CHAPTER ON/INTRODUCTION
Background to the study
Energy continues to be the center around which all socio-economic and technological development in every country revolves, and as a result, having access to a steady supply of energy is thought to be essential for the smooth running of all business development. As a result, inconsistent energy supply has an impact on all business operations. With a wealth of natural resources, including potential energy resources, Nigeria is one of the largest developing countries in Africa. But expanding access to energy in Nigeria has proven to be a recurring problem (Odularu and Okonkwo, 2009). Nigeria must therefore address its ongoing energy crisis in order to meet the country’s rising energy demands. According to Iwayemi (2008), this crisis has significantly hampered efforts to achieve sustained business and economic growth, the competitiveness of domestic industries on regional and global markets, and the creation of jobs.
The Nigerian economy’s oil and gas and power sectors are both included in the energy sector. It accepts additional unconventional energy sources like nuclear, solar, wind, and biomass, among others. Due to its multiplier effect on all other economic sectors, it is one of the most significant sectors in Nigeria. Both its potential to encourage significant business development and its contribution to government revenue are enormous. The energy sub-sector is thus linked to infrastructure, skill acquisition, the Knowledge Based Economy – ICT, Technology Based Investment, Agricultural Businesses, Solid Minerals, and a wide range of other things. One of the fundamental sectors that is most important to the overall development of countries is energy. As a result, one of the indicators for determining a nation’s level of life is energy usage.
The sector’s goal is to offer the country with an energy supply of roughly 7,000 Mega Watts that is sufficient and dependable. The capacity utilization was as low as 2,200 MW in June 2013 but now varies between 3,500 and 4,500 MW (NIIMP, NPC 2015). Nigeria now has 30% of its installed capacity coming from hydro and 70% of it coming from gas. There are reportedly enough gas deposits to power more than 50,000 MW of the country’s entire exploitable large-scale hydropower potential, but only 5,000 MW are presently built (NIIMP, NPC 2015).
Nigeria’s transmission system is divided into two categories: a 132kV network and a 330kV network. There are two components to the fundamental transmission infrastructure for any network. Transmission lines and transmission substations are what they are. While substations and distribution lines with varied capacity make up the distributing infrastructure All economic activity that is productive, such as manufacturing, trade, agriculture, and all industrial services, is driven by the energy subsector.
Recently, there has been an upsurge in private sector engagement in the energy industry. Since the year 2000, private companies have received 55 licenses. Nine of these tiny, privately-driven energy producing units are now being built, leaving roughly twenty operating. There are now fewer generation companies operating in Nigeria as a result of the privatization of the assets of the Power Holding Company of Nigeria (PHCN) and the National Integrated Power Projects (NIPP). Over the previous ten years, there have been inadequate investments, which is one of the generational concerns. The National Integrated Power Project (NIPP) plants are insufficient in comparison to the overall need, according to the National Integrated Infrastructure Master Plan (2015). Energy sector generation and distribution have been privatized. This development has already begun to bring about desperately needed investment in generation assets (NIIMP, NPC, 2015).
The energy sector has played a crucial enabling role in supporting economic growth and business development in emerging economies. The force
From employment generation to resource efficiency, sectors have a big impact on the health and sustainability of the overall economy. The energy industry has a significant effect on the growth of businesses and influences almost every item and service in the economy (Voser, 2011). Simply put, the operation and performance of the business sub-sector are influenced by the energy sub-sector. Other significant and related characteristics, such as greater opportunity equality, political freedom, and civil rights, are believed to be part of development. The main objective of development is to expand everyone’s access to economic, political, and civil rights, regardless of gender, ethnicity, religion, race, area, or nation (World Bank, 1991). It is well acknowledged that the availability of power and corporate growth are strongly correlated.
The development of Nigeria’s economy and commercial sector have been significantly hampered by the country’s inadequate and poor access to power. Small and medium-sized businesses have long been considered the backbone of the economy, yet owing to insufficient energy supplies, they perform appallingly. Rising energy consumption has been noted by researchers as an important aspect of growing economies. According to Morimoto and Hope (2001), the availability of a sufficient and reliable energy supply is a key component supporting corporate development and economic progress in emerging nations. Business development, improving production structures, patterns, and evolution, resource allocation, and efficient resource use should be of the utmost importance in order to guarantee a proper recovery of the socioeconomic process within the framework of an effective economic system. A country should be prepared to provide a sufficient and consistent energy supply if it wants to achieve economic growth and development. Is Nigeria prepared for this leap forward in development?
Priorities have been established to raise generation from the present level to 20 GW by 2018 and to 350 GW by 2043, with a concentration on gas as the immediate priority and the addition of alternate sources after 2023, taking into account Nigeria’s aspirations and targets for the energy industry. This will improve the distribution capacity, with an urgent emphasis on strengthening the transmission capacity, with priority given to
enabling industrial customers to get power while minimizing distribution losses. Priorities for the energy sector’s oil and gas objectives include building infrastructure for gas distribution and increasing refining capacity to completely satisfy domestic demand.
In order to fulfill the nation’s rapidly rising energy demand, the Oil and Gas subsector is also advancing “gas to power.” By 2030, the country hopes to be self-sufficient in premium motor spirit (PMS), with oil output rising to 4 mbpd by 2043. The capacity of Nigeria’s gas output would rise from 7,580 to 11,000 mcfpd by 2018 and to 15,000 mcfpd by 2043. The oil-based industries’ production capacity are anticipated to increase in line with this (Energy TWG, 2015).
The expectations and priorities for the energy sector include completing the privatization of the assets used for power generation and distribution, laying out a clear path for the Transmission Company of Nigeria’s (TCN) development, including giving it authority to lead future industry planning and welcome private sector investment, putting the Transmission Reinforcement Plan into practice to address transmission bottlenecks and enhance grid capability, and finishing up the implementation of the Gas Master Plan. As a result, energy supplies are crucial to the productivity of the manufacturing and industrial sectors of the economy. These would be founded on the idea of developing market-based strategies and having a solid regulatory framework (Hammond, 2012).
Nigeria started producing electricity in 1896. In 1929, a hydroelectric power plant was built at Kurra, close to Jos, and the Nigerian Electricity Supply Company (NESCO) began operating as an electric utility company in Nigeria. The first 132KV line between Ijora Power Station and Ibadan Power Station was built in 1962. The Electricity Corporation of Nigeria (ECN) was founded in 1951. The mission of the Niger Dams Authority (NDA), which was founded in 1962, is to maximize the nation’s hydroelectric potential. However, the National Electric Power Authority was created in 1972 as a result of the union of ECN and NDA (NEPA). In 1998,
NEPA lost its monopoly over the production, transmission, distribution, and sale of energy.
A law creating PHCN, an Initial Holding Company (IHC), was passed by 1999–2000 as a consequence of government efforts to revive the energy industry. This was the planned name for the privatization that was supposed to transfer NEPA’s assets and liabilities to PHCN. It was given the green light to start operating in 2005 and handle NEPA business. In a similar vein, the National Integrated Power Projects (NIPP) were established in 2004 in order to accelerate and expedite the upgrading of adding additional capacity to the present available power capacity in the nation. The Niger Delta Power Holding Company, which is presently in charge of it, effectively undertook this as a commercial enterprise (NDPHC).
Six producing businesses, one transmission firm known as Transmission Company of Nigeria (TCN), and eleven distribution companies make up the 18 companies that made up the PHCN as a whole. Egbin Electricity Generating Company (EEGC), Sapele, Ughelli, Afam, Shiroro, and Kainji are the power-generating businesses. Additionally, there are a few new Independent Power Producers operating under the Niger-Delta Power Holding Company’s supervision (NDPHC). Benin Electricity Distribution Company (BEDC), Eko Electricity Distribution Company (EkEDC), Enugu Electricity Distribution Company (EnEDC), Ibadan Electricity Distribution Company (IbEDC), Ikeja Electricity Distribution Company (IkEDC), Jos Electricity Distribution Company (JEDC), Kaduna Electricity Distribution Company (KdEDC), Kano Electricity Distribution Company (KnEDC), Port-Harcourt Electricity Distribution Company (PEDC) are the 11 distribution (YEDC). Currently, the Federal Government controls 20% of the producing firms and 100% of the transmission company (with 80 per cent of equity sold to private investors). So, the generating firms (GENCOs) are 80% owned by the private sector, 20% controlled by the government, and 100% held by the transmission company of Nigeria (TCN). 60% of DISCOs are owned by the private sector, and 40%
the government owns. The government has authority of the TCN (nonetheless, the management of TCN is handled by the Canadian company, the Manitoba Hydro Company). The Federal Government distributed ownership certificates to potential owners on September 30, 2013.
The highest generation was 1,500MW as of August 2000. This was far less than the expected demand of 4,500 MW. The radial transmission lines were overwhelmed. The power transformers had been neglected for a long period, while the switchgear was out of date. Because many of the distribution transformers were overloaded and the wires resembled “cobwebs,” the distribution sub-sector desperately needed to be upgraded. The overall transmission and distribution losses ranged from 30 to 40%. Collections were less than 50% of the electricity produced when these factors were combined with customers’ poor payment history (NIIMP, NPC, 2015).
4,833.7MW was the predicted load for the year 2001. A producing capacity of around 6,000MW was needed to accommodate this demand. In 2005 and 2010, the expected electricity demands were 9,780 MW and 20,000 MW, respectively. By the corresponding years, they needed generating capacity of 12,700 MW and 25,000 MW. As a result, it became imperative to immediately and in the near future add additional producing, transmission, and distribution capacity to the grid in addition to completely renovating the existing power plants (which were anticipated to produce a maximum of 5,400MW of generating capacity). The power objective for the years 2014–2043 calls for increasing generating capacity from 7 GW in 2013 to 350 GW by the end of 2043, as well as ensuring enough transmission and distribution capacity to meet both industrial and residential demand for this energy production. By the end of 2043, the overall length of 330 KV transmission lines will have increased from 5,552 km in 2013 to 16,600 km. From 2013 to 2043, the overall transmission transformer capacity will increase from 6,000 MW to 420,000 MW (Energy TWG, 2015).
Nigeria’s Vision 20:2020, on the other hand, emphasizes the need of infrastructure, particularly a steady supply of electricity, for attaining sustainable growth and development. The government set a generating goal of 40,000MW to achieve Vision 20:2020. Even the average person is impacted by the effective functioning of important government parastatals within the national economy. The main public utilities are parastatals whose operations may be considered to constitute a significant portion of most people’s everyday lives, both at work and at home.
There are concerns that the restructuring of the energy industry did not advance commerce in Nigeria, a matter of national discussion. The contrasting findings arising from the contribution of the energy industry to the commercial growth of Nigeria’s South Eastern Zone and its influence on the entire economy are still being debated, despite empirical research and outcomes.
Statement of the Problem
Numerous Nigerian governments, from military to civilian, have started energy restructuring programs to solve the country’s energy issues, but despite significant capital expenditures included in the national budget for this purpose, little progress has been made. The energy sector in Nigeria has shown a relatively low capability. The existing level of transmission and distribution capacity is insufficient.
As a result, there are many additional issues with the Nigerian energy industry, especially in the areas of low power production, transmission, and distribution. The limitations have caused a gap between the supply and demand of power, and the industry continues to be plagued by a lack of local technology and human resource input. Additionally, it has yet to be stabilized how much more gas will be produced in order to serve the anticipated gas power plants as well as expand other gas-based businesses and petrochemicals.
Once again, this sub-sector is seriously threatened by instability, particularly in the South Eastern Region. Gaps in the energy sector has hampered the growth of
Nigeria. However, the country’s current economic crisis has prompted a reconsideration of government engagement in these parastatals. In essence, the emerging countries’ distinct historical backdrop has made considerable government engagement in the majority of economic sectors necessary, especially the Energy Sector.
One of the biggest issues with energy generation capacity in Nigeria has been the inability of the energy supply to properly satisfy the demand for electricity consumption. The production, transmission, distribution, and consumer sales of electricity have all been the responsibility of this utility, which has been administered as a vertically integrated business. The existing capacity struggles to meet demand from both residential and industrial clients because to the strong development rate. Energy supply disruptions in the manufacturing and industrial sectors have given the issue a very alarming dimension.
These issues, which among others include but are not limited to poor generation capacity relative to installed capacity, inadequate supply, outdated technological power plants, fluctuating water levels powering the hydro plants, vandalism of existing power infrastructure, and gas supply company failure, are the root causes of the energy sector’s inability to effectively meet the demand for energy consumption in the country and in particular the South Eastern Zone of Nigeria. An obstacle to company growth and survival in Nigeria is the difficulty of businesses to acquire the energy supply required for corporate development.
Energy interruptions are common in the manufacturing and industrial sectors as well as in residential areas. This demonstrates how the energy industry is unable to satisfy the South Eastern Zone of Nigeria’s energy requirements. As a result, a restructuring program was launched in an effort to guarantee consistent energy supply and boost corporate growth across the board. The aforementioned issues combined with frequent
Industrial production is impacted by energy equipment failure (apparently caused by overload), which reduces the amount of power that is available for use. The present state of Nigeria’s electrical supply, particularly in the South Eastern Zone, depicts a condition of supply crisis in which socioeconomic activities, industrial expansion, and corporate development are restricted to levels below the economy’s potential.
Objectives of the study
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