The World Bank says addressing power sector issues offers Nigeria an opportunity to tackle longstanding challenges and give the economy a boost.
The bank said this in its Nigeria Development Update, NDU, for June 2021, a bi-annual publication of the bank on the economic outlook of Nigeria.
The publication is titled: “Resilience Through Reforms”.
According to the report, a holistic approach integrating comprehensive measures is necessary to address Nigeria’s power problems sustainably.
It recognised the fact that to address the economic challenges that arose from the oil price shock and COVID-19, the Federal Government inaugurated a N23 trillion Nigerian Economic Sustainability Plan, NESP, in July 2020.
“The NESP lays out an ambitious package of policy measures and programmes to stimulate activity and create jobs through investments in agriculture, roads, renewables and housing.
“But any economic recovery programme will be severely challenged by minimal access to electricity, an insufficient power supply and a financially unviable power sector.
“However, the focus on kick starting the economy and the general push to place it on a stronger and more sustainable recovery path, provide a new impetus to reforms in the sector.”
The bank said that increasing the capacity and reliability of the transmission network was critical to the power sector’s financial viability.
It added that insufficient investment in transmission had curtailed the network’s capacity to transport power, contributing to the fact that only 33 per cent of the installed capacity was usable.
The report also said that there was a clear need to refurbish the transmission infrastructure to enhance system stability and ensure that the grid could dispatch generation at lower cost while increasing the supply.
“At the same time, Nigeria is a critical member of the West Africa Power Pool (WAPP), the regional market inaugurated in 2018, which can significantly improve the electricity supply not just in Nigeria but throughout all of West Africa.
“By the mid-2020s, it is expected that all 14 countries in the WAPP will be interconnected, efforts are already underway to increase the capacity of the network and to reinforce it in order to increase domestic supply and accrue the benefits of regional trade.”
The bank said that because Distribution Companies, DISCOs, own and operate the Nigerian distribution network, they were central to the turnaround of sector performance.
It said that the Power Sector Recovery Programme, PSRP, of the Federal Government recognises poor revenue collection and remittances, as well as insufficient investment as factors in the inadequacy of DISCO performance.
Citing the Federal Government’s intervention, it said it recognised the critical need to improve distribution and transmission networks and provided N240 billion to improve services and resolve transmission and distribution bottlenecks.
“Programmes such as the National Mass Metering aim to increase metering significantly to help DISCOs increase their billing transparency and collection efficiency.
“Performance Improvement Plans (PIP) preparation and activation under Nigerian Electricity Regulatory Commission (NERC) guidelines will ensure that investment planning is fact based rather than speculative.
“Timely adherence to PIPs will improve the technical and financial performance, and the governance of DISCOs, reducing Aggregate Technical, Commercial and Collection (ATC&C) losses, increasing collection rates, and connecting more customers to the grid.
“This will eventually enable the sector to end Federal Government assistance and fill its investment needs by accessing private financing.”
The report also said that increasing operational efficiency and improving infrastructure were essential for a transition to clean energy as the energy sector was the largest contributor to Nigeria’s Greenhouse Gas, GHG, emissions.
It, however, said that the country had committed to cutting its GHG emissions by 45 per cent by 2030, primarily from the energy sector.
It added that 22 per cent of the targeted emissions could be met by replacing the more than 20GW of gasoline-based generator capacity that Nigerians use to supplement grid-based electricity.
The bank recommended that in the short to medium term, distributed solar-based solutions for homes and rooftops and mini grids could be used to replace the generator sets using innovative business models and financing that meets the needs of end-users, developers and local finance institutions.
In the long run, however, grid-connected solar capacity was a critical component of the least-cost generation path that could keep the sector in line with the Nationally Determined Contribution targets.