According to the draft document of the Power Sector Recovery Programme (PSRP) it has been discovered that Nigeria loses $29.3 billion annually due to inadequate power supply.
As unemployment continues to rise in Nigeria the capacity utilisation among companies is very low because of lack of power. Companies in the country have to spend about 40% of their production cost on generating electricity for themselves.
When a large number of manufacturing firms shutdown operations accross the Federation last year, power challenges and foreign exchange difficulties were cited as major reasons for their closure.
In a nation that requires over 160,000MW the power sector struggles to meet the average power supply of 3000MW.
This gap between demand and supply of power in nigeria has in turn crippled the manufacturing sector, raised operational costs of business and is a major factor blighting ease of doing business in Nigeria.
Stakeholders have long canvassed for deep reforms in the electricity sector, beyond occasional funding interventions to ease liquidity gaps created because operators could not recover costs, as economic realities rendered obsolete, the assumptions on which tariffs were based.
“What the sector needs is deep reforms beyond just intervention and this is a step in the right direction,” says Chuks Nwani, energy lawyer and vice president of PowerHouse International, an energy consultancy.
Since 2013, gas prices have increased to from $2.44/mmbtu to $3, inflation rates have spiked to 18 per cent from 8.8 per cent and foreign exchange rate climbed to $1/450 from $1/198 yet the Nigerian Electricity Regulatory Commission (NERC) says tariff increase is not imminent.