is becoming increasingly difficult to analyse this category of power consumers owing to paucity of  data from the Customs and Excise Department, the Federal Office of Statistics, PHCN, the Standards Organisation of Nigeria (SON) and other government agencies contacted. Indeed, while the number of power consumers continues to rise, there hasn’t been a corresponding increase in the capacity of the PHCN to meet the demand.

Essentially, while demand for electricity among this group of consumers is rising, available power supply is shrinking – resulting in load-shedding and all manner of power supply management to ensure what is available gets around.

Early this year, we had to depend on projections, assumptions and averages in arriving at the number of power generating sets used by residential consumers.

We discovered that power generating sets utilised by this category of consumer ranges from 0.8Kva to 500Kva depending on how many consumers it was meant to serve. We, therefore, projected most of those who had recourse to use of power generating sets were mostly urban dwellers and a few others in the rural areas.

For ease of summation, we contended that of the 140 million people in the country, there were 60 million consumers in this category which had access to a 2.5Kva power generating set which utilised an average five litres of petrol per day.

This amounts to 300,000,000 million litres of diesel per day and at a current pump price of N70 per litre, this amounts to an expenditure profile of N21 billion per day,  N651 billion per month or N7.812 trillion or $6.676 billion per annum.

However, random surveys conducted in selected cities across the country revealed that fuel consumption pattern amongst residential and other fuel users has since doubled — a direct result of the dramatic drop in power generation.

Commercial Consumers    

Similarly, investigations carried out last year also revealed that there may be about five million commercial enterprise operating in the country including barbers shops, hair dressing saloons, restaurants, super markets, boutiques, block moulding factories, recording studios, dry cleaning services, night clubs, vulcanizing services, casinos, offices,  etc utilising average eight litres of diesel per day.

This translates into 40 million litres or 1.24 billion litres of diesel per month or 14.88 billion litres per annum. At current pump price (N125 per litre), this translates into N1.86 trillion or $ 15.89 billion expenditure per annum. However, the cost of fuelling these power generating sets does not include the oil change, spare parts and labour.   

Petrol Stations

In the downstream petroleum sub-sector it was discovered that all the filling stations operating in the country have to depend on power generators due to the inability of the state power utility company to meet their needs.

In this sub-sector, the Independent Petroleum Marketers Association of Nigeria (IPMAN) is the umbrella body of all registered independent petroleum marketing companies. IPMAN is said to control about 62% of the retail outlets in Nigeria. It has three thousand, eight hundred (3,800) members and eight thousand six hundred and seventy one (8,671) service outlets nationwide.

Investment in the downstream is well over N25, 000,000,000 (twenty five billion Naira). Its member companies also claim to have over 70% of the market share in the downstream sector. Total staff strength is about 220,000 in all their service outlets, with the expectation of 5.5% increase in their employment profile across the country annually.

Between the major downstream marketing companies operating in the country, it was discovered that there exists another two thousand, five hundred and eighty nine (2,589) service outlets, bringing the total number of outlets to eleven thousand, two hundred and sixty (11,260).

These major downstream operating companies are publicly quoted and they include: ChevronTexaco, Mobil, Total, AP and Oando.

Checks revealed that almost all of these service outlets are currently operating 27Kva or 30Kva power generating set with each consuming average 100 litres of diesel per day, owing to the shortfall from the state power utility company.

This translates to 1,126,000 million litres of diesel per day, 34,906,000 million litres of diesel per month or 418,872,000 million litres of diesel per annum.

At current pump price, this translates to forty three billion, nine hundred and eighty one million, five hundred and sixty thousand naira (N43,981,560,000.00) or $376 million expenditure per annum. 

Further checks revealed that the bulk storage depots operating in the country also depend largely on private power generating sets to service the needs of their teeming clientele – petroleum tankers from across the country which load products throughout the day.

Owing to the shortfall in power supply from the state power utility company, these bulk storage depots deploy power generating sets with capacities ranging from 100Kva to 500Kva at each of their depots.

Industries

Available statistics indicates that all the existing industries in the country have back-up power generators. These includes: the hotels services sub-sector, small and medium scale enterprises, operators in the maritime sector and conglomerates among others.

Investigations revealed that there are about 12,230 such organisations spread across the country with each of them using private power generating sets with installed capacity ranging between 150 and 2000Kva.

On the average, each of these power generators utilise about 400 litres of diesel per day. That is a total of about 4.9 million litres per day, 151.652 per month or 1.820 billion litres of diesel per annum. At current market price, this translates to N191,08 billion expenditure per annum or $1.6billion per annum. Cost of oil changes and labour for maintenance could not be computed at the time of filling this report.

Financial services

Banks — In the financial services industry, the banking sector which boasts of 24 operators and a total branch network of 4,625 all depend on private power generators to provide services for their teeming customers.

Investigations revealed that these branches have power generators with capacity ranging between 30Kva and 60Kva depending on the size of the branch and the facilities contained therein. It was also discovered that each of these branches utilise an average of 500 litres of diesel per week or a total of 2,312,500, 9,250 million litres per month or 111 million litres of diesel per annum.

At current pump price, this translates to N11.7 billion expenditure or $100 million on diesel every year. The cost of oil changes and labour for maintenance could not be computed at the time of filling this report. Below are the number of banks and their branch network – AfriBank (250), -Access Bank (110), -City Bank (13), -Diamond Bank (109), – EcoBank (130), -ETB (72), -Fidelity (120), -First Inland (146), -First Bank (415), -FCMB (135), -GT Bank (68), -Spring Bank (183), -Intercontinental (250), -Stanbic/IBTC (60), -Sterling Bank (90), -Oceanic Bank (320), -Bank PHB (106), Skye Bank (197), -Standard Chartered (8), -Union Bank (400), -UBA (730), -Unity (215), -WEMA (148),
-Zenith (350).

Insurance — In the insurance sub-sector, 49 Insurance companies emerged from the consolidation exercise embarked upon by the government. At an average of 10 branches per company, we have estimated 490 branches in the country for underwriters.

There are the big companies and the small ones. But on average, companies are spending between 5% and 15% of income on fuel.  Tony Ojeme, an assistant general manager in charge of corporate planning at Niger Insurance Plc says cost of independent power generation comes only second to salaries and emoluments. 

Altogether, the cost of running power generators at small branches is estimated at N100,000 monthly per company branch, the estimated 490 branches will have a monthly cost of N49million or an annual expense of N588million or $5.25million.

However, for the corporate head offices the figure is slightly higher. At an estimated N3million spent on running generators per month, each company may be spending about N36million annually. For the 49 insurers, the figure comes around N2.28billion annually including the branches expense on fuel. This estimate translates to less than 5% of insurer’s gross premium put at N80billion in 2007.

PHCN Reaction

When contacted, a PHCN official who spoke on the basis of anonymity disclosed that the State power utility company had little control over the current state of power generation supply and distribution, adding that it can only perform to the extent that it has gas supply to feed its thermal stations.

The official said the PHCN has been generating between 2,000 Mw and 2, 400 Mw except on occasions when it had to shut in output owing to advice from the Nigeria Gas Company (NGC), a subsidiary of the Nigeria National Petroleum Corporation (NNPC).

On these occasions, it was gathered that power generation drops as low as 1,200 Mw. The official also concurred that if the level of power generation and the drop in output owing to shut-ins in the last one year is anything to go by, average output could be estimated between 1,630 Mw and 1,800 Mw.

Typically, the official explained that power generation from the thermal power plants could be augmented with that produced by the hydro power plants, adding however, that this input is tied to a seasonal cycle. “By end of July to early August there will be enough rainfall to fill up the dams and there will be improvement in power generation from the hydro power plants,” the official said.

Current Efforts by Government

Unlike its predecessor, checks revealed that the Yar’Adua administration has not initiated any concrete step(s) aimed at addressing the power supply nightmare.

Rather, in the last one year, it has concentrated efforts on investigating and verifying existing contracts and expenditure of the Obasanjo administration. While speaking on the power sector expenditure recently, President Yar’Adua claimed that over $10 billion was spent by his predecessor.

The House of Representatives Committee on Power latched unto this and initiated a probe of the sector. But this was not before sections of the media quoted Mr. Dimeji Bankole; the Speaker of the House saying sector expenditure was indeed in excess of $16 billion.

While testifying before the House Committee on Power, Mr. Charles Chukwuma Soludo, the Governor of the Central Bank of Nigeria (CBN) served notice that not more than $3.2 billion was budgeted for the National Integrated Power Project (NIPP), adding that there were adequate controls in place to ensure that the contractors deliver on ongoing projects.

Also testifying before the House Committee, Senator Liyel Imoke, erstwhile Minister of Power under the Obasanjo administration and current Governor of Cross River State, disclosed that not more than $7 billion was budgeted for power projects under the past administration.

However, claims and counter claims continue to fly between the executive and legislative arms of government. Industry watchers say while attempts at verification of expenditures and claims are commendable, it should not over-ride the more critical issue of providing electricity for the growth and development of the country.

It also follows that if Nigeria expects to become one of the 20 largest economies in the world by 2020 government has to tackle the electricity supply nightmare more efficiently than it has done in the last one year.

As a matter of urgency, government has to boldly address the issue of gas pricing and electricity tariff; privatise the unbundled entities of the PHCN including the generation and distribution companies; deliberately seek out companies with proven track record as well as a willingness to invest in improvement of power generation supply and distribution in the country. Otherwise, Nigeria shall remain a nation in darkness.

 

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One Response to “Nigeria – A nation in darkness – Hector Igbikiowubo (Vanguard)”

  1. Atunde Wasiu says:

    The darkness that is plaguing Nigeria for so long is that which solution cannot be proffered. If not why are we not out of the doldrums since 1970 when we had our independence. Allow all corrupt (of course we know them) to surrender all their loots in the name of fair play. and a sound of warning should go to our religious leaders to stop harboring thieves in their folds.And lastly, instead of praying, why not let us gather our selves and lay just a-day curse on whoever is troubling this nation. It will work like magic.

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