he World Bank has approved of $750 million for the Power Sector Recovery Programme (PSRP) through the International Development Association (IDA).1 The disbursement plan to commence in 2021 is as follows: $426 million in 2021 and $162 million in 2022 and 2023, respectively, summing up to $750 million. The recovery plan being set up is to enable Nigeria achieve a more reliable electricity supply and improve the accountability of the power sector. Presently, approximately 47 percent of the population do not have access to national grid electricity. The population that has access are subjected to frequent power outages, a major constraint that costs the Nigerian economy around $28 billion, annually – equivalent to 2 percent of the GDP. Furthermore, the aim of the PSRP is to make Nigeria a more financially sustainable nation and it will achieve this by increasing the annual electricity supplied to the national grid by 4,500 MWh/hour by 2022. Aside improving service delivery, the additional liquidity will strengthen the balance sheet of distribution companies and enhance their ability to attract private finance. Furthermore, the government will be better positioned to utilize the resources previously used to bail out the power sector for other development spending.
October 27, 2020
Nigeria Economic Update (Issue 38)
The Naira continued to depreciate in the review week. At the parallel market, naira exchanged for N498/$ on January 27, 2017 and N500/$ on February 3, 2017. Despite the weekly sales of forex to BDCs and the significant improvements in the external reserves, the naira has continued to lose value to other currencies. The pressure on the naira has been triggered by escalating scarcity of forex in the spot market, likely due to forex hoarding. However, in the preceding week, the CBN sold $660 million in forwards contract in an attempt to manage liquidity and stabilize the naira. In the face of growing speculation in the parallel market, the monetary authority should institute mechanisms that would discourage excessive forex hoarding among licensed BDC operators. An initiative that monitors transaction dealings in the parallel market would go a long way in detecting erring BDC operators.
Power sector analysis shows a decline in power generated by 15.07 percent from a peak of 3,424 mw to 2,908 mw between May 8, 2016 and May 15, 20169. The declining power supply is attributable to vandalism of pipelines and gas shortages, which has a debilitating effect on power generation. As part of the efforts by the Federal Government to improve power supply in the country, the Bank of Industry (BoI) is currently funding intervention projects to provide alternative source of energy (solar) in rural areas across the country10. Since the major problem facing power generation in the country is gas shortages, the government should make concerted efforts to combat vandalism.