Due to erratic power supply in many African countries, it has been estimated that African countries will require an average of $40billion annual grid power investments in the next five years for stable power supply in the region. Currently, over 640 million Africans have no access to electricity. This indicates that only 40 per cent of Africans have access to electricity, which is the lowest in the world. The Group Managing Director, Sahara Power Company, Kola Adesina, disclosed this in a keynote address on the “Future of Power Supply in Africa,” which he delivered recently at the Lagos Business School.
He projected that by 2040, the energy demand could reach 30 per cent higher than the current need. Therefore, African governments and stakeholders should work together to strengthen the power grids through yearly investments. The reality is that per capita consumption of energy in sub-Saharan Africa, excluding South Africa, is 180kWh, compared to 13,000kWh per capita in the United States, and 6,500kWh in Europe.
Therefore, access to stable energy is crucial for the attainment of health and education outcomes and for reducing the cost of doing business and unlocking economic potential and creating jobs. In fact, insufficient access to electricity can lead to hundreds of deaths annually due to the use of wood-burning stoves for cooking. Energy access is one of the key drivers of inclusive growth as it creates opportunities for women and youths in urban and rural areas.
Massive investment in Africa’s grids, Adesina says, is critical to improve system reliability, expand access and facilitate the integration of variable energy renewables. This has become imperative because distribution networks account for over two-thirds of the total projected amount. In Nigeria, the frequent collapse of the nation’s power grid has become worrisome. It raises a lot of questions about the huge investments in the sector.
With the frequent grid crashes, Nigeria has not been able to generate more than 4,500 megawatts in the last six months. This has had its toll on businesses. The Renewable Energy Association of Nigeria (REAN) says that Nigeria has lost over $25 billion or N12trillion to grid collapse. Business owners have reportedly spent about $14 billion or N6.05 trillion on generators yearly. Apart from its unsustainability, it comes with many health and environmental hazards.
The economic loss due to grid collapse is 2 per cent of the nation’s Gross Domestic Product (GDP). The 2020 Ease of Doing Business report revealed that 47 per cent of Nigerians lack access to electricity supply. This can explain the meagre contribution of the private sector to the economy. Most of the Micro, Small and Medium Enterprises (MSMEs) have identified unreliable electricity as a major challenge to their businesses. A new survey shows that business owners are willing to switch to renewable energy with the right incentives and product guarantee. The Nigeria Electricity Regulatory Commission (NERC) revealed that in the last nine months, electricity consumers were billed N1.12trillion, out of which N750billion was paid as tariff. The national grid has crashed at least ten times this year.
Between January 2010 and June 2022, the nation’s power grid suffered 222 partial and total system collapse. In 2021, it collapsed 24 times, and 28 times in 2016. All of this is at a heavy cost to the economy. Due to poor power supply in Nigeria, businesses lost over N96.4trillion in the last nine years. The loss to the economy is almost double the cumulative national budget of N76 trillion from 2013 to 2022. Between 2015 and 2019, about 320 firms shut down operations as a result of erratic power supply, while others relocated to other countries in West Africa. Some businesses that depend on diesel for their operations are struggling to survive.
Nigerians are yet to see the expected results of some of the investments in the sector. They include the Memorandum of Understanding (MoU) with Siemens and loans from the African Development Bank (AfDB) and the World Bank. The AfDB is partnering with the government on a $410 million transmission project and an additional $200 million through the Rural Electrification Agency (REA) that will make electricity available for the rural areas.
In 2020, the World Bank approved Power Sector Recovery Operation (PSRO) loan to ensure the supply of 4,500mw/h of electricity to the national grid. This is in addition to the $550 million loan to the government to develop more grids and solar systems. Despite these investments, the nation’s power supply is still epileptic. There is need for transparency in the power sector investments. Government should broaden sources of power supply to meet the energy needs of Nigerians.