Trade & Investment
With a population of over 200 million people and a population growth rate of 2.7 percent per annum, the demand for power in Nigeria can only be expected to rise. An estimated 55 percent of Nigeria’s population has no access to grid connected electricity. Presently, Nigeria has an installed electricity generation capacity of 12,522 megawatts, of which 10,592 megawatts is gas-fired and 1,930 megawatts is from hydro generated. However, the maximum peak generation has been about 5,074 megawatts so far. Nigerians self-generate a significant portion of their electricity, at a cost that is twice more than the cost of grid-based power. The Nigerian power sector remains in need of significant investment as its utility-scale electricity generation capacity continues to fall short of meeting domestic demands. In an effort to tackle this problem, in 2005, the Nigerian government privatized generation and distribution phases of the power value chain, retaining just a minority stake. In view of these developments, Nigeria’s current administration has exhibited a strong will to reform the power sector, with the Minister for Power, indicating that the government is looking to partner with private parties to facilitate investment in the power sector.
There are also opportunities for investment in off-grid power solutions or ‘mini-grids’ which typically provide for smaller communities; such as rural areas, industrial clusters and residential estates. It is estimated that about 42 percent of Nigerian businesses generate their own power supply to augment the national grid supply. With regard to power distribution, given the fact that electricity consumption should be four to five times the amount it is today, Nigeria also contains a bed of opportunities in the distribution phase of the power value chain. The federal government has no direct equity interest in Nigeria’s distribution companies, popularly known as ‘DisCos’ — there is a ready market for Nigerians who are willing to get on-grid and pay for their electricity consumption. There are also opportunities in the manufacturing of power sector tools and equipment. Most of the equipment is currently being imported, which therein presents opportunities in import substitution. Given the large population of Nigeria coupled with its Savanna climate, a massive investment in solar power and renewable energy will automatically attract favourable dividends to investors.
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