Deal with Siemens: Hope For The Power Sector?

Culled—Proshare

February 22, 2021

by CSL Research

High-voltage power lines. Electricity distribution station. high voltage electric transmission tower. Distribution electric substation with power lines and transformers. (Source: Africa Oil & Power Conference)

According to a news report by Punch, the Federal Government last week signed a contract with Siemens Energy Nigeria for the pre-engineering phase (the first phase) of the Presidential Power Initiative through a Special Purpose Vehicle (SPV), FGN Power Company. The Presidential Power initiative seeks to improve power generation in the country. Notably, the pre-engineering phase will include engineering design works, specifications for onshore installation, commissioning works for the transmission and distribution systems, network development studies, power simuation, training, and support services.   

The federal government in July 2019 signed a power deal with the power giant to deliver 25,000MW by the end of 2025 and to fix the archaic transmission and distribution infrastructure in the sector. Furthermore, milestones were set to ensure provision of  7,000MW and 11,000MW of reliable power supply by 2021 and 2023 respectively. Since then, several steps have been taken such as the initial N8.6bn commitment made by the government in 2020 as disclosed by the Minister of Power, Sale Mamman.  Currently, Nigeria has a power generating capacity of about 13,000MW with a less than 50% utilization capacity at a peak power generation of 5,222MW. 

The Nigerian power sector has been bedeviled by a number of constraints since the privatization done in 2013 such as lack of cost-reflective tariff, poor metering infrastructure, low network coverage and decrepit transmission facilities have continued to undermine performance and drive liquidity squeeze in the sector. Over the years, the widening deficiency in on-grid supply of power has forced consumers into costly off-grid alternatives, which account for 52% of electricity consumption, based on IMF estimates.

According to the world bank, about 80 million people still lack access to grid electricity, making Nigeria the country with the largest access deficit in Sub-Saharan Africa. The institution further puts the national electrification rate at 55%, with rural electrification rate at a meagre 39%. Clearly, a lot of work is required in improving the supply of power across the country and ensuring its availability to unserved and underserved households and businesses.

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