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Power Sector: N16.5 Trillion Spent on Generators Dwarfs Grid Revenue

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Nigeria faces a peculiar power sector paradox. While the country boasts vast natural gas reserves, its citizens spend a staggering amount on inefficient personal power generation.

According to the Federal Government, Nigerians shelled out a whopping N16.5 trillion in 2023 on diesel, petrol, and generators for self-generated electricity. This dwarfs the mere N1 trillion revenue earned by the formal power sector in the same year.

Adelabu Highlights the Gap

Speaking at the ongoing 2024 Nigeria Oil and Gas conference, Power Minister Adebayo Adelabu shed light on this concerning disparity.

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“The last study we had in 2023 showed a total of N16.5 trillion spent on self-generation. Even industries are off the grid, resorting to captive power with gas-powered generators,” Adelabu revealed.

This reliance on personal power generation translates to an estimated total expenditure of nearly N20 trillion outside the grid.

Adelabu emphasized the stark contrast: “The revenue for the entire formal power sector, including generation, transmission, and distribution companies, was just N1 trillion in 2023.”

Grid Power More Economical Choice

Adelabu underscored the economic benefits of connecting to the national grid. He pointed out that grid electricity is significantly cheaper compared to generator-powered alternatives. Homes on Band A of the national grid, with near-constant power supply, pay N206 per kilowatt-hour (kWh). This contrasts sharply with the N450/kWh cost for those relying on petrol generators, with diesel generators even more expensive.

“Studies show Band A customers enjoy uninterrupted power at N206 per kWh,” the minister explained. “Companies using captive gas generators pay around N290/kWh. Petrol generators cost N450 per kWh, and diesel generators even exceed N900. Grid power remains the cheapest, most efficient option for our productive activities.”

Read Also: Band A Customers Face Electricity Tariff Hike

Investment in Power Sector: Natural Gas

The minister also highlighted the crucial role of natural gas in Nigeria’s power sector. Gas currently supplies roughly 60% of the nation’s electricity and holds the key to achieving the country’s ambitious energy plan. This plan aims for 30 gigawatts (GW) of power generation by 2030, with 70% from gas and 30% from renewables.

Recognizing the need for improvement, Adelabu appealed to investors at the conference to consider investing in Nigeria’s gas sector, particularly the abundant unexploited non-associated gas reserves. He emphasized recent government initiatives designed to make the power sector more attractive to investors, such as cost-reflective tariffs and resolving legacy debts.

The minister expressed confidence in the government’s commitment to creating a viable and attractive power sector that encourages investment.

If You Ask Me

The heavy reliance on expensive generators by Nigerians underscores the challenges faced by the power sector. While government efforts are underway to improve the sector’s attractiveness to investors and promote grid connection, significant work remains to ensure Nigerians have access to reliable and affordable electricity. Investing in Nigeria’s gas resources holds the key to unlocking the nation’s energy future and powering sustainable economic growth. Only then can Nigerians truly reap the benefits of a stable and affordable power supply.

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