Lagos - Nigeria is seeking $5.2 billion from the World Bank to expand
electricity generation and help the economy recover from its first contraction
in 25 years.
The bank’s private-sector
lending arm, the International Finance Corporation, may invest about $1.3
billion in power projects and electricity distribution companies. Its
political-risk insurer, the Multilateral Investment Guarantee Agency, could
provide equity and debt of $1.4 billion for gas and solar power programs,
according to Power, Works and Housing Minister Babatunde Fashola.
That’s in addition to
loans of $2.5 billion Nigeria is seeking from the lender to help improve the
distribution of power, expand transmission-capacity and increase access to electricity
in rural areas, Fashola, 53, said.
“Disbursements with the
World Bank are being worked out to start from around June, July this year,”
Fashola said in an interview from his office in the capital, Abuja on May 4.
Nigeria is asking the
lender to bring forward the timetables “because next year we want to see
results,” he said.
Africa’s most populous
nation produces about 4 000 megawatts of power compared with an average peak
generation of about 35 000 megawatts in South Africa, with a population that’s less
than a third of the size of Nigeria’s 180 million people.
The lack of supply
increases production costs for many businesses forced to provide their own
electricity, mostly using diesel-run generators. The Nigerian economy shrank
1.5 percent last year, the first full-year contraction since 1991 because of a
fall in oil prices and production and dollar shortages. Gross domestic product
could expand 0.8 percent this year and 1.9 percent in 2018, according to the
International Monetary Fund.
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Fashola, who presided over
several infrastructure projects in Nigeria’s commercial hub of Lagos as its
governor, was appointed last year by Buhari to boost the power industry, one of
the biggest impediments to growth in the country.
Power generation and
distribution companies are facing cash-flow difficulties, partly because of
foreign-exchange losses, outages due to technical faults and the theft of electricity
by some users, according to Fashola. In 2016, power distributors paid only 27
percent of the 331 billion naira ($1 billion) that generating companies
invoiced, according to the National Bureau of Statistics.
Cost-reflective tariffs
Buhari last month
introduced an economic plan that proposes cost-reflective electricity tariffs,
partly to attract investment in the sector and help the economy recover. Power distributors
should fix meters to measure what they receive from generators and what
they sell to users, Fashola said. The
Nigerian Electricity Regulatory Commission should simplify the price-setting
formula and work with the central bank to protect the tariff from exchange-rate
fluctuations, he said.
Nigeria’s currency lost
about a third of its value against the greenback after the central bank removed
a 197-199 naira to dollar peg in June. The regulator continued to intervene in
the market to keep the naira at about 315 per dollar, which helped to create a
thriving black market where foreign currency cost about 30 percent more.
Electricity tariffs were fixed before the naira was allowed to devalue.
“I don’t think we will
have any successful tariff regime where you have a very fluid
exchange rate,” Fashola said.
Depreciation of the naira
“wiped out any or most of the gains that the new tariff should have
conferred.”
The national grid can currently
only transmit about 6 200 megawatts, with projects in the pipeline to
expand that capacity to 10 000 megawatts by 2019, Fashola said.
The World Bank said in a
statement last month Nigeria’s power sector is characterised by poor service
and lack of liquidity which causes macroeconomic imbalances and a binding constraint
to economic recovery. The lender will support the government’s power-sector
recovery plan, according to the statement.