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With a population of over 183 million people and a population growth rate of 2.7 percent per annum, the demand for power in Nigeria can only be expected to rise. An estimated 55 percent of Nigeria’s population have no access to grid-connected electricity.
Presently, Nigeria has an installed electricity generation capacity of 12,522 megawatts; 10,592 megawatts is gas fired and 1,930 megawatts is from hydro. However, the maximum peak generation that has been reached is about 5,074 megawatts.
Nigerians self-generate a significant portion of their electricity, at a cost that is greater than twice the cost of grid-based power. The Nigerian power sector remains in need of significant investment as its utility-scale electricity generation capacity continues to fall short of meeting domestic demands.
In an effort to tackle this problem, in 2005, the Nigerian government privatized the generation and distribution phases of the power value chain, retaining just a minority stake. In view of all these, Nigeria’s current administration has exhibited a strong will to reform the power sector, with the Minister for Power, Works and Housing indicating that the government is looking to partner with the private sector to facilitate investment in the power sector.
Power Generation: On-grid and Off-grid
With the privatization of power generation in 2005, there have since been a myriad of opportunities to invest in this arm of the power sector. As a result of the immense power deficit, vis-à-vis the higher cost of self-generation, there is a large and ready market for on-grid power generation in Nigeria.
There are also opportunities for investment in off-grid power solutions or ‘mini-grids’ which typically provide smaller communities – such as rural areas, industrial clusters and residential estates) with electricity. It is estimated that about 42 percent of Nigerian businesses generate their own power supply to augment the national grid supply.
Power Distribution
Given the fact that electricity consumption in Nigeria should be four to five times the amount it is today, the distribution phase of the power value chain Nigeria also contains a bed of opportunities. The federal government has no direct equity interest in Nigeria’s distribution companies, popularly known as ‘DisCos’. There is a ready market of Nigerians that are willing to get on-grid and pay for their electricity consumption.
Manufacturing of Equipment
There are also opportunities in the manufacturing of power sector tools and equipment. Most of these equipment are currently being imported, which therefore presents opportunities in import substitution.
Renewable Energy – Targets
The present administration has expressed its commitment to pursuing and developing alternative sources of power, with a focus on renewable energy.
With respect to the renewable energy market, the FGN introduced feed-in tariffs (FIT) as a tariff regulatory mechanism to accelerate investment in renewable energy sources. The FIT regime guarantees a stable price for electricity generated from renewables for a fixed duration, thereby securing adequate returns on investment.
In 2015, NERC approved new regulations that aim to:
The under listed are the expected renewable energy projections:
Incentives in the Power Sector
The Federal Government of Nigeria has set-up several incentives to attract foreign direct investment into the power sector.
Proposed Incentives for Power Sector
Manufacture of electrical equipment, appliances, parts etc.
(Between 10 and 20 years depending on quantum of investment),
150% on R & D,
2% tax concession on in-plant training for specified number of years
(Years depend on quantum of Investment).
Preferred Vision 20-2020 Target of 40GW
Testimonials
TRANSCORP
Transcorp Power – formerly Ughelli Power – is among the 18 electricity successor companies unbundled from Power Holding Company of Nigeria (PHCN) in 2003. Transcorp has four power plants with a total installed capacity of 900 MW, most of which is transported through a network of conductors to the national grid.
AZURE
United States-based American Capital Energy and Infrastructure (ACEI), in 2013, committed to investing $130 million in Azura Power Holdings Limited.
Azura is a developer, financier, acquirer and operator of Independent Power Plants (“IPPs”) and power related assets utilising its project development, industry expertise and financing skills to actively shape and develop power projects in West Africa. Azura Power Holdings Limited is the company responsible for developing the Azura-Edo Power Project in Edo State, Nigeria. The Azura-Edo power project is a proposed 450 megawatts open cycle gas turbine power station being developed near Benin City in Edo State and represents the first phase of a 1,000 megawatts power plant facility. The project reached financial close on 28 December 2015 and construction started on 5 January 2016.
For more information, please visit:
http://www.azurawa.com/
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