NIGERIA - The Power Sector.

Nigeria has about 5,900 MW of installed electric generating capacity, consisting of three hydro-based stations and five thermal power plants. Nigeria faces a serious energy crisis due to declining electricity generation from the power plants. Power outages are frequent and the power sector operates well below its capacity.

The Nigerian Electric Power Authority (NEPA) is in charge of a sector which is grossly inefficient. The government is hoping to increase foreign participation in the power sector and is looking for independent power producers (IPPs) to generate and sell electricity to NEPA.

In October 2000, NEPA signed a partnership agreement with South Africa's Eskom to help improve electricity supply. Eskom was to help develop NEPA's repair capabilities, execute transmission line projects, and participate in rehabilitating, operate and transfer (ROT) schemes for the running of its power stations. Shell in late 2001 was awarded a 15-year ROT contract for units 1-4 of the Afam power plant, and a lease operate and transfer (LOT) contract for Afam's fifth unit. Shell was to refurbish the Afam power plant at a cost of about $500m, and with a capacity expanding from 400 MW to 900 MW. Eskom was to provide management of maintenance and operations at Afam. ConocoPhillips in late 2001 bought 20% into an IPP being built near Kwale, in the Oil Mining Lease (OML) 60. The other partners in OML 60, to produce oil and gas, are Agip (20%) and NNPC (60%). The IPP, to start up in 2004, will have a capacity of 450 MW.

The privatisation of NEPA has been pushed back to late 2003. But the determination of the new companies to be created from NEPA has been set. NEPA's transmission network will remain a single entity, the Nigeria Transmission Co. Generation will be split into six independent companies, with 11 companies to be created from NEPA's distribution operations. No time table on the creation of the new companies has been announced.

Only 10% of rural households and about 40% of Nigeria's population have access to electricity. NEPA plans to boost this share to 85% by 2010. NEPA's plan would call for an additional 15,000 km of transmission lines, 16 new power plants, and new distribution and marketing facilities. The government awarded contracts for three 335-MW gas-fired plants, valued at $1.1 bn, in November 2002. China's CMEC will build the facility at Okitipupa in Ondo State. A second plant, to be built by the Chinese firm, SEPCO, will be located at Papalanto in Ogun State. Seimens will build the plant at Ajaokuta in Kogi state. The government has begun 1,400 rural electrification projects, and has awarded 410 new contracts.

Utilisation of renewable energy in Nigeria is limited. Although use of solid biomass, such as fuelwood, constitutes a major energy source for rural Nigerians, these traditional resources are not being consumed sustainably. The fuelwood being supplied for domestic needs is resulting in deforestation. In the 1990s Nigeria lost nearly 500 square miles of forested land annually, in part due to fuelwood consumption. Usage of hydropower, geothermal, and solar energy is still small, although there is a realisation that the renewable energy sector must grow in order for the country to develop sustainably.

Hydropower output, which has more than doubled since 1980, nonetheless accounted for just 6.8% (0.06 quads) of the country's 0.92 quads' worth of energy use in 2001. The seasonal nature of Nigerian rainfall limits hydropower from increasing in importance. Nevertheless, in May 2003 the government approved construction of a $6 bn, 3,960 MW hydropower project on the Mambila Plateau in north-east Nigeria.

Solar power is being promoted as a method to improve electricity service to rural villages not connected to the country's power grid. In June 2003, Solar Electric Fund, a US-based NGO, provided a N40m grant to the state of Jigawa to aid in the supply of solar power to some selected villages in an effort to improve socio-economic conditions.

There are also increased efforts to boost the renewable energy sector as a whole in Nigeria. In May 2003, a new Nigerian NGO, the Centre for Renewable Energy Development in Nigeria (CREDN), called on the government to take added steps to boost the use of renewables and thereby diversify the country's energy base away from oil.

CREDN emphasises the fact that, despite Nigeria's vast oil wealth, much of the country's citizens do not have access to uninterrupted supplies of electricity. The group is pushing for increased use of solar, biomass, wind and geothermal sources in order to supplement the country's power production and provide a constant supply of electricity to all Nigerians.

Oil Subsidy: A crippling eight-day strike, which had threatened to disrupt oil exports, ended on July 7, 2003, after the government partly backed down on fuel price increases. But the underlying debate over planned fuel price deregulation continues.

The government on June 20 had raised the gasoline price by more than 50% to N40/litre (US$1.21/USG). But to end the strike it had to reduce it to N34/litre.

During the general strike period violence flared in Lagos and several other parts of Nigeria, with many lives lost. The walkout kept airports, harbours, banks, shops and petrol stations closed. President Obasanjo wanted to end the strike at any cost because US President George W. Bush was due to visit Nigeria on July 11.

The government remains determined to end the fuel subsidy, which in 2002 amounted to about $500m. Fuel prices have been subsidised for more than 20 years.

Nigeria consumes about 160,000 b/d of gasoline. Only one of the country's four refineries was operational last month. This is a 150,000 b/d plant at Port Harcourt which, according to Petroleum Argus of July 14, was operat-ing at 60% of its capacity. This meant the government had to import around 80% of the country's gasoline requirements, up from the usual import of about 80,000 b/d.