Petrol dispenser
In 2023 alone Nigerians spent a total of N16.5 trillion to buy diesel, petrol and generators to get electricity, the Federal Government announced on Tuesday.
It also announced that the formal power sector, including electricity generation, transmission, and distribution companies, made a total revenue of N1tn last year amid the over N16tn spent by power consumers in the informal sector.
The Minister of Power, Adebayo Adelabu, who announced this at the ongoing 2024 Nigeria Oil and Gas conference in Abuja, however, noted that electricity consumers on Band A category now get up to 24 hours supply of power.
He said, “If you know how much our people spend buying diesel, petrol, generators, and servicing them in a year; the last study we had in 2023, a total of N16.5tn was spent on this in self (power) generation. Even a number of the industries are off the grid. They now have their captive power between their environments with gas-powered generators.
“So spendings in this sector out of the grid is close to N20tn. And let me blow your mind, the revenue for the entire industry, the grid, I mean the formal power sector was just N1tn for 2023 that goes to the generation companies, transmission company and the distribution companies. Just N1tn formal revenue. But the informal spendings on generators, diesel, petrol, was close to N20tn.
“Even if it is just a quarter of that is put in the official power sector, we are talking about incremental revenue of N5tn that will bring the sector’s revenue to N6tn, sincerely we are going to have something close to uninterrupted 24/7 power supply in Nigeria,” Adelabu stated.
The minister said the government was currently working hard to earn the trust of power consumers, stressing that it would be better to spend on electricity provided by the national grid because it is cheaper than spending on diesel or petrol-powered generators.
“That is what we are working on to ensure that that trust is back, that that confidence is back. And all the manufacturing companies that are doing self-generation can cut it off and reconnect to the national grid because it is the cheapest source.
“As at the last study, Band A customers are enjoying uninterrupted supply and pay N206. For the companies that have their captive power using gas, they pay about N290/kwh.
“For those that are using petrol generators, it is about N450 per kilowatt-hour. And for those using diesel to power their generators, it is upward of N900. So it is still the cheapest, most efficient and the least cost for our productive activities,” the minister stated.
Meanwhile, Adelabu told delegates at the conference that the power sector in Nigeria consumes the largest share of the country’s domestic gas supply.
“I am here to advocate for increased investment in Nigeria’s gas development to unlock the full potential of our power sector and achieve the Nigeria Energy Transition Plan. The domestic gas-power market accounts for 60 per cent (approx. 700mmscf daily) of the total domestic gas supply. This gas quantity currently sustains Nigeria’s four gigawatts average grid generation capacity.
“In line with the Nigeria Energy Transition Plan vision 30:30, which seeks to achieve 30GW by the year 2030, our energy mix is projected to be 70 per cent (or 21GW) thermal source (most likely gas considering the country’s gas potential) and 30 per cent (or 9GW) renewable source.
“The power sector would require over five times what the industry currently utilises from the domestic gas market to achieve our 70 per cent thermal energy target with gas-powered generation. Additional investments would be needed to increase the country’s gas production to achieve this level of gas supply to the power sector without compromising the export obligations,” Adelabu stated.
To this end, the minister called on the investors at the conference to strongly consider investments in the further development of gas production in the country, especially Nigeria’s abundant unexploited non-associated gas reserves.
“To briefly spotlight the Federal Government’s recognition of the need for adequate liquidity in the Nigerian power sector to catalyse the much-needed investments across the value chain, the government recently introduced a cost-reflective tariff for the sector’s most served grid-tied customer segment.
“In addition, presidential approval was granted to resolve the power sector obligations to defray legacy debts to generation and gas companies. These actions speak to the government’s commitment to allowing efficient gas supply for the Nigerian power sector and ensuring there’s a clear line of sight for investors to recoup their investments in the country,” he stated.
The minister said he was confident that the Federal Government was committed to ensuring a viable and bankable power sector, and “we are convinced that the industry is investment-ready.”
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