3. CONTENT
• INTRODUCTION
• ASSESSMENT AND DIAGNOSTICS OF NIGERIA’S
POWER SECTOR
• FINANCING STRATEGY FOR DEVELOPING NIGERIA’S
POWER SECTOR.
• MECHANISMS FOR MONITORING, REVIEW AND
ACCOUNTABILITY
• GOVERNANCE AND COORDINATION FRAMEWORKS.
• CLOSURE
4. INTRODUCTION
Over the last decade, Nigeria has
been one of the shining stars in
African economy, given its status as
one of the preferred destinations
for global investments.
5. INTRODUCTION
However, an African progress
report states that more than
90million Nigerians lack access to
electricity: 17million in urban
centres and 73 million in rural
areas.
6. INTRODUCTION
This presentation is an attempt to
provide a national financing
strategy for the development of
power sector in Nigeria.
7. ASSESSMENT AND DIAGNOSTICS
According to the inter-agency task force on
financing for development, assessment and
diagnostics is the first of four building blocks.
For this presentation, this would comprise of:
1. Financing needs of Nigeria’s power sector.
2. Financing Landscape in Nigeria
3. Power sector risk assessment.
4. Policy and institutional binding constraints.
8. ASSESSMENT AND DIAGNOSTICS –
FINANCING NEEDS
• Current power demand in Nigeria is estimated
at 17.520GW including latent and suppressed
demand
• 60-70% of 200million Nigerians live without
regular access to power.
• Experts say Nigeria losses ₦126BIlion annually
due to power outage
9. ASSESSMENT AND DIAGNOSTICS –
FINANCING NEEDS
• Nigeria has a per capita power consumption
of only 151 kWh per year, which is amongst the
lower end of the spectrum in Africa.
10. ASSESSMENT AND DIAGNOSTICS –
FINANCING NEEDS
• Nigeria is endowed with large oil, gas, hydro
and solar resource, and it already has the
potential to generate 12,522 megawatts (MW)
of electric power from existing plants, but most
days is only able to generate around 4,000 MW,
which is insufficient.
11. ASSESSMENT AND DIAGNOSTICS –
FINANCING NEEDS
MIXTURE OF NIGERIA’S POWER GENERATION SOURCES
Gas (71%)
oil (11%)
Hydropower (17.8%)
non-hydropower renewable source (0.2%)
12. ASSESSMENT AND DIAGNOSTICS –
FINANCING NEEDS
• The goal is to increase Nigeria’s annual per
capita power consumption by 6.5 times in ten
years, from 151 kWh in 2015 to 982 kWh per
capita by 2025.
• This is an additional uplift of 125% above the
projected consumption of 433 kWh per capita
in 2025.
13. ASSESSMENT AND DIAGNOSTICS –
FINANCING NEEDS
• This can be achieved by driving improvements
across a combination of key variables:
• Installed capacity to 45GW
• Utilisation factor of 55%
• Cutting down transmission and distribution
losses to 13%
• 10% contribution of renewable energy to
Nigeria's total energy consumption by 2025.
14. ASSESSMENT AND DIAGNOSTICS –
FINANCING NEEDS
• It is estimated that at least ₦3.5 billion annual
investment in power generating capacity will
be needed and large investment in supply
chain of transmission and distribution
networks.
16. ASSESSMENT AND DIAGNOSTICS –
RISKS ASSESSMENTInstalled capacity, supply and losses across the power value chain in
Nigeria.
IC = Installed capacity
GC= Generating capacity
TR= Transmission
DIS= Distribution
17. ASSESSMENT AND DIAGNOSTICS –
RISK ASSESSMENT
• These substantial losses as shown in the
preceding slide across the value chain can be
attributed to two key causes – technology
limitations and out-dated infrastructure.
• Supply disruptions due to violence are also
risks observed across the power value chain in
Nigeria.
18. ASSESSMENT AND DIAGNOSTICS –
RISK ASSESSMENT
• Theft and corruption are other important
concerns in the power sector – particularly for
the distribution segment.
• Policy inconsistency by Nigerian government.
• The cash flow problem due to customers
refusal to pay for electricity used.
19. FINANCING STRATEGY-
PUBLIC FINANCE
• Nigeria has great potential in raising her
domestic revenue by increasing tax.
• This because Tax to GDP ratio in Nigeria has
been very low.
• It increased from about 1.5% in 2013 to 6.1%
in 2017, which still falls below the bench mark
of 15% encouraged by World Bank Group
20. FINANCING STRATEGY-
PUBLIC FINANCE
• Nigeria should raise her debt to GDP from 6%
to about 10% by increasing VAT and cutting
down tax evasion and avoidance in Nigeria.
• Carbon pricing can mobilize substantial
amounts of new revenue. If carbon pricing
were integrated into existing fuel tax regimes
it will encourage investment in renewable
power (e.g. solar power)
21. FINANCING STRATEGY-
PUBLIC FINANCE
• A proper synthesis of these policies will
increase government revenue by at least 40%.
• Public expenditure also need to be properly
allocated. It is not enough to generate
revenue, it also has to be spent well. Thus, has
to be synthesised with MTEF.
22. FINANCING STRATEGY-
PRIVATE FINANCE
Nigeria can mobilise private finance for the
development of the power sector by:
• Deregularisation: oil marketers and investor
are reluctant to invest in facilities for gas
production and processing because the gas
industry remains highly regulated. Under the
current regime, gas producers have quotas to
be supplied for domestic consumption and
this is usually at a fixed price.
23. FINANCING STRATEGY-
PRIVATE FINANCE
• Restructuring of Tariff Policies. It would be
difficult to recoup investment with the
present tariff system. The current tariff is
below the international price and this has
failed to incentivise needed foreign direct
investment (FDI).
24. FINANCING STRATEGY-
PRIVATE FINANCE
• Reducing Risk by working with MIGA. By
linking FDI with MIGA products will crowd-in
private investment.
• For instance, MIGA’s War, Terrorism, and Civil
Disturbance coverage will help to reduce the
risk as a result of vandalism in power supply
channels.
25. FINANCING STRATEGY-
PRIVATE FINANCE
• Government ministries, departments,
agencies and military facilities owe about N93
billion to DisCos and have mostly failed to pay
up.
• Thus, MIGA’s protection against Non-
Honouring of Financial Obligation will help to
encourage more private investment in
Nigeria’s power sector.
26. MONITORING, REVIEW AND
ACCOUNTABILITY
• This has always been a major draw-back in
Nigeria’s development plan. Thus, for the
achievement of the power development goals,
Nigeria must:
1. Track changes in different financial flows
highlighted in the previous slides.
2. Integrate this financial strategy into her
budgetary performance evaluation system.
27. ESTABLISHING GOVERNANCE AND
COORDINATION MECHANISM
• Nigeria needs to set up n institutional
committee of stakeholders in the public and
private sector to undertake this task.
• Nigeria also needs to create a platform for
public dialogue concerning power sector
development policy framework.
28. CONCLUSION
• Despite the setbacks experienced in Nigeria’s
power sector, this hypothetical financial
strategy can stir Nigeria in the right direction
if properly implemented.
