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Nigeria: Government signs electricity deal with Siemens

CategoryPress Releases
TagsEnergy Access, Finance and Investment

The federal government has entered into an agreement with a German company, Siemens, to boost power supply in Nigeria.

President Muhammadu Buhari, who signed the deal on behalf of the federal government yesterday, in Abuja, challenged Siemens and other investors in the distribution companies, Transmission Company of Nigeria (TCN) and the industry regulators to work hard to achieve 7,000 megawatts of reliable power supply by 2021.

The agreement, where Nigeria is partnering with the German government and Siemens, entails two phases – 7,000 megawatts of reliable power supply by 2021 and 11,000 megawatts by 2023 – in phases 1 and 2 respectively.

Buhari recalled that in his meeting in late August last year with Chancellor Angela Merkel in Abuja, both governments committed themselves to future cooperation to support economic growth and development in Nigeria.

According to him, the two countries agreed that fixing the power sector was a key priority for this administration.

The president noted that it was during that event that Mr. Joe Kaeser, the chief executive officer of Siemens AG committed himself to working with Nigeria to develop a feasible roadmap to modernise Nigeria’s electricity grid with support from the German government.

He explained that “we all know how critical electricity is to the development of any community or indeed any nation. And in Nigeria, whilst we are blessed to have significant natural gas, hydro and solar resources for power generation, we are still on the journey to achieving reliable, affordable and quality electricity supply necessary for economic growth, industrialisation and poverty alleviation.”

Buhari said that there have been many attempts at solving the electricity problem in Nigeria, noting that previous governments had explored state-funded solutions through the ill prepared National Independent Power Projects (NIPP).

Disclosing that they also explored the installation of large emergency power projects, Buhari recalled that there was also the partial privatisation of the power generation and distribution sectors.

He explained that these various interventions to solving the electricity problem had yielded an imbalance between the amount of power generated and the amount available for the consumers.

The president lamented that despite over 13,000 megawatts of power generation capacity only an average of 4,000 megawatts reliably reaches the consumers.

Buhari explained that his administration had an excellent opportunity to address the challenge.

He said: “This government’s priority was to stabilise the power generation and gas supply sector through the Payment Assurance Facility, which led to a peak power supply of 5,222 MW. Nonetheless, the constraints remained at the transmission and distribution systems.

“This is why I directed my team to ask Siemens and our Nigerian stakeholders to first focus on fixing the transmission and distribution infrastructure – especially around economic centres where jobs are created.

“Whilst it was evident that more needed to be done to upgrade the sub-transmission and distribution system, our government was initially reluctant to intervene as the distribution sector is already privatised.

“I am, therefore, very pleased with the positive feedback from private sector owners of the distribution companies, who have all endorsed government’s intervention to engage Siemens on this end-to-end plan to modernise the electricity grid.

“Our goal is simply to deliver electricity to Nigerian businesses and homes. My challenge to Siemens, our partner investors in the dstribution companies, the Transmission Company of Nigeria and the electricity regulator is to work hard to achieve 7,000 megawatts of reliable power supply by 2021 and 11,000 megawatts by 2023 – in phases 1 and 2 respectively.

“After these transmission and distribution system bottlenecks have been fixed, we will seek – in the third and final phase – to drive generation capacity and overall grid capacity to 25,000 megawatts,” he said.

Buhari expressed confidence that with his administration’s strong commitment to the development of Mambilla Hydroelectric and the various solar projects under development across the country, the long-term power generation capacity would ensure adequate energy mix and sustainability in the appropriate balance between urban and rural electrification.

“Our intention is to ensure that our cooperation is structured under a government-to-government framework. No middlemen will be involved, so that we can achieve value for money for Nigerians.

“We also insist that all products be manufactured to high quality German and European standards and competitively priced,” the president said.

He, however, pointed out that this project would not be the solution to “all our problems in the power sector,” but remarked that “I am confident that it has the potential to address a significant amount of the challenges we have faced for decades.

“It is our hope that as the power situation improves, we will improve investors’ confidence, create jobs, reduce the cost of doing business, and encourage more economic growth in Nigeria,” he stated

After the meeting, Kaeser (Siemen’s CEO) told State House correspondents that the roadmap would enable the country deliver the country’s capacity of power in the first phase of 7,000, second phase up to 11,000 and third phase 25,000 megawatts.

“That will significantly enhance the country’s power supply and gets the country to the next industrial phase. We believe we will all very much benefit together, the people of Nigeria and of course Siemen as a company.

“I’m very honoured that we were able to sign this road map today in the presence of the president and our partners. I will personally make sure that this will be the big success of Nigeria, Siemen and our partners in the country,” he said.

On the cost of the project and how long it would last, Kaeser said: “We have really talked about solutions and how it can bring power to the people literally, from generation to transmission and effective distribution. Yes, we have not been talking money at this time because this about a long-term partnership and is a roadmap which we are going to work all the way till 2025.

“The first phase is supposed to be done by 2021, second phase till end 2023 and the final phase by 2025,” he said.

The director-general of the Bureau for Public Enterprises (BPE), Alex Okoh, who also fielded questions from State House correspondents, described the partnership as credible.

He said that what had been done so far was the technical evaluation from both the transmission and distribution to know what the gaps were in terms of the technical infrastructure to improve the transmission and distribution capacity.

Okoh said the next phase is to do the detailed commercials and see the costing of what the Siemen intervention will entail before they will agree on the financial frameworks to domicile the financial commitment within the books of the Discos.

“If you look at the amount of losses that is being experienced in the entire power sector, they are huge. We are talking about double digits losses between 30 per cent and in some Discos almost 70 per cent. So that is a strong signal that the way the market is currently structured is not sustainable and if we don’t improve the critical infrastructure in terms of the winning capacity of TCN and also the distribution capacity of the Discos, then this kind of situation will persist for a long time.

“That is why we welcome this intervention and we believe that within the timelines that have been directed by Mr. President, we will be able to significantly improve power supply in the country,” Okoh said.