SIGNIFICANT REFORM IN THE POWER SECTOR (INVESTMENT PROSPECT)
The 33-year monopoly of NEPA was broken in 2005 by the Power Holding Company of Nigeria (PHCN), opening doors for various players in the energy sector. Although power generation and distribution are now primarily in private hands, transmission remained under federal government control until the introduction of the new Electricity Act, which established the state electricity market. This change led to the availability of the Power Purchase Agreement, encompassing engineering, procurement, and construction contracts, as well as gas sale contracts. These agreements are crucial for all stakeholders in the industry, serving as preconditions and primary motivation for financiers.
According to estimates from the Rural Electrification Agency (REA), around 90 million Nigerians, or nearly 50% of the country’s population, lack access to grid energy, and millions of those who do have access to it only get less than 12 hours of electricity every day. This current energy predicament presents both a difficulty and an opportunity to stakeholders and new investors at large,
Investment prospects in the Nigerian power sector can be categorized into the following areas:
1. Investment in Gas/Gas Power Plant: The pipeline infrastructure that currently exists is grossly inadequate, particularly when it comes to the recently constructed power plants, prospective IPPs, and industries. To match current gas use, pipelines spanning thousands of miles would be required.
2. Investment in Hydro Power Generation: Converting existing dams into hydropower plants is the quickest approach to invest in small hydro in Nigeria. To do this, there are already more than 25 small dams spread around Nigeria that, if turned into hydroelectric plants, could produce roughly 30MW. These plants can feed into the embedded generation system, giving the distribution businesses in their respective localities more power.
3. Investment in Coal–Fired Power Generation: Nigeria is estimated to have a coal deposit of approximately two billion metric tonnes. 12.8 million tonnes of sub-bituminous coal, sufficient to fuel a 10,000 MW power station for 30 years. Interested investors may approach the Federal Ministry of Solid Minerals Development and state government for more information on project implementation.
4. Investment in Solar Energy: Solar investments would primarily focus on the construction of power facilities and feasibility studies in high-yielding locations. Solar power procurement is progressing to the competitive stage, where capacity is acquired competitively. This allows more investors to join, thereby increasing its popularity in Nigeria by lowering the cost.
5. Investment Opportunities in Transmission & Distribution: Due to a shortage of funds from the Federal Government’s budgetary funding, this sector is looking for alternative financing models such as contractor financing of new transmission projects, Rehabilitate Operate and Transfer (ROT), and Management contracts. Investments are expected in refurbishing existing facilities, restoring the network to its original capacity, completing ongoing projects in various stages of construction, initiating the construction of over 120 newlines and substations, and many new voltage control facilities and expand the network.