ESI-Africa, in conversation with Ade Yesufu, Business Development Director at Spintelligent for the African market, who travelled to Nigeria in July, to explore the latest developments in the West African country’s power sector.
- Since the conclusion of the 2015 Presidential elections, two licenses to decentralise the transmission arm of the sector have come into effect.
- Challenges that are a concern in the energy sector are centred on security of fuel and electricity tariffs.
What news of significance have you brought back from your recent trip to Nigeria?
My travels lead me to the offices of the state-owned Transmission Company of Nigeria (TCN). Since the conclusion of the 2015 Presidential elections two licenses to decentralise the transmission arm of the sector came into effect.
TCN has been sub-divided into two divisions, namely – the Transmission Service Provider (TSP) and the Independent System Operator (ISO). This has come about to promote an efficient and effective interface between privately owned generation companies and the privately owned distribution companies to ensure the efficient transfer of power between these two sectors.
In turn, the ISO has two separate divisions, that being a department for: System Operators (SO) and a separate one for Market Operators (MO). The SO, when operational, will be tasked with operating the system efficiently and dispatching generation at the lowest least cost.
The MO on the other hand, will be in charge of managing the market according to the market rules. The market rules are designed by various market participants and stakeholders, including Generation companies (Gencos), Distribution companies (Discos) and anybody else with a vested interest in the energy market place.
Overall, my interaction with people during my visit has reaffirmed that the most established power companies in Nigeria are all quite optimistic about the future of the electricity industry in Nigeria hence they will continue to invest in the West African power sector.
What were the concerns and challenges of the people with whom you met?
In the first quarter of the year, the Nigerian presidential elections was the sole focus of those operating in the country.
With the potential of political instability now put to rest, investors have restored their confidence in the Nigerian energy sector, where they feel assured that their investments are secure.
Challenges that are a concern are centred on security of fuel and electricity tariffs. Despite owning the ninth largest gas reserve in the world, the shortfall and intermittent nature of gas supply to power plants is a major threat to achieving increased generation capacity.
Nigeria has a history of power challenges due to poor gas infrastructure, and energy companies are reluctant to incur large investment costs unless a cost-reflective tariff is instated.
However, President Buhari has expressed his commitment to put strategies in place that will eliminate corruption and insecurity, which according to him would improve the economic base of the nation.
Since the unbundling of the sector, the power supply has not improved significantly and challenges still exist. The average Nigerian has not felt the impact of the privatisation process despite the lowering of the electricity tariffs.
This can be attributed to aging infrastructure, vandalism and theft- the lack of skilled manpower, obsolete transmission equipment and lengthy bureaucratic processes.
At the time of publishing the interview, Yusufu added that the main concern investors now had was the delay in the formation of the cabinet by Buhari’s administration.
Industrialist and business operators are optimistic that the delay will augur well for the economy. According to them it will ensure that only “technocrats who are square pegs in round holes” make the list, thus boosting investor’ confidence.
What was your experience with the country’s electricity supply during your stay?
During my two week visit there were numerous black outs, but most businesses and consumers are prepared for these and have back-up generators. Communication about black outs, unlike South Africa’s power utility Eskom, is non-existent. There is no communication regarding when a power outage will occur and for how long it will last.
With Buhari in the presidential seat, investors and government are confident that the president will enforce discipline in publicly-run institutions across the nation as part of his mission is to create a transparent government with a free flow of communication from government through to the end power consumer.
What are the opportunities for entrants wanting to explore the power sector?
With a market GDP growing at 7% per annum without power, investors see a large potential and a gap in the market for new energy investment.
The opportunity for entrants lies in:
- The security of pipelines and pipeline refurbishments
- Skills and training in all energy fields (from base-loads to renewables)
- The establishment of local manufacturing facilities
With your knowledge and experience, can you provide us with your top prediction for the Nigerian energy sector?
I see a surge of investors trooping to Nigeria due to their renewed investor confidence of the sector and government determination in tackling the power crisis in the country.
ESI Africa is the official media partner of the West African Power Industry Conference (WAPIC), being held in Lagos from the 24-25 November 2015. We look forward to travelling there and meeting with the industry’s movers and shakers who are driving the expansion of a reliable power supply in the West African region.