2020 budget: N127b is Grossly Inadequate for the Power Sector

2020 budget, Nigeria Power Sector

By Ikenna Omeje

In the last 59 years existence of Nigeria as an independent state, power generation, transmission, and distribution has been one of the major problems confronting her Socio-economic development, coupled with her rising population. The poor state of electricity in the country has made her a dumping ground for petrol and diesel-powered generators with their attendant consequences of high fumes emission, which experts say are unhealthy for human inhalation.

The United States Agency for International Development (USAID) in March 2019 said that Nigeria has installed capacity of 12,52 megawatts (MW). Out of this number, 10,142MW is through thermal while 2,380MW is generated through hydro. Unfortunately, the evacuation capacity of the generation companies is about 7,000 MW. What this means is that the companies cannot supply more than 7,000MW to the Transmission Company of Nigeria (TCN), which is responsible for wheeling the energy generated to the Distribution Companies (DisCos). TCN has about 8,000MW capacity, but wheels between 4,000MW and 6,000MW because of poor transmission infrastructure. On the part of the DisCos, they often collect less than 4,000MW because of poor facilities required to distribute energy efficiently.

In recent years, research has shown that there is a correlation between power generation, transmission, distribution and the Gross Domestic Product (GDP) of a country. In other words, a country that has sufficient electricity will do better economically than a country that has a deficiency in electricity like Nigeria. This points to the urgent need for aggressive funding of the power sector, which is why the proposed N127 billion for power in the 2020 budget as was presented by President Muhammad Buhari to the National Assembly recently, is nothing but a paltry sum. It’s like a drop in the ocean-going by the report of the 2010 Federal Government’s Power Road Map.

According to the 2010 Power Reform Roadmap Report, Nigerians spend over twice as much on self-generated light and power, using candles, diesel, and petrol as they do with grid-based electricity. More so, it is estimated that at a minimum 6000MW is generated using petrol and diesel generators. This mode of self-generation represents a financial albatross on Nigerians equivalent to between $6.7 and $10.47 billion compared to grid-based power.

To address the situation, the Country previously set for itself a target of generating 40,000MW within a 10-year period starting in 2010. This seemingly modest target for generating capacity alone, according to the Government’s Roadmap for Power Sector Reform will require an investment of $3.5 billion per annum over a 10-year period.

The entire value chain will require $10 billion per annum over 10-years. Comparing what was proposed for power in the 2020 budget with the target set in the 2010 Power Road Map Report, it’s clear that the Federal Government is not ready to address the issue of epileptic power supply in the country.

The 2020 budget proposal for power also shows a significant drop in allocation to the sector, when compared with that of 2016. In 2016, the Federal Government budgeted $1.4 billion for power sector capital expenditure while the total budget was about $21.3 billion.

Therefore, the yearly cost to achieve what is, in fact, a very modest goal of 40,000MW over a 10-year period equals one half of the Country’s annual budget. Additionally, owing to missed milestones and exigencies, the initial target of 40,000 MW by the year 2020 has also been revised down to 20,000MW.

Since 2015 that the All Progressives Congress (APC)- led government at the center took over the reins of power, the Federal Government has invested N900 billion in the power sector, in terms of support, according to the Vice President of Nigeria, Prof. Yemi Osinbajo.

Based on some reports, Nigeria has spent a total of $12.38 billion in the last 46 years; and between 1999 and 2019 Nigeria Spent N2 trillion. The country cannot be able to deliver affordable, reliable, efficient and sufficient energy for her population with this kind of investment in the power sector.

By the United Nations standard, a country is said to be sufficient in electricity if it provides one megawatt per one thousand people or 1,000WM for every one million people. Sadly, this is not currently the reality in Nigeria. According to 2017 data from Trading Economics, 40 percent of the country’s population do not have access to electricity. When compared to other highly populated countries in the world, the data shows only 20 percent for Brazil, less than one percent for Pakistan and 10 percent for Indonesia. It was reported that based on the total installed capacity, only 0.06MW of electricity is available for 1,000 Nigerians.

This is not to say that the Federal Government is not making effort to address the issue of erratic power supply considering the Letter of Agreement on the Nigeria Electrification Roadmap with Siemens that was signed in August this year. But truth be told, the government effort is not enough. Aggressive investment is needed in the power sector if Nigeria must meet the 2030 Sustainable Development Goals (SDGs). Affordable, reliable, efficient and sufficient electricity is key to addressing the country’s economic and social challenges, as well as issues around climate change.

It is also important to note here that the Federal Government has no excuse not to invest in the DisCos, contrary to the views of some Nigerians. The government has a 40 percent stake in these power companies, which makes it a necessity for it to invest in them.

Going forward, the National Assembly should do the needful by ensuring that a significant amount of the budget is allocated to the power sector by taking a holistic look at the budget and divert funds from other areas that are not that significant to the power sector, like part of the N4.5 billion for the repair of State House buildings, N1.5 billion for the upgrade of Presidential aircraft and over 3 billion budgeted for the transportation of the President and his Vice.

Allocating more funds to the power sector subsequently will help the President in no small measure to achieve his promise to lift 100 million Nigerians out of poverty. This is based on the fact that sufficient and affordable power means job creation, wealth creation, and economic development.

Ikenna Omeje is a journalist based in Lagos.
E-mail: ikennaomeje2014@gmail.com

Leave a Reply

Your email address will not be published. Required fields are marked *