INEFFICIENT POWER SUPPLY IN NIGERIA

2.0 Literature Review

This chapter introduces basic concepts and topics related to the Power outage in Nigeria, Basic
issues will be discussed such as how to eradicate power outage in Nigeria and the cost of power
outages to business sector of the Nigerian economy in order for communication industries to carry
out normal operations without power outage. One strong outcome of the study is that the poor
state of electricity supply in Nigeria has imposed significant costs on the business sector.

2.1 Electrical Power Outage in Nigeria

Generally, a power outage can be identified as a power cut, power failure or blackout. This can be
addressed as loss of electricity power to a specific area. Nevertheless, there are different causes of
power failure in electricity which can easily cause damages to human and business operations.

It is fairly settled in the literature that infrastructure plays a critical and positive role in economic
development. Infrastructure interacts with the economy through multiple and complex processes. It
represents an intermediate input to production, and thus changes in infrastructure quality and
quantity affect the profitability of production, and invariably the levels of income, output and
employment. Moreover, infrastructure services raise the productivity of other factors of production
(Kessides, 1993).

Currently in Nigeria, lack of electricity supply is one of major infrastructure problem affecting the
business sector. The typical Nigerian firm experiences power failure or voltage fluctuations about
seven times per week, each lasting for about two hours, without the benefit of prior warning which
may likely cause damages such as spoiled materials, lost output, damaged electronic equipment,
restarting cost operations and distraction of business operations(Adenikinju, 2005, p.3).

In Nigeria, the National Electric Power Authority (NEPA) now Power Holding Company of Nigeria
(PHCN) is responsible for power supply in Nigeria. However, the failure of NEPA to provide adequate
and reliable electricity to consumers despite billions of Naira of investment expenditure has
generated a confidence crisis in the industry. Public confidence in NEPA’s ability to supply
uninterrupted and stable electric power is so low that consumers have coined a term for the
organization’s acronym NEPA as “Never Expect Power Always”.

The inefficiency of NEPA imposes a huge cost on the economy. In 1990, the World

Bank estimated the economic loss to the country from NEPA’s inefficiency, at about N1 billion
Nigeria Naira (Adenikinju 2005, p.3).

Power failure in Nigeria is a debilitating problem that needs be addressed. The envisioned growth of
the economy cannot be achieved without improved electricity supplies, and there are crippling
multiplier effects associated with thousands of small businesses throughout the country not having
access to uninterrupted power supply to run their flour mills, printing presses, restaurants, cyber
cafes and clinics. Putting any one of these businesses out of work at any given point in time, due to
power failure, has a direct impact on the growth and expansion of the business, which in turn feeds
unemployment, keeps wages low and negatively impacts workers’ ability to provide financial
support to their families. No nation can achieve economic development and industrialization
without adequate and regular power supply. Nigeria has what it takes and this government must
raise to its responsibilities, as very clearly echoed in a statement by the US Secretary of State, Hillary
Clinton (Nasirschronicles, 2009)

Figure 1: installation of a power transformer (courtesy 234next image)

In Nigeria the story is the same everywhere, whereby those who can afford to rely on generator sets
to keep businesses and establishments running in the West African country.

Power failure under PHCN is more than what it used to be under NEPA. Now it is total darkness. This
is affecting everybody's business (Ipsnews, 2005).

Magnus Abbe states that trying to get around the acute power shortage, some state governments
have resorted to establishing Independent Power Production (IPP) companies to boost electricity
production. The Lagos State government in 1999 set up an IPP project that is presently producing 40
MW. Between 1999 and 2000, the Rivers State government in the Niger Delta region started the
Omoku Power Station as part of the IPP Gas to Power project of the state.

The project which uses gas from the nearby AGIP oil well (where gas is still being flared) is expected
to generate 400 MW. When completed, it is expected to satisfy the power drought in the entire
state. (Ipsnews, 2005).

According to the former President of Nigeria Olusegun Obasanjo states that the plants are part of
the government's strategy to raise the country's electricity generation capacity from the current low
of 3,400 MW to 10,000 MW by 2007. Nigeria's hydro and thermal power generating stations have an
installed capacity of 5,237.6 MW, but due to lack of maintenance and corruption, twin ills of most
public service utilities, which are operating below the installed capacity.

The private sector has a pivotal role to play in meeting the power requirement for the development
of the country. A suitable framework is required to be put in place to facilitate the private sector
involvement in this highly capital intensive power and gas sector (Ipsnews, 2005).

According to a new power generation expansion plan programme released early this month and
made available to IPS, electricity generation by PHCN is projected to hit 15,853 MW by 2010. PHCN,
according to the document, plans to achieve the new generation output by building up its capacity
steadily over the next five years, through the total resuscitation of all existing power stations, and
contributions from Independent Power Producers (IPPs).
Nigerians hope to achieve this based on a strong conviction that all power plants are currently
undergoing repairs and will be brought on stream by 2010. Nigerian are also very confident that by
end of the 2010, the IPPs, ongoing Federal Government power projects, the proposed Niger Delta
power stations and the proposed Joint Venture Independent Power Projects (JVIPPs) with oil and gas
firms and other IPPs will come on stream.

Some existing power stations in Nigeria are expected to carry out installation in some states which
are: Egbin Thermal Station, Lagos (1,320 MW); Afam Thermal, Rivers State (969 MW); Sapele
Thermal, Delta State (1,020 MW); Ijora Thermal plant, Lagos (40 MW); Kainji Hydro Station, Niger
State (760 MW); Jebba Hydro Station, Niger State (578.4 MW) and Shiroro Hydro, Niger State (600
MW).

According to the projections, IPPs are expected to contribute 750 MW by 2010 while the proposed
JVIPPs and other IPPs are expected to generate 2,790 MW and 1,365 MW respectively into the
national grid. Before the end of 2010, officials are optimistic of changing forever the bleak electricity
situation in Nigeria (Ipsnews, 2005).

Furthermore, without adequate power supply Nigeria cannot achieve its potential to help put things
in comparative perspective, Nigeria’s power demand is estimated at about 15,000 MW as at
September 2009, peak generation supplied by PHCN was 2,443 MW – less than 17% of the electricity
needed, All the claims of generating “over 5,000MW” recently by the administration’s officials are of
course the usual slogans, and a false one at that! By way of comparison South Africa has 40,000 MW
of electricity for a population of 50 million people; Brazil has 100,000 MW for a population of 192
million people; the US has 700,000 MW for a population of 308 million people; while Nigeria with a
population of over 150 million people only generates 2,443 MW at peak! (Nasirschronicles, 2009)

Currently in Nigeria, government regulations in the supply and trading of infrastructural services
prevent the possibilities of three other mechanisms: joint production, satellite behaviour or shared
production. The unreliability of NEPA has led most manufacturers to incur extra costs for private
alternatives. The generator market is very vibrant. Most small gas-powered electric generating sets
in use are Japanese products (e.g., Honda, Suzuki, and Yamaha). Most of these products are
imported from Japan, while some are assembled in Nigeria by Holt Engineering Limited, which the
company is specialised in assembling Yamaha generators. Moreover, many small-scale industrialists
now prefer locally fabricated generating sets, which are considerably cheaper than the imported
brand names (Adenikinju 2005, p.20).

According to the World Bank, South Africa generates 40,000 MW of electricity for a population of
nearly 50 million, while Nigeria with a population of over 150 million only generates 3,400 MW at
peak. This translates to very disappointing levels of electricity consumption per capita, thereby
leaving some industries to perform at epileptic levels, goods and services to be sold at prices that
automatically adjust, during power outages, to account for the expensive cost of production via
generating sets and a populace that is unable to take advantage of the latest advances in technology
and appliances. All this puts a painful strain on the already difficult situation of Nigerian citizens who
must in addition to be paying higher prices for goods and services, also invest hard earned Naira to
buy, maintain and fuel power generating sets for the their homes (Nasir El-Rufai 2010)
2.2 Business perspective

There are some huge businesses in Nigeria that find it difficult to carry out daily operations, A
business cannot be successful if there is power interruption, every business organisation want to be
successful in business, but on the other hand it is a shame to Nigerian government for not providing
the right infrastructural facilities for the society. In general, there are arguments to proffer for
massive investments on the power supply in Nigeria that for purposes of effective communication of
the depths of sufferings and hardships faced by the people, this section will highlight a few points
(PMWorldToday 2010) these include the following:

The Impact on large companies: Currently in Nigeria some manufacturers associations and other
professional bodies have finding it very difficult to cope with the inadequate power supply in the
society, some companies spend large resources every year to provide large generators as an
alternatives to the poor electricity supply. With the use of a stand by generator business
organisation can only carry out daily activities. Generators are design to support electricity failure for
some duration, Due to inadequate power supply, some companies does not rely on “NEPA” the best
means is to install a power stand by generator that can provide electricity supply without
interruption.

Figure 2: Inefficient power supply in Nigeria (courtesy 234next image)

Chima Okereke, states that many factories have had to shut down over the lack of power supply, it is
alleged that over 100 companies including multi-nationals across the country have closed down in
recent times. Textile/garment, chemical/leather are some of the affected sectors. Others such as
those in the cement industry are unable to operate at full capacity. Both situations result in loss of
jobs and increase in levels of unemployed.

Suggestions and how to eradicate power outage in Nigeria

This part critically analyses the solution to the power outage in Nigeria for business organisation and
the society to achieve stable power supply.

Over the years, Nigerians has been lacking electrical power supply which causes huge damage to the
society and business organisation presently. Some suggestions have been made over the years but
due to the corruption in Nigeria government the motion has not been moved on. Nevertheless,
there are positive means of solving this problem in Nigeria.

According to the Ambassador of the Islamic Republic of Iran to Nigeria, Khosrow Rezazadeh, which
have made a suggestion on how Nigeria would solve the problem of inadequate power supply,
“Rezazadeh” quotes that a nuclear power plant was needed so as to enable Nigeria put an end to its
epileptic power supply, also stated that Iran has only 3.5 percent of nuclear enrichment and it has
become necessary to increase it in order to meet up with medical and industrial purposes (Allafrica
2010).

Inadequate power supply is not easy to resolve but one of the means to resolve this issue is by
carrying out different observation by people and also comparing other countries that had similar
issue. Furthermore, Professor Tukur Saad who is the vice chancellor of the Federal University of
Technology, Minna, states Nigeria must embark upon an extensive nuclear power generation project
if it must overcome the problem of erratic power supply, because the world is moving towards
nuclear power generation and it is the most reliable way of providing stable electricity supply
(Allafrica, 2007).

In conclusion, over the years, all efforts at resolving Nigeria’s power problems have met with
spectacular failure. Huge amounts spent on the sector seem to go down some bottomless drain as
poor electric power generation and supply remain the bane of the manufacturing sector and a drain
on resources, many companies, unable to cope with the high cost of doing business in Nigeria, which
lead to have relocated to neighbouring nations, while others have simply shut down, driving more
people into the labour market. Presently, no one has yet quantified the damage to health and to the
environment by the millions of generators that threaten to overwhelm the country with noise and
fumes.

It’s mostly about corruption. The failure of Nigeria to generate enough power to meet even the
modest target of 6000 megawatts that the government has set for itself by December this year is
largely due to corruption. However, apart from fraud and corruption in the country, there is the
absence of a creative way of solving Nigeria electricity power failure; one solution would require the
exploitation of massive deposit of coal in Nigeria, This has succeeded in solving the power problems
in many countries at what amounts to a cheaper rate, at least in the long run. Nigeria has a coal
reserve of some 2.7 million tonnes, which is expected to supply between 10,000-15000 megawatts
of electricity. This rich resource has been largely ignored by government’s overtime. In the same
manner, uranium deposits, confirmed in six states of the federation and used by more advanced
countries to produce electricity, have not been exploited by the Nigerian government (234next
2009)

Finally, the issue of Nigeria inadequate power supply could be controlled by the government and not
private sectors, on the other hand if the government carry out some of these suggestion it would be
a great benefit to Nigerians.