The federal government of Nigeria has signed a memorandum of understanding with General Electric Energy, a United States company, to boost electricity supply in the country. The MOU allows the company to invest $10 billion in the construction of power plants with a combined capacity of 10,000 megawatts

The federal government’s quest to have regular power supply received a boost on March 23 with the signing of a memorandum of understanding, MOU, with General Electric Energy, for $10 billion to be invested in various power plants with combined capacity of 10,000 megawatts, MW. In the agreement, GE would take up 15 percent equity in each of the plants to be constructed. The type and number of power stations GE would invest in was not known, but the company signed the agreement with the Niger- government to potentially build and operate power plants in the electricity-starved nation, which is on the verge of privatising Power Holding Company of Nigeria, PHCN, the failing state-run power company.

   Barth Nnaji, minister of power, said that the government would not be involved in any of the projects, but would provide guarantees for the private sector participants. According to him, what the government and GE had signed after a meeting with President Goodluck Jonathan in Abuja, was a series of general agreements for support in various sectors of the economy including power, transportation, especially rail and health.

“What we are doing today, is the culmination of a series of work done, some behind the scenes and some in the open. With the meeting between President Jonathan and the chairman of GE last month in Abuja, there was a narrowing of focus for the ministry and GE to collaborate on specific areas,” he said.

   The minister explained that with GE’s cash and government’s bank guarantees, the projects would become more bankable, as investors can approach financial institutions to raise funds. He also said that the relationship between the Nigerian government and GE is a long-term one, as the energy company has moved from just being a supplier of power equipment in Nigeria to being an equity investor. According to the minister, “The MOU creates a relationship that will allow GE to not just selling turbines to Nigeria, but also have equity participation in collaboration with the government and private sector.” Jay Wileman, President of GE, Sub-Saharan Africa, said with the signing of the MOU, things can get started, as “now is the beginning of the real work of delivering power in Nigeria.” He also said that with the agreement, Nigeria has become “the epicentre of GE’s focus and will be bringing in our experience and partners to demonstrate our capacity.”

   But the pertinent question is, would this agreement with GE signal the end to the incessant power outage long experienced by Nigerians? President Jonathan unveiled his government’s power privatisation plans 18 months ago as a flagship policy and pledged that the state’s power generation and distribution assets would be sold off last year. But no meaningful progress has been made towards implementing the policy. Nigeria, last month, again delayed the timeframe for selling state-owned power assets, dimming hopes of carrying out the reforms any time soon. Also, Nigeria holds the world’s seventh-largest gas reserves, but the lack of power-generating capacity means the gas associated with oilfields is simply flared off by oil companies, while most of it remains underground.

The 4,770 mw of electricity expected from the National Integrated Power Project, NIPP, has been facing undue setbacks due to lack of gas supply and absence of transmission facilities to evacuate the power generated from the power plants. For example, the biggest NIPP plant, the Alaoji power plant, being handled by Rockson Engineering Limited, which has 1,074 mw installed capacity, evacuates only 150 mw. The power plant has four gas turbines of 112.5 mw each and two steam turbines of 255 mw. Apart from power evacuation limitation challenge, the company only has a temporary gas supply agreement with the Nigeria Gas Company, NGC, and there is no security for the Shell 40 million standard cubic feet per day gas supply agreement.

   The two other plants being handled by Rockson Engineering, Gbarain and Egbema power plants, which have installed capacity of 225 mw and 338 mw respectively, have their peculiar problems. While the two gas turbines for Gbarain, under construction, has available evacuation capacity, the challenge borders on community issues. Egbema, which is under construction, has no capacity and no gas supply facility. The same applies to the Sapele power project being handled by Marubeni West Africa. The power plant has an installed capacity of 451 mw with four gas turbines of 112.5 mw each.

   In the past two months, power generation has dropped to 3,775 mw, as gas supply to the Escravos – Lagos Pipeline Systems, which provides natural gas to key thermal power stations in the country has declined to 180 million standard cubic feet, leading to a considerable loss of electricity and power rationing nationwide. Similarly, the Oben gas facility in Delta State, which supplies gas to the Western axis has been shut down at the instance of Shell Petroleum Development Company, so as to carry out leakage repair on the Ughelli-Sapele line.

   Nigeria’s gross domestic product growth was 7.68 percent in the last quarter of 2011, official statistics showed, and much of this was from growth in the non-oil sector. If the present administration could fix the country’s creaky power sector, which previous leaders have failed to do, it would unlock the huge potential of Africa’s second-biggest economy.

Many Nigerians see power shortages as the main bottleneck to broad-based growth. Several deadlines to privatise the power sector have come and gone. Despite investing more than $12 billion in the sector, the highest quantum of power generated by the federal government has not exceeded 4,242.7 mw, which is a far cry from the 40,000 mw needed.

   To address the problem of energy deficit, Nigeria had, in the past two years, entered into partnership with some countries. An MOU was signed for gas supply to Germany, which would in return invest in Nigeria’s energy sector. The agreement was to provide power generation assets, as well as utilise available feedstock such as coal, wind, solar and hydro to produce power. Similarly, Nigeria and Brazil established an energy commission aimed at addressing the energy challenges of Nigeria. The commission planned to discuss the development of the Mambilla hydro-power and other hydro-power projects in Nigeria, as well as the development of the gas sector. Apart from that, Nigeria had secured more than $20 billion investment pledge for power sector. Out of this amount, the United States, the United Kingdom and India, made a total commitment of $100 million, while the Commonwealth Business Council pledged $20 billion. Also, the European Union, and Islamic Development Bank signified their interest to partner with the federal government in its bid to provide uninterrupted power to Nigeria.