IMPACT OF POWER GENERATION ON THE ECONOMY OF NIGERIA (1990-2015)

INTRODUCTION

1.1   BACKGROUND TO THE STUDY

Electricity is pivotal to the economic development of nations. Its use is directly correlated with healthy economic growth (Kaseke& Hosking, 2013). Nigeria is one of the most populated countries in Africa but only about 40% of the people are connected to the energy grid. The people who actually have power experience difficulties around 60% of the time (Aliyu, Ramli&Saleh, 2013).

Aliyu, Ramli and Saleh, (2013) claim that these blackouts that is occasioned by poor power generation has crippled the industrial sector. For example outages in this area of the world also have implications for the mining industry. When power fails, workers may be trapped in the mines, so as soon as there is a risk of failure the operations are such down, which leads to economic difficulties (Kaseke& Hosking, 2013). Poor power generation also causes problems for agriculture. Most irrigation lines are run by electricity, so when the power is cut out then the crop yield decreases, (Kaseke& Hosking, 2013). Nigeria’s energy grid is arguably in crisis due to lack of development. The key to making a more reliable energy sector is to find and use a renewable energy resources, rather than simply relying on the country’s non-renewable resources for power generation. The crisis of power generation is a complex problem stemming from a variety of issues. This study will cover the impact of power generation on the economy of Nigeria between 1990 and 2015 and the effect on the people who live in Nigeria and the potential solutions to the crisis.

The people in Nigeria near the oil and natural gas reserves often vandalize or steal oil because they feel like they should have a share in the oil that is coming from their area of the country (US Energy Administration, 2013). In Nigeria the shortfall of electricity leads to the overuse of generators for energy. It is estimated that about 30% of power generated is produced in this manner (US Energy Administration, 2013). Currently the only plan the government has in place to help solve the power generation crisis is to expand the fossil fuel burning sector (US Energy Administration, 2013). Nigeria has a reputation of having one of the most corrupt governments in the world (Ejiogu, 2012). It is rich in natural resources, which should and does create billions of dollars of revenue, the production of the oil is not shared with the rest of the country. About 70% of people in Nigeria live below the poverty line and the unemployment rate is 21% (Ejiogu, 2012). Alternative forms of power generation are not used probably because of availability of oil in Nigeria, as it has the world’s seventh largest oil reserves (Ejiogu, 2012).

Currently Nigeria uses four different types of energy sources for power generation and they includes natural gas, oil, hydro and coal (Aliyu, Ramli&Saleh, 2013). The power generation sector is heavily dependent on petroleum as a method for electricity production which has slowed down the development of alternative forms of energy (Aliyu, Ramli&Saleh, 2013). Three out of the four above resources used for energy production in Nigeria are linked with increasing greenhouse gas emissions: coal, oil and natural gas, with coal emitting the worst of the three (Middleton 2013). The effectiveness of the six power generation companies (GENCOs) in Nigeria has been questioned by stakeholders in recent times. The concerned authorities has continued to blame the failure of these generation companies on the activities of pipeline vandals and other agitating groups sabotaging the efforts of government. However, all these has greatly affected the economic growth of the nation negatively.

As at 1990, the generation and distribution of electricity in Nigeria is handled by the National Electricity Power Authority (NEPA). By 1999-2005 (The advent of democratic government), an act wasenacted establishing PHCN, an Initial Holding Company (IHC), as aresult of Government effort to revitalize power sector. This was anintended name for privatization which was meant to transfer assets andliabilities of NEPA to PHCN. It was officially commissioned on the 5thof May 2005 and was to carry out business of NEPA which is still on.In the same vein, the National Integrated Power Projects (NIPP)was inaugurated in 2004 to be able to catalyze and fast track theupgrading of adding more capacity to the current available power generating capacity in the country.

The PHCN, as a Company, was unbundled into 18 companies asfollows: six (6) generating companies, one (1) transmissioncompany (i.e. Transmission Company of Nigeria-TCN), andeleven (11) distribution companies. The generating companies areEgbin Electricity Generating Company (EEGC), Sapele, Ughelli,Afam, Shiroro and Kainji. There are also some new IndependentPower Producers under the auspices of the Niger-Delta PowerHolding Company (NDPHC). The 11 distribution companies areAbuja Electricity Distribution Company (AEDC), BeninElectricity Distribution Company (BEDC), Eko ElectricityDistribution Company (EkEDC), Enugu Electricity DistributionCompany (EnEDC), Ibadan Electricity Distribution Company(IbEDC), Ikeja Electricity Distribution Company (IkEDC), JosElectricity Distribution Company (JEDC), Kaduna ElectricityDistribution Company (KdEDC), Kano Electricity DistributionCompany (KnEDC), Port-Harcourt Electricity DistributionCompany (PHEDC), Yola Electricity Distribution Company(YEDC). Currently, the Federal Government owns 100% of thetransmission company, while its hold on the generating companies is20 per cent (with 80 per cent of equity sold to private investors. In other words; the transmission company of Nigeria (TCN) is100 per centowned, generating companies (GENCOs) 20 per centowned by government and 80 per centprivate sector ownership. On the 30th of September 2013,theFederal Government handed over certificates of ownership toprospective owners. Since then the generation and distribution ofelectricity have been transferred to the private investors. On Wednesday February 12, 2014, the NigerianElectricity Regulatory Commission at the meeting held with powergenerating and distributing companies in the country unanimouslyagreed that the Transition Electricity Market (TEM) idea should beleft in the cooler for the meantime. The meaning of this is that theelectricity industry in the country is believed to currently operate in thetransition regime.

1.2   STATEMENT OF THE PROBLEM

Power generation is the hub of both economic and technological development of any nation.The electricity industry in the Nigeria has gone throughquite a lot of metamorphosis between 1990 and 2015. Power generation and electricity supply is a very sensitive issue with several political andeconomic sophistications in many countries which most of the timedefine the industry’s effectiveness. Thus, it has continuously drawngreat attention from both the industrialists and the political class. As amatter of fact, it has become a veritable avenue to gaining more votes during elections. More important is the fact that every other sector of theeconomy depends on adequate supply of electricity through effective power generation.

1.3   OBJECTIVES OF THE STUDY

The following are the objectives of this study:

1. To examine the impact of power generation on the economy of Nigeria between 1990 and 2015.
2. To examine the level of effectiveness of the Power generating companies in Nigeria.
3. To identify the factors limiting the adequate generation of Power in Nigeria between 1990 and 2015.

1.4   RESEARCH QUESTIONS

1. What is the impact of power generation on the economy of Nigeria between 1990 and 2015?
2. What is the level of effectiveness of the Power generating companies in Nigeria?
3. What are the factors limiting the adequate generation of Power in Nigeria between 1990 and 2015?

1.5   HYPOTHESIS

HO: There is no significant relationship between power generation and economy development in Nigeria between 1990 and 2015.

HA: There is significant relationship between power generation and economy development in Nigeria between 1990 and 2015.

1.6   SIGNIFICANCE OF THE STUDY

The following are the significance of this study:

1. The outcome of this study will educate the general public on the impact of power generation on the economy of Nigeria between 1990 and 2015.
2. This research will be a contribution to the body of literature in the area of the effect of personality trait on student’s academic performance, thereby constituting the empirical literature for future research in the subject area

1.7   SCOPE/LIMITATIONS OF THE STUDY

This study will cover the activities of power generation companies in Nigeria between 1990 and 2015 and examining its effect on economic development.

LIMITATION OF STUDY

Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).

Time constraint- The researcher will simultaneously engage in this study with other academic work.