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Nigeria Power Report Q4 2011
Business Monitor International, Oct 2011, Pages: 44
BMI View: Plenty of work is needed if Nigeria is to extend market coverage and boost capacity in order to ensure the absence of power shortages. There are many opportunities in renewables, but investment prospects are poor. The promise of nuclear over the long term is likely to be unfulfilled, so Nigeria will likely remain over-dependent on oil, gas and hydro resources. Protecting oil and gas export volumes at the same time as expanding the generating portfolio is a major challenge.
The government in June 2010 revealed that the country will need to spend about US$6bn annually on electricity generation and distribution across the country to meet its target of becoming one of the 20 most industrialised nations in the world by 2020.
During the period 2011-2015, Nigeria's overall power generation is expected to increase by an annual average of 7.56%, reaching 33.0TWh. Driving this growth is an annual 9.0% gain in gas-fired and a 6.9% rise in hydroelectric generation, offsetting an annual decrease of almost 1.0% for oil-based electricity supply.
Over dependence on gas-fired power generation has resulted in supply disruptions during periods of gas shortage. The low level of gas pricing means that producers favour exports, while cheap electricity makes investment in new capacity unattractive. There is a belated focus on solar, wind, geothermal and other forms of renewable supply to help with medium-term supply expansion.
Nigeria has abundant renewable energy resources, led by solar energy, biomass, wind and hydro-power, with potential existing for geothermal and tidal power. The current state of renewable power generation use is very low. There is a lack of appropriate policy, and regulatory and institutional framework to stimulate demand and attract investors.
Following an increase in 2011 real GDP of an estimated 7.8%, BMI forecasts average annual growth of 7.4% between 2011 and 2020. The population is expected to rise from the current level of 162mn to 179mn during the period 2011-2020, and net power consumption looks set to increase from 23.5TWh to 32.0TWh by 2015, rising further to 45.4TWh by 2020.
During the period 2011-2015, the average annual growth rate for electricity demand is forecast at 8.05%, but slowing later in the decade to an average 7.24% in 2016-2020.
Thanks partly to the forecast rise in net generation, growth of which barely matches the underlying demand trend, Nigeria is faced with a growing power supply shortfall. A gradual decline in the percentage of transmission and distribution losses from around 9% will help balance the market.
The theoretical net import requirement by 2015 is put at 1.9TWh, which could rise to more than 3.0TWh by 2020.
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