Atlantic Post

ABUJA, Nigeria — In a revelation that underscores the monumental challenges facing Nigeria’s power sector, the Federal Government disclosed that Nigerians spent a staggering N16.5 trillion on diesel, petrol, and generators to secure electricity in 2023. This alarming expenditure dwarfs the N1 trillion revenue generated by the formal power sector, highlighting a severe imbalance and inefficiency in the nation’s energy supply system.

The Cost of Self-Generation

The Minister of Power, Adebayo Adelabu, made this announcement at the ongoing 2024 Nigeria Oil and Gas Conference in Abuja. He laid bare the stark contrast between the funds expended on self-generation and the revenue of the formal power sector.

“If you know how much our people spend buying diesel, petrol, generators, and servicing them in a year; the last study we had in 2023, a total of N16.5tn was spent on this in self (power) generation,” Adelabu stated. “Even a number of the industries are off the grid. They now have their captive power between their environments with gas-powered generators.”

A Nation Off the Grid

Adelabu’s comments paint a dire picture of Nigeria’s energy landscape. Despite the presence of a formal power sector, many industries and households have resorted to self-generation due to unreliable grid power. This trend not only highlights the inefficiencies in the national grid but also points to the broader economic implications of such dependence on alternative power sources.

The Minister revealed that the formal power sector’s revenue stood at a mere N1 trillion in 2023, covering the generation, transmission, and distribution companies. In stark contrast, the informal sector’s spending on generators, diesel, and petrol approached N20 trillion. This figure underscores the vast sums being diverted away from the formal sector, which could otherwise be used to enhance grid reliability and reduce overall costs.

The Economic Burden

The implications of this spending are profound. Households and businesses are bearing an immense financial burden to secure electricity, a basic necessity. The high cost of self-generation, especially with diesel and petrol-powered generators, is unsustainable and detrimental to economic growth. Adelabu noted, “For those that are using petrol generators, it is about N450 per kilowatt-hour. And for those using diesel to power their generators, it is upward of N900. So it is still the cheapest, most efficient, and the least cost for our productive activities.”

Band A Customers: A Glimmer of Hope

There is, however, a glimmer of hope for some electricity consumers. According to Adelabu, customers on the Band A category now receive up to 24 hours of power supply. This development demonstrates the potential for reliable grid power, provided there is adequate investment and management.

The Minister emphasized the cost-efficiency of grid power compared to self-generation. “As at the last study, Band A customers are enjoying uninterrupted supply and pay N206 per kilowatt-hour,” he explained. In comparison, captive power using gas costs about N290/kWh, petrol generators cost N450/kWh, and diesel generators cost upwards of N900/kWh.

The Path to Trust and Investment

Rebuilding trust in the national grid is a crucial step towards reducing the heavy reliance on self-generation. Adelabu acknowledged the importance of earning consumer trust, stating, “That is what we are working on to ensure that that trust is back, that that confidence is back. And all the manufacturing companies that are doing self-generation can cut it off and reconnect to the national grid because it is the cheapest source.”

The Role of Gas in Nigeria’s Energy Future

Adelabu highlighted the significant role of gas in Nigeria’s energy strategy, particularly in achieving the Nigeria Energy Transition Plan. “I am here to advocate for increased investment in Nigeria’s gas development to unlock the full potential of our power sector and achieve the Nigeria Energy Transition Plan. The domestic gas-power market accounts for 60 percent (approx. 700mmscf daily) of the total domestic gas supply,” he said.

The Vision 30:30 Target

The Nigeria Energy Transition Plan aims to achieve 30 gigawatts (GW) by 2030, with a projected energy mix of 70 percent thermal (predominantly gas) and 30 percent renewable sources. To meet this target, the power sector will need significantly more gas than it currently uses. Adelabu stated, “The power sector would require over five times what the industry currently utilizes from the domestic gas market to achieve our 70 percent thermal energy target with gas-powered generation.”

Call for Investment

The Minister called on investors to consider opportunities in Nigeria’s gas sector, particularly in exploiting the country’s abundant unexploited non-associated gas reserves. He emphasized the Federal Government’s efforts to ensure a viable and bankable power sector, which includes introducing cost-reflective tariffs and resolving legacy debts to generation and gas companies.

Conclusion

The staggering N16 trillion expenditure on self-generation in 2023 reveals the immense challenges and inefficiencies within Nigeria’s power sector. The contrast between this figure and the formal sector’s revenue of N1 trillion underscores the urgent need for reform and investment.

As Nigeria aims to transition towards a more reliable and cost-effective power supply, the role of gas and the potential for increased investment in the sector are critical.

The Federal Government’s commitment to addressing these challenges and creating a viable power sector is a step in the right direction, but the path forward requires sustained effort, trust-building, and significant investment. The eyes of the nation and the world are now on Nigeria, watching to see how it navigates this complex and critical journey towards energy stability and economic growth.