Siemens Deal to Fix Nigeria’s Power Sector Problems Faces Delay

A deal between the federal government and the German government to debottleneck Nigeria’s electricity transmission facilities could be delayed for about five years, the global energy systems firm has said.

Some five years ago, former President Muhammadu Buhari met with the then German Chancellor, Angela Merkel and initiated the deal to overhaul and increase the operational transmission and distribution capacity of the power grid.

The agreement was basically meant to include the rehabilitation, upgrade and expansion of transmission and distribution networks and to improve power generation in three phases.

The first phase was to raise power supply to 7,000mw by 2021; and then increase it to 11,000mw in 2023 and thereafter push it to 25,000mw from 2025.

 A Bloomberg report said on Monday that although Siemens Energy AG expected to complete an overhaul of Nigeria’s dilapidated power infrastructure, it will now happen five years later than originally planned, due to delays caused by the coronavirus pandemic.

The German engineering company, which was contracted by Africa’s most populous nation four years ago to rehabilitate and expand Nigeria’s electricity grid by 2025, will now only conclude the project in 2030, Oladayo Orolu, Head of Business Development and Government relations at Siemens Energy told Bloomberg in an interview.

The three-phase project was set back by delays in starting the first phase, he said.

“When we conceptualised this project in 2018, our plan was within two years we should be done with phase one, but then Covid happened,” disrupting supply chains, which meant getting raw materials took longer than before, Orolu added.

The report said the delay is a blow to Nigeria President Bola Tinubu’s reform agenda. The president, who took office in late-May, pledged to make electricity more accessible and affordable in the nation, where more than 40 per cent of its population lack access to power and face constant blackouts.

In 2020, the World Bank estimated the economic cost of power shortages in Nigeria at around $28 billion – equivalent to 2 percent of its gross domestic product. The delays are also likely to cause cost overruns.

“Prices are not at the same level they used to be,” Orolu said during the interview. “Some raw material components costs have been doubled, some are still close to where they used to be, some are just marginally higher,” he said. In 2020, phase one was projected to cost about €2 billion.

Orolu said he expects electricity output to increase by an additional 2,000 megawatts at the completion of phase one by 2025.

“The objective of phase one is to do quick fix projects that will free up 2,000 megawatts, we currently have 5,000, we are looking at taking that to 7,000,” he said.

The West African nation has an installed capacity of more than 13,000 megawatts, of which a daily average of about 3,400 megawatts is dispatched to consumers due to a poor transmission and distribution network.

The partnership with Siemens will modernise the existing network before enlarging it until the country can produce and distribute 25,000 megawatts.

Following a groundswell of enquiries recently, the Managing Director of FGN Power Company, the Special Purpose Vehicle (SPV) for the execution of the project, Mr Kenny Anuwe, said that 80 per cent of equipment needed for the pilot project was already available in-country.

Stressing that the project remained on course, Anuwe reiterated that the initiative for Phase 1 was underway and had recorded notable successes.

“FGN power company has received delivery of about 80 per cent of the equipment for the pilot projects, which are being deployed to critical sites across the country to improve power transmission capacity.

“Some of the sites include Apo, Ajah, Okene, Nike Lake, Kwanar Dangora, Maryland, Omouaran, Ojo, Amukpe, Ihovbor, Potiskum, Birnin Kebbi, amongst others,” Anuwe said in a statement.

Emmanuel Addeh in Abuja

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