Nigeria | Darkness Looms Over Nigeria as Delta Attacks Cut Power

LAGOS, Nigeria, Capital Markets in Africa: Unless President Muhammadu Buhari, 73, can subdue armed militants attacking gas facilities that supply the nation’s power plants, his plans to remedy an electricity shortage he called a “national shame” in his inauguration speech a year ago, will be stillborn. In March, Buhari said he would increase power generation by 2,000 megawatts this year and raise it by 2019 to 10,000 megawatts, double this year’s peak in early February.

Then militants in the oil-rich Niger River delta started repeatedly blowing up gas pipelines, lowering electricity output to 1,000 megawatts on May 23. The scarcity has battered an economy already in crisis because of falling prices for its main export, oil, threatening a recession. As it is, Africa’s largest economy currently generates about a 30th of South Africa’s electricity production, for a population more than three times its size.

“For all the plants, there’s no gas,” said Dallas Peavey Jr, chief executive officer of Nigeria’s largest power facility, Egbin, whose output has fallen to less than 10 percent of its 1,320-megawatt capacity. “We’re sitting idle here.”

Gas Reserves 
With Africa’s biggest gas reserves of more than 180 trillion cubic feet, gas-generated power was touted as the obvious solution by a succession of governments to end daily blackouts that cost the economy at least 2 percent of gross domestic product growth annually, according to the ministry of Finance. Gas-fired power plants provide about 80 percent of Nigeria’s electricity supply, according to Pabina Yinkere, head of research at Lagos-based Vetiva Capital Management Ltd.

With current power output the lowest in a decade, millions of Nigerians either do without electricity or are forced to buy fuel for their own generators. Even when output reached its 5,000-megawatt peak, most of the country was in darkness, Yinkere said.

“Nigeria’s electricity consumption per capita is 142 kilowatt hours compared to 4,328 KWH in South Africa,” Yinkere said.

The partial sale of 17 former state-owned power utilities three years ago was meant to attract investment needed to expand the grid. Yet, private investors have been hampered by increasing debt owed by government, an inability to obtain foreign exchange to import equipment and now, militant attacks on key installations.

“If the vandalism is not addressed urgently and comprehensively, electricity will continue to deteriorate and the government’s aspiration to significantly increase power generation by 2019 would be a mirage,” Desmond Ogba, managing counsel and head of energy projects at Lagos-based law firm Templars, said in a phone interview.

Militant Attacks 
All but four of the country’s 23 gas-powered generators have been shut down after militants calling themselves the Niger Delta Avengers knocked out the Forcados export pipeline in February, and the Escravos-Lagos link early May. ARoyal Dutch Shell plc spokesman, Precious Okolobo, said Wednesday repairs were continuing on Forcados and couldn’t say when they would be completed. Government officials say Escravos may not open until September, according to Peavey.

“When people break the gas line it’s like breaking the diesel tank or your petrol tank that supplies your generator at home and that’s why the power situation is currently this bad,” Babatunde Fashola, the minister of power, works and housing, said in a statement on May 21. “As soon as we restore those gas pipelines, power will improve.”

Buhari has vowed to deal with the militants in the delta in a similar way he has handled Boko Haram’s deadly campaign in northeastern Nigeria. The army has fought the Islamist group for years and appears to have succeeded in weakening it in recent months.

Environmental Pollution 
Rebels in the delta say they are fighting for greater share of the region’s oil resources and to protest poverty, unemployment and environmental pollution from decades of hydrocarbon exploration and production. A previous militant campaign abated in 2009 when the government offered the fighters an amnesty and payments to disarm. Insurgent leaders also received contracts worth millions of dollars to protect the oil facilities.

The violence resumed when Buhari, a former army general, ended the security contracts and reduced the monthly stipends.

In a speech marking his first year in office on May 29, Buhari signaled he may reconsider the termination of stipends for the ex-fighters and said he would curb violence through steps including talks with regional leaders and “re-engineering” the amnesty program.

“There are no quick fixes to the challenges,” Yinkere said. “The only way out I see is for the government to negotiate with the militants. The government needs to dialogue. Using force will not bring a solution to the challenge.”

Until the violence ends and the gas supplies resume, Peavey has shelved plans to double Egbin’s output.

“We can’t double the capacity if we can’t find the fuel,” he said.

Source: Bloomberg Business News