Nigeria to Start Building $5.8 Billion Power Plant in 2018

Nigeria plans to start building a $5.8 billion hydro-power plant in the eastern Mambila region this year, after it agrees on loan terms with China’s Export-Import Bank.

“We hope to break ground this year if we can conclude the financing,” Power, Works and Housing Minister Babatunde Fashola said in a Jan. 23 interview in the capital, Abuja. “Contracts are in place. We are good to go.”

Fashola told reporters in August that the Chinese lender would finance 85 percent of the cost, and the Nigerian government the rest. China Civil Engineering Corp. will build the 3,050-megawatt power plant over five years, and the facility will include four dams measuring 50 meters (164 feet) to 150 meters high, and 700 kilometers (435 miles) of transmission lines, he said.

Nigeria, a country of 180 million people living with daily power cuts, is seeking to expand electricity generation to drive growth after the economy contracted in 2016 for the first time in 25 years. Fashola, a former governor of Lagos State, the nation’s bustling commercial hub, was appointed in 2015 by President Muhammadu Buhari to take charge of the troubled power sector.

The government expects power-production capacity to increase to 8,600 megawatts in a year from 7,000 megawatts currently, Fashola said in the interview. In comparison, South Africa, with a third of Nigeria’s population, has an electricity-generating capacity of more than 40,000 megawatts.

Transformers with a combined capacity of 1,400 megawatts will be deployed across the country this month to further boost electricity supply, state-owned Transmission Company says on its website. Transmission capacity currently stands at about 7,000 megawatts.

Distribution Capacity

Nigeria also plans to improve distribution capacity, currently at about 5,000 megawatts. Since the country is able to produce more electricity than it can distribute, some production capacity will remain idle until the government expands the network.

The government is looking to partner with private companies to invest in mini-grid projects and generate an additional 3,000 megawatts of electricity over five years, Fashola said. Investors are showing interest, he said, without further details.

A number of planned solar power projects have failed to secure funding and should be reassessed, according to the minister. State-controlled Nigeria Bulk Electricity Trading Plc signed preliminary power-purchase agreements in 2016 with private companies for 14 solar projects meant to generate 1,125 megawatts of electricity, but there have been issues over payment-related guarantees, Fashola said.

These should be redesigned to sell electricity not only to the government via the national grid but to customers in remote areas directly, according to the minister.

“They should rethink their models and begin to look at estates and communities,” he said.

The government is also working on regulations to license suppliers of electricity meters to stop some distribution companies from billing arbitrarily, Fashola said. “We want to open the meter market because the core business of a distributor is not metering but distribution of energy.”

Source: Bloomberg L.P.