Nigeria’s nuclear option
By Lanre Akinola | Published: 01 December, 2008
The dire state of Nigeria’s power sector continues to slow the growth of sub-Saharan Africa’s second biggest economy. Promised reforms have been slow in coming, leading some to suggest ever more radical solutions.
In August 2008, reports circulated that Nigeria had signed a nuclear energy technology sharing agreement with Iran. Although Ojo Maduekwe, Nigeria’s foreign minister, denied that such a deal existed, the rumours were credible enough to provoke the US government into voicing its concerns. However, it was more the proposed choice of partner than Nigeria’s nuclear ambitions that created the controversy. As Nigeria continues to struggle against the daily and widespread blackouts that have put a brake on its economy, some within the country are looking at atomic energy as a potential solution.
There used to be a common joke amongst Nigerians that NEPA – officially the acronym for the now defunct National Electric Power Authority – stood for ‘Never Expect Power Always’. NEPA has since been re-branded to the Power Holding Company of Nigeria, or PHCN, but the change of name has done little to improve the monopoly energy provider’s image. For those who have access to electricity, estimated to be as little as 40 percent of the population, lengthy and daily blackouts have been the norm for years. Less than a fifth of rural households are covered and many Nigerians depend on private generators for their electricity supply. There is no definitive data on energy demand in Nigeria, but it is estimated that a total generating capacity of between 10,000 MW and 20,000 MW would be required to provide a constant stream of electricity to those currently connected to the grid. What this figure would be if it includes the remaining 60 percent of Nigeria’s 147m people is impossible to determine until they actually have access to electricity.
As of 2009, Nigeria’s total installed capacity is roughly 6,000 MW, with actual generation hovering between 2,600 MW and 3,500 MW. To put this into perspective, South Africa, with a population a third the size of Nigeria’s has a total installed capacity of over 40,000 MW. Yet even there, power shortages have been occurring in recent years. “This is not even close to being enough. Nigeria’s energy grid is really in a pretty woeful state,” says Philip Asante, an analyst at Canadian based infrastructure consultancy CPCS Transcom. Mr Asante notes that the transmission network is not much better. “The situation is so bad that nobody can actually put a figure on the amount of losses between the generation and transmission. It could be as low as 20 percent and as high as 40 percent.”
Industrial development is stifled under the current situation. The Manufacturers Association of Nigeria claims that 50 percent of Nigeria’s industrial capacity has been crippled largely due to power cuts and those businesses that can afford it generate their own electricity. “I don’t know of any industry in Nigeria today that is run on the national grid,” says Asante.
Christian Wright, project director at Aldwych International, which develops and operates generation, transmission and distribution projects in Africa and Asia, estimates that the cost of generating electricity privately is at least four times that of a reliable national grid. “The effect on the economy is massive. If you ask any industry what their biggest constraint is they will say power, without flinching,” he says.
After decades of state ownership and management that have failed to provide Nigerians with an adequate power supply, efforts are underway to reform the power sector. In March 2005, the administration of then president Olusegun Obasanjo passed the Electric Power Sector Reform Act. There were high hopes for the planned privatisation of the PHCN, and the government promised to build more L than a dozen new power stations with private sector participation. The goal was to increase Nigeria’s installed generating capacity to 10,000 MW by the end of 2007. Three years later, the PHCN is still entirely state-owned, private investment in the power sector has been negligible, installed generating capacity has remained the same and the former president is under investigation over more than $10bn of state funds that were spent on electricity during his time in office.
Despite repeated promises, President Umaru Yar’Adua, who succeeded Obasanjo in May 2007, is yet to declare an intended state of emergency in the power sector. Nor is it clear what the implications of such an emergency would be.
Oil sector dominance
There is some irony that Nigeria’s estimated reserves of 36.2bn barrels make it Africa’s largest oil producer and the 14th largest producer worldwide. It is also a major exporter of natural gas. The oil sector dominates the economy, providing 95 percent of foreign exchange earnings, 20 percent of GDP and 80 percent of budget revenues. In 2004, 92 percent of energy consumption in Nigeria came from Oil and Gas.
