Nigeria To Invest In Expanded Electricity Generation With $5.2B World Bank Loan

By Peter Pedroncelli Published: May 10, 2017, 6:09 am
electricity generationNigeria's power, works, and housing minister Babatunde Fashola. Photo: thenationonlineng

Nigeria is looking to invest in plans to expand electricity generation and capacity with a proposed $5.2 billion loan from the World Bank, thereby boosting economic recovery following the country’s first contraction in a quarter of a century.

Nigeria’s power, works, and housing minister, Babatunde Fashola has identified the loan amount as a requirement in order to address the issues that the country has in terms of distribution of power, transmission-capacity and poor access to electricity in rural areas.

These issues have a knock-on effect for the economy, and addressing these would allow for improved electricity capacity for Nigerian private and public enterprise, which would be an investment in Nigeria’s ailing economy.

In a statement last month, the World Bank said the following about Nigeria’s energy situation: “The current status of the power sector characterized by poor service and lack of liquidity is a source of macro-economic imbalances and a binding constraint to the revival of growth for the country.”

Fashola suggests that the World Bank’s private-sector lending arm, the International Finance Corporation, could invest about $1.3bn in power projects and electricity distribution companies, while their risk insurer, the Multilateral Investment Guarantee Agency, may provide additional equity and debt of $1.4bn for gas and solar power programs.

On top of those amounts, loans of $2.5bn will be sought to assist in improving the distribution of power, expanding transmission-capacity and increasing rural access to electricity, and Fashola seems confident that the World Bank will provide the requested funding.

Electricity generation investment through World Bank loan

“Disbursements with the World Bank are being worked out to start from around June, July this year,” Fashola indicated, according to PremiumTimes.

The loan will support capacity building activities that will have a direct impact on economic recovery following a poor 2016 in which the Nigerian economy shrank by 1.5 percent due to the falling oil price and dollar shortages.

Recent World Bank data shows that 57.7 percent of Nigeria’s population has access to electricity, which is a positive increase from 1990 levels at 27.3 percent, but still leaves a great deal of space for improvement, especially in rural areas.

The shortages of electricity lead to increased costs for businesses operating in the country, as they often need to provide for their own electricity requirements through the use of diesel-run generators.

Fashola says that the Nigerian national grid can only transmit around 6,200 megawatts of power at the moment, but projects to be funded via the proposed loan would extend that capacity significantly to around 10,000 megawatts by 2019, according to Fin24.

Last month Rachid Benmessaoud, the World Bank country director for Nigeria made it clear that the bank would be supporting the country’s power sector recovery programme.

“The World Bank Group is committed to supporting the implementation of the Government’s Power Sector Recovery Program to re-establish financial sustainability in the power sector,” said Benmessaoud in a World Bank statement.

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