Electricity generation companies (Gencos) in Nigeria have reported how Nigeria may not completely profit from the continental trade agreement – the African Continental Free Trade Agreement (AfCFTA) it lately approved and acknowledged due to inadequate electricity supply in the country.
They also stated that they were currently caught up in a poor market structure and failing transmission network.
The Gencos under their umbrella association – the Association of Power Generation Companies (APGC), explained recently that although the AfCFTA was a welcome development, the chances of Nigeria making maximum benefits from it were limited on account of her power sector which was unstable.
It noted for example that due to the significant role stable electricity plays in economic development, poor power supply in Nigeria means that goods and services offered by the country may not be comparatively and competitively priced when compared to other countries in the continent with better power supply.
“Thus, the cumulative result of a significant boost in trade and therefore the economy, may not be realised,” the APGC said in a statement signed by its Executive Secretary, Dr Joy Ogaji.
According to the association, “For instance, steel mills consume a huge amount of power to convert pig iron blocks to liquefied iron, mix with ingredients such as carbon, alloys and chemicals to change into a different type of steel, alloy, bars, rods, H-beams, and sheet metals.
“In the mining industry, changing the mineral deposit and ores from the mines to concentrate metal blocks also require a huge amount of power. Hospitals need uninterrupted electricity supply 24 hours a day, for many health care functions and operation of patients.
“Also, our universities require constant electricity to undertake high-level research and development works.”
APGC added that: “Steady and regular power supply is needed for a different type of industries, where goods, appliances, tools, instruments, machines, modern communication equipment and gadgets, vehicles, aircraft, ships are manufactured.
“Indirect relation to the just signed AfCFTA agreement, the benefits it poses to Nigeria may not be fully reaped until the problems of the power sector are fully addressed.”
It noted that with the country signing the agreement, there was a need for a renewed zeal to solve the problems of the power sector to enable it to benefit from the AfCFTA.
“This singular solution to power issue will make consumer goods, machinery, equipment and tools flood the African and global consumer markets.
“It will also bring about increased employment and empowerment of the youth which category from statistics, forms a greater proportion of the population.
“The impacts of inadequate and steady power supply are multifarious. They include low manufacturing capacity utilisation rates, low competitiveness of manufacturing firms, and lack of firm growth, incessant power cuts which impose additional costs on firms both in terms of wastage of raw materials and deterioration of machinery.
“Inadequate power also increases the cost of production and maintenance of factories.
“Nigeria’s potential to become one of the world’s largest economies will remain just an aspiration without the electricity required to pursue aggressive industrialisation, including the revitalisation of moribund local industries,” the Gencos explained.
The Gencos stated that Nigeria has an installed grid power capacity of about 13,000 megawatts (MW), an available generation capacity of over 7,500MW, and an average actual generation of about 4,000MW, which is a poor situation.
“To optimise the current generation capacity, there is a need for massive investment in transmission and distribution networks in the country. Gencos have the capacity to increase their output in the near term.
“However, an increase in power generation without a resultant increase in Transmission Company of Nigeria’s (TCN) wheeling capacity and improved distribution infrastructures will continue to lead to stranded generation. Optimising generation may mean utilising what is existing or getting the most out of what is available, which in order words means consuming what is available and recovering unavailable capacities, which currently is about 5,000MW.
“Gencos are caught in the middle of a weak transmission network and a poor commercial market structure. Instances abound where Gencos have had to resort to other means other than the electricity market to support the gas and other services just to put power on the grid,” they added.
The AfCFTA is a regional agreement that creates a free trade area among 55 African countries. Of these, 54 members have signed, only Eritrea is yet to endorse it. The free trade area is a customs union, which would allow for the movement of physical goods without tariffs from 2022.
It would be similar to the European Union (EU), which has 28 member countries and a central monetary authority, the European Central Bank (ECB).
The ECB is the central bank for 19 member countries of the EU that use a common currency called the Euro. The EU was founded when the Maastricht treaty was signed in 1992.