Daily life in Lagos – and for that matter, I guess in most of Nigeria and Africa – offers certain small excitements. One of them is the blackout excitement: some time(s) during the day, the light and/or the power goes off. Nobody gets disturbed; they just go about their business. There are generators both at school and at home, which means that typically the blackout lasts just a few minutes. There was no light when I woke up yesterday before sunrise. This time it was the generator that was damaged. I still managed to take a shower and get dressed with the assistance of some far away street lighting that came through the window, and the little light my tablet projected. This is just a small example of power problems in Nigeria.
Power supply is a critical obstacle to the economic development of the country. So as to ensure a regular supply, companies need to install their own generators. I’ve read that the operating cost of these generators is six times the tariff per kilowatt hour on the public grid, adding an extra 40% to the cost of doing business. I don’t know how accurate these estimates are, but in any case they indicate a substantial extra cost!
Fortunately, the situation seems to be changing for the good:
- The industry is undergoing a process of privatization likely to bring efficiency into the system. Both generation and distribution are being privatized. There’s a need, however, to invest in the supply of natural gas for power generation.
- Companies such as General Electric are committed to invest in power generation. A few weeks ago, GE launched its new “Destination Africa” program. They are committed to invest in power-generation, transportation, and healthcare, three critical sectors in Africa.
I had a conversation with Ernest Ndukwe, one of my colleagues in the Strategy department at Lagos Business School. Ernest is the Head of CIPRA (Centre for Infrastructure, Policy, Regulation and Advancement), a research center at LBS “devoted to research, training and advocacy in infrastructure development.” He believes that in a 3-5 year time the situation will improve significantly: There are generation plants currently under construction scheduled to be operating in this time frame. These need gas to be fueled. The good news here is that the government has committed more than $1.5 billion to ensure the necessary gas supply.
Things are changing in the Nigerian power industry that will have a very positive impact on the other sectors!