Increased focus required on hydro

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Culled–Proshare

March 30, 2017/FBNQuest Research

Over the past several years, Nigeria’s hydro sector has been neglected. The underinvestment within the sector is reflected in the national accounts produced by the NBS.

Last year the sector, which is classified as water supply, sewerage and waste management, contributed just 0.2% to total GDP yet managed to grow by 9.3% y/y amid the macroeconomic challenges. We note that the FGN has recently launched a roadmap geared towards tapping into the vast potential within the country’s hydro sector.

Nigeria boasts 250bn cubic metres of water (both surface and ground). This is sufficient for industrial, agricultural, domestic, hydropower and recreational usage. However, the country is ranked as an economic water scarce country.

In 2016 the ministry of water resources was allocated N53.3bn (less than 1% of the total budget). Given the number of projects under its purview, the ministry secured N46.1bn from the allocation for capital expenditure. These projects include irrigation, the rehabilitation and construction of dams, and solar powered borehole installations.

According to the OECD, farming accounts for around 70% of water used globally. Nigeria has an irrigable land potential of 3.1 million hectares (ha); yet the actual irrigated area is only 70,000 ha.

The national irrigation development programme within the sector roadmap reveals that the FGN’s targets 78,000 ha of planned irrigation by 2019, which would require an average yearly investment of N59bn. Meanwhile, its long-term target of 500,000 ha by 2030 would require a total investment of N1.5trn.

From the roadmap, we notice that the ministry has prioritised 38 projects, which are grouped into irrigation & drainage (10 projects), dams (13) and water supply (15).

Furthermore, the total funding requirement for the aforementioned is N338bn, with irrigation & drainage accounting for 57% and dams 32% of the total funding requirement.

According to the roadmap, there are currently 17 existing dams with combined installed hydropower capacity of 200 MW. Dadin Kowa dam in Gombe State and Gurara dam in Kaduna State have power generating capacity of 51MW and 50MW respectively. However, improved turbine technology is required to attain this level.

As for hydro dams under construction, the Mambilla dam located in Taraba State, when completed, will have a power generating capacity of 3,050MW. Given that the power sector struggles to meet the estimated national demand of c.18, 000MW, alternative sources of energy (such as hydro) will give the power sector a leg up.

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