World Bank’s $750 Million Credit and the need to drive productivity in Nigeria’s chaotic Power sector
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THEMATIC REPORT
Written by Lucas Nwachukwu
Many Nigerians have reacted with skepticism to the approved $750 Million International Development Association (IDA) credit made by the World Bank for Nigeria’s Power sector Recovery Operation (PSRO), said to be aimed at improving electricity supply in the country. The recurring question is centred on how the $750 Million would be put to judicious use. According to the World Bank, about 47% of Nigerians do not have access to grid electricity and those who do have access, face regular power cuts. In addition, the economic cost of power shortages in Nigeria is estimated at about $28 Billion, equivalent to 2% of its Gross Domestic Product (GDP). Despite the privatisation of Nigeria’s Power sector in 2013, during the Goodluck Jonathan administration, the country has failed to achieve a consistent and reliable supply of electricity. In the past and even presently, there have been enormous promises made to address Nigeria’s unreliable energy supply and power needs. Huge investments have been made in the sector which still lies in shambles. Nigeria, with its expanding economy, has one of the widest energy gaps in the world. Power production falls short of demand, which constitutes a primary constraint on the nation’s economic growth.
It could be recalled that in 2019, Nigeria’s Vice President, Yemi Osinbajo stated that the Federal Government has pumped about ₦1.5 Trillion in intervention fund, into Nigeria’s Power sector in the last two years, with little or nothing to show for it. Also in the same year, the Central Bank of Nigeria disbursed the sum of ₦120.2 Billion to the Electricity Generating Companies (GENCOs) and Distribution Companies (DISCOs), as well as service providers and gas companies, in order to address the liquidity and funding challenges facing the sector. The Federal Government also entered a partnership with Siemens AG to help the country produce and distribute 25,000 megawatts of electricity, a deal which will gulp ₦1.15 Trillion. Assertions have been made by the government, that the country generates a fair amount of power but, the challenge lies in distribution. In 2019, the Managing Director of the Transmission Company of Nigeria (TCN) at that time, Usman Mohammed, stated that the country’s electricity generation has reached 7,500mw (megawatts), the transmission has gone to 8,100mw and distribution is vacillating between 3,000mw and 5,000mw. Yet, the country can only boast of a current access rate of 45% and over 20 million households are without power, according to reports published by the United States Agency for International Development (USAID).
It is worrisome that billions of dollars have been committed towards improving the Power sector in the past, but there has been no commensurate result from the expenditures. Instead, an epileptic power supply still persists in the country. This sad commentary has to be addressed. The government must be transparent about the process of investing the World Bank $750 Million and ensure the fund is used judiciously, and not siphoned into personal pockets of selfish individuals. Nigerians as major stakeholders, must hold the government to account on the disbursement and utilisation of the fund. Apart from financing, other major challenges of the Power sector are the inadequacies in policy and regulatory frameworks. To this end, there is a need to review shoddy agreements between the Federal Government, the GENCOs and the DISCOs, as well as strengthen the regulatory and policy framework guiding the activities in the Power sector.
While this funding is aimed at improving financial viability, service delivery and reduce fiscal burden in the Power sector, there will be a need for more revenue to be generated in the sector and this means that there might be need for tariff adjustment, which would hurt poor consumers. The regulatory agency, GENCOs and DISCOs should design a consumer-friendly tariff plan predicated on fair commercial policies that will protect the consumers.
Finally, as efforts are being made to improve the Power sector, the government must also focus on diversifying the country’s energy portfolio. Experts have severally suggested alternative sources of energy that are equally sustainable, environment-friendly and cost effective, such as the Solar-based alternative energy source. This can improve access to electricity across Nigeria. The desired result and revolution of the Power sector should be vigorously pursued in the light of economic realities.