by Dino Mahtani

20-03-07

Across Lagos, Nigeria’s commercial capital, businesses and residential areas are groaning with the heavy thud of back-up power generators.
Africa’s most populous country is facing a power generation crisis, imposing huge costs on businesses and crippling the real economy. Power generation has fallen to as low as 800 MW over the past few weeks, way below its capacity of about 4,000 MW.

Since January, maintenance problems have reduced gas supply to power turbines, and militia in the oil rich delta have cut an important gas feed. In eight years of civilian rule, the government of president Olusegun Obasanjo has failed to meet its production target of 10,000 MW despite elaborate privatisation plans to revitalise the sector. Many businesses now are spending almost as much on diesel for back-up generators as they are on their ground rent.
“It has never been this bad. Everybody was used to using generators anyway, but now they have to be left on pretty much all the time,” says one banker.

In January Joseph Makoju, a presidential adviser on electricity, estimated generation capacity in Nigeria was only enough to light just one 30-W light bulb for each of Nigeria’s 140 mm people. Having set the target of generating 10,000 MW by the end of this year, the government had planned to then scale up to 16,000 MW by 2010.
Some additional generating capacity is being built by the government but most of the growth is set to come through new independent power plants.

Schedules for the completion of projects are already slipping. Government officials say a significant chunk of lost power production will be restored after repairs to the gas supply are done. But many businesses are planning for months of disruption.
Private power companies are reluctant to invest heavily as long as violence in the oil-rich Niger Delta continues. Many companies say it is difficult for them to put valuations on generation and distribution assets in the delta that are up for privatisation, because of the security fears.