Osinbajo Advocates Change of Strategy in Power Sector

Yemi Osinbajo

Peter Uzoho and Esther Oluku

The Vice President, Prof. Yemi Osinbajo, has declared that a change of strategy is necessary for an improvement in the country’s power sector.

Osinbajo also stated that the distribution capacity of the 11 distribution companies (Discos) in the country was significantly low, noting that their capacity was hovering around 4,000 megawatts on average with a peak at only about 5,400MW.

The vice president made the remarks yesterday during the inauguration of 2X60MVA, 132/33KV Substation and associated 132KV transmission lines constructed by the Niger Delta Power Holding Company (NDPHC) in Abeokuta, Ogun State.

According to him, despite all the availability of about 8,000MW of power generation and 7,000MW of transmission capacity, lack of distribution infrastructure to absorb and deliver grid power to end users has largely restricted generation to an average of 4,000MW, and sometimes, even falling below 4,000

Osinbajo said: “The distribution capacity in the 11 Discos are significantly low, hovering at around 4,000 megawatts on average with a peak at about 5,400MW.

“So, despite all the availability of about 8,000MW of generation and 7,000MW of transmission capacity, the lack of Disco infrastructure to absorb and deliver grid power to end-users has largely restricted generation to an average of about 4,000MW, and sometimes even falling below 4,000MW.”

“It is evident that despite all the efforts that has been put into trying to expand the grid, the structure of the market today cannot deliver on the government’s promises to provide power for domestic and industrial use.

“A substantial change of strategy is necessary. There is clearly a need for a change of strategy. What we have done in the past has taken us to a point where there is clearly a change of strategy.”

In his address, the Ogun State Governor, Mr. Dapo Abiodun said despite the annual capital injections averaging $2 billion into the power sector, the available capacity of Nigeria’s state-owned electricity utility has been stuck at about less than 5,000 MW, adding that that only happened when the Buhari’s government came to power.

“By my own cursory assessment, the attendant cost – in terms of lost GDP – is many times greater than all the waste and leakage which have attended these capital budgets. This is the inescapable link between electricity supply and our economic development and social reality. There is no gainsaying the fact that rebuilding the energy sector to meet both domestic and industrial needs is vital,” he said.

The governor noted that as part of the efforts to improve on the system, the federal government deregulated the energy sector, stressing however that the unbundling has not totally dealt with the crisis in the energy sector.

“It will be recalled that in the recent decades, past regimes have put in billions of dollars to reverse the neglect and mismanagement, which characterised the sector without much success. In 2005, the government launched an ambitious capital investment programme under the title of the National Integrated Power Project (NIPP). The NIPP projects comprise both gas fired-power plants and transmission lines. At conception, it was envisaged that when completed, the NIPP projects would add nearly 5,000 MW to the country’s generating capacity within the next 3 years. But this is 2019 and 14 years after and the NIPP’s contribution is still a drop in the ocean compared to the investments that would be required for the country to meet the generating target then set for 2020, that is 40,000 MW,” Abiodun explained.

According to the governor, if this target of 40,000 MW were to be met, Nigeria’s power capacity per head of population in 2020 would still be less than a quarter of what countries with similar status, especially the BRICS economiesb- Brazil, Russia, India, China and South Africa currently enjoys.

“Nevertheless, I understand that to reach this relatively modest ambition (of 40,000 MW) will require investments in power generating capacity alone of at least $ 3.5 billion per annum for the next 10 years. Correspondingly large investments will also have to be made in the other parts of the supply chain (i.e. the fuel-to-power infrastructure and the power transmission and distribution networks). In summary, a total $10 billion per annum would represent a conservative estimate of the sums that will need to be spent on the whole supply chain over the next 10 years in order to reach the modest target required for us to have stable and uninterrupted power supply,” Abiodun added.

Abiodun said this vision propelled the President Muhammadu Buhari-led administration towards improving energy generation.

“In addition to a dogged fight against corruption, tackling infrastructural development in different parts of the country, diversification of the economy from dependency on oil, and many other development initiatives, this project will stand as another eloquent testimony of President Muhammadu Buhari’s commitment to a wholesome development of all the sectors of our National economy,” he added.