Friday, March 04, 2022 / 09:53 AM / by FBNQuest Research / Header Image Credit: Premium Times

Our chart today, drawn from the National Bureau of Statistics (NBS), shows that total power generated and transmitted by the country's power generating companies fell by c.6% to 9,078 gigawatt hour (GWh) and 8,895GWh respectively. The level of power generation is very low for an oil-producing country like Nigeria with a population size of around 200 million people. Drawing inspiration from other emerging markets, Vietnam, a country with a population size of less than half that of Nigeria, generates over 20,000 GWh.

The challenges with Nigeria's power sector are well documented. These include a flawed privatisation process that has failed to deliver the desired outcomes, lack of cost-reflective tariff and poor infrastructure.

Unlike Nigeria's power sector privatization process which was dominated mostly by local investors with little technical expertise, Vietnam's power sector reforms resulted in the commercialization and introduction of independent power producers.

Like Nigeria's situation in the 1990s, Vietnam's per generation capacity was only around 8,700 megawatts (MW) in 1990. In stark contrast to Nigeria, its generation capacity has risen to around 48,000MW.

Since 1990, there has been a strong association between the country's yearly power capacity increase of c.6% CAGR and its average annual pre-pandemic GDP growth rate of c.7%.

A key strategy used in the initial stages of the electricity expansion program was the deployment of rural electrification to commercial and productive sectors of the economy.

For instance, given the importance of rice exports to the country, the earliest electrification programmes focused on connecting rice-producing regions of the country, thereby industrialising the rice production process.

Closer to home, Cote d'Ivoire's privatisation programme, though on a smaller scale, has largely delivered the right outcomes with international companies running power generation and distribution.

As echoed by the state governors recently, more decentralisation is needed for Nigeria's power sector to move forward, with state governments playing a bigger role.