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Nigeria-Siemens electricity deal to gulp over N1.15 trillion across four states

The electricity deal signed between the federal government of Nigeria and German-based company, Siemen, may cost Nigeria about €3.11 billion or N1.15 trillion across four major states.

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Buhari signs Siemen's deal, Nigeria-Siemens electricity deal, Power: FG signifies financial commitment to Siemens agreement, Nigeria denies plan to hand over electricity distribution to Siemens

In order to execute the recent electricity deal signed by the Federal Government of Nigeria and German-based company, Siemen, Nigeria may spend about €3.11 billion or N1.15 trillion across four major states.

According to the Technical and Commercial Proposal obtained, the Nigerian electrification project which has three phases and is aimed at achieving 25,000 megawatts of electricity in the country by 2025 will require more than N1.15 trillion to execute.

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The details: According to the information contained in the technical proposal, the budgetary price for the transmission assets upgrade, which includes 11 containerised substations and 10 mobile substations is €330 million or N113.42 billion.

  • Similarly, the cost of the distribution assets upgrade was estimated at €250 million (N85.92 billion). The upgrade would include products and systems for 14 stations and upgrade of 26 substations.
  • According to the proposal, the power system simulation which would entail new software licences for the Transmission Company of Nigeria (TCN) was put at €192,000; software M&S for TCN (€182,000); training and technical services support for TCN (€1.35 million); new software licences for 11 distribution companies (€1.41 million); software M&S for Discos (€848,000) and training and technical services support for Discos (€1.81 million).
  • Lastly, the cost of system development studies for 25,000MW transmission, sub-transmission and distribution grid capacity was put at €1 million.

The Back Story: President Muhammadu Buhari signed the Nigerian Electrification Roadmap which was presented by Siemens in November 2018. The deal was facilitated by the German Chancellor, Angela Merkel last year, in August.

  • The deal was signed in Abuja with the Global Chief Executive Officer of Siemens, Joe Kaeser. The agreement came months after the leading supplier of systems for power generation held several meetings and consultation across Nigeria.
  • Speaking about the roadmap deal, President Buhari said, “we are making an important move towards addressing Nigeria’s electricity challenge. Our goal is a simple one: to deliver more electricity to Nigerian businesses and homes.”

Execution Phases: According to the proposal, the second phase of the project execution is targeted at increasing the grid capacity from 7,000MW (expected to be achieved in phase 1) to 11,000MW.

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Basically, for the new power generation to support central and northern regions, it was revealed in the proposal that “The Nigerian National Petroleum Corporation is already in the process of developing the Ajaokuta-Kaduna-Kano Pipeline Project and the establishment of power plants in Abuja, Kaduna, and Kano states.”

In order to achieve this, Siemens and other participants will focus on transmission and distribution assets upgrade including the North East Transmission Infrastructure Projects 2; supervisory control and data acquisition for Discos; 40MW embedded power project in Abuja, and gas processing projects to ensure fuel availability.

It was further disclosed that: “Siemens proposes a gas processing facility for 300 million standard cubic feet per day from existing flare gas assets for the generation of about 1,200MW of electricity within 36-48 months.

“The 40MW embedded power project was estimated to cost $770 — $815 per kilowatt, depending on the scope of supply and location, among others, amounting to about $31.68m (N9.72bn).”

The third phase according to the proposal would focus on additional transmission and distribution assets upgrade and large-scale power project in order to increase the grid capacity from 11,000MW to 25,000MW.

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The projects will be executed in four states in Nigeria. The proposed projects are 1,350MW in Abuja; 1,350MW, Kaduna; 1,350MW in Kano, and 450MW in Lagos (Agura).

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The budgetary cost of the Abuja, Kaduna and Kano projects is an average of €700/kW, while that of Lagos is €600/kW, amounting to about €3.11 billion ( N1.07 trillion).

In the meantime, it was stated that the current estimations are still subject to changes based on additional information on the specific projects, location, financing and contractual terms and conditions.

[READ MORE: President Buhari signs Siemens electricity deal]

 

 

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Samuel is an Analyst with over 5 years experience. Connect with him via his twitter handle

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Business News

Why households that engage in subsistence agriculture are poor – Yemi Kale

“We established the poverty line at N137,430 and any individual or family that spends below this on food in a year will be classified below the poverty line.”

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Rauf Aregbesola annual colloquium

Subsistence agriculture alone may never be able to sustain any household in Nigeria. This is according to Nigeria’s Statistician-General and CEO of the National Bureau of Statistics (NBS), Dr Yemi Kale, who spoke during the Rauf Aregbesola annual colloquium earlier today. The event had the theme Government Unusual: Innovative Economic Solutions to Unlock Mass Prosperity.

Using insights from the 2019 National Living Standards Survey, Dr Kale explained that households that are solely engaged in subsistence agriculture appear to have the highest levels of poverty. This set of families are followed by households with more than twenty members.

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“This doesn’t mean agriculture is a bad thing. It simply means the way we do agriculture in Nigeria has to be improved so that it does not become synonymous with poverty or we have to find other sources of income for farmers to supplement their standard of living,” he said.

Speaking further, Dr Kale explained that the living standards survey, which was conducted in collaboration with the World Bank, started in late 2018 and ended in 2019. The survey utilized data from all states in Nigeria except Borno whose data was not considered credible enough given the security situation in the state. Kale said:

“We established the poverty line at N137,430 and any individual or family that spends below this on food in a year will be classified below the poverty line.”

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Given this yardstick, the survey established that at least 22.9 million Nigerians are living in poverty, with the bulk of this number coming from the rural areas and states with low indices on education, social welfare initiatives, employment, and income equality.

Formalising the informal sector

The informal sector comprises people who earn enough to keep above the poverty line on a daily basis, but not enough to sustain them in the event of a lockdown, as was seen recently in some states during the April COVID-19 lockdown. This is a problem that can only be solved if the informal sector becomes formalised, Kale said. In other words, formalizing this sector will help more daily wage earners stay above the poverty line. He made reference to the recent lockdown which incapacitated lots of daily wage earners in states such as Lagos.

Nigeria’s poor versus other African countries

Making a comparison, Yale also noted that Nigeria’s poor are poorer than their counterparts in South Africa despite the fact that the nominal size of Nigeria’s economy is much larger.

He attributed this to findings which showed that Nigerians spend three times more on foods and consumables than all other items put together, as against countries like South Africa and Egypt where less is spent on food items.

“Nigerian remains Africa’s largest economy, but per capita income is rather low for a country of this size, and the level of poverty presents a major development challenge” he noted.

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Reducing unemployment – the fastest way out

According to Kale, the fastest way out of poverty is to reduce unemployment, as people will naturally have more to spend on their needs when they are employed. To support his point, Kalu cited five Nigerian states with the least poor people in comparison to the other states Lagos, Delta, Ogun, Osun, and Oyo. Each of these states has fewer unemployment levels compared to the states with higher poverty rates such as Sokoto, Taraba, Jigawa, Ebonyi, and Adamawa states.

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Other indicators which show similar trends across the states are education, and ease of doing business. The poverty rates are almost always higher where education is poor.

Increasing local production

Also making a presentation during the colloquium, Dr Joe Abah called for a review of the 1978 land use act which he said is limiting in its provisions. He also stressed that Nigeria needs to improve access to capital, raw materials, lands, and technological innovations so that production capacity can increase significantly.

“All of the richer countries simply produce more, and they produce more things that people want to buy and want to consume. It could be products or services. the higher your production capacity, the richer you are. if you cannot produce, you cannot develop your education or your health sector.”

According to Abah, the cost of governance cannot be reduced without adopting some of the suggestions of the Oronsaye report, and restructuring the system for productivity. He said that “there is also a need to link budget and funding to productivity so that public sectors begin to understand that the more funding they require, the more they are expected to produce as well.”

He also suggested that states should start focusing on their competitive advantage and use same to improve general productivity in their state.

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Other panelists at the colloquium include Mallam Nasir El-Rufai, Governor, Kaduna State, Sen. Abubakar Bagudu, Governor, Kebbi State, Mrs. Hajara Adeola, CEO, Lotus Capital Limited, Mr. Bismarck Rewane, CEO, Financial Derivatives Limited, Dr. Joe Abah, Country Director, DAI, Dr. Yemi Cardoso, Chairman, Citibank Nigeria, with Boason Omofaye as the moderator.

You may watch the colloquium by clicking here.

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Economy & Politics

Output cut: Nigeria leads in OPEC non-compliance with 50 unsold cargoes of crude

Nigeria and Iraq were reported not to have kept to their commitment to the huge production cut deal that had promised to reduce output by 9.7 million barrels of crude oil per day.

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Petroleum Industry Bill to be passed by mid-2020, says Sylva, FG discovers crude oil in north, says there’s more , OPEC, non-OPEC countries to meet as Saudi, Russia price war affects Nigeria’s budget, FG considers fuel price reduction, OPEC deal: Nigeria to generate additional $2.8 billion revenue as FG reacts

As opinions continue to differ on whether OPEC will extend its current oil output cut beyond June, available information has shown that not all members of the oil cartel complied fully with their agreed quotas for the month of May. This is despite the fact that the oil output by OPEC member countries reached its lowest in almost 20 years.

Available data from oilprice.com showed that OPEC members cut their output by 5.91 million barrels per day from the April level, producing 24.77 million barrels per day. This figure also showed a 4.48 million barrel per day of the agreed output cut, thereby representing a 74% compliance level.

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Nigeria and Iraq were reported not to have kept to their commitment to the huge production cut deal that had promised to reduce output by 9.7 million barrels of crude oil per day.

Iraq was able to achieve just 38% compliance of its agreed output cut for the month of May, while Nigeria, which achieved a much lower compliance of the agreed output cut, recorded 19% compliance of what was agreed. Saudi Arabia showed the highest compliance, recording 96% of the agreed output cut.

Some have attributed the noncompliance of some members of OPEC to the agreed output cut, to the contractual obligations and commitment to buyers, given the short timeframe between when the agreement for the output cut was made and its implementation.

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Meanwhile oil exports from Angola and Congo remained steady at high prices on Friday, while Nigerian oil fared lower amid huge inventory of unsold cargoes.

Nigeria continues to face some difficulty in the oil market, primarily due to sluggish demand from Europe; it has around 50 unsold cargoes of crude oil yet to be sold for the months of June and July.

Meanwhile, India has become one of the few buyers for the Nigerian oil. Indian oil firms bought about 5-6 million barrels of Nigerian crude oil last week and has bought about 2 million barrels as at Thursday this week.

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Business News

President Muhammadu Buhari reshuffles NNPC’s board of directors

Note that the former board included the late Chief of Staff to the President, Abba Kyari as a member. Stakeholders have since expected the President to reconstitute a new board to take over.

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President Muhammadu Buhari to address Nigerians on Monday, receives update and recommendations from PTF

President Muhammadu Buhari has approved the reconstitution of the board of the Nigerian National Petroleum Corporation (NNPC) after the expiration of the tenure of the current board.

The newly constituted board members are expected to serve for a tenure of three years, effective immediately. They will take over from the last board, whose 3-year tenure officially ended in 2019. Information about this development is contained in a State House press release that was published on the official twitter handle of the Nigerian Presidency on Saturday morning.

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READ MORE: Construction of ICT Parks nudges Nigeria into digital transformation

READ ALSO: CBN and NIPOST open pilot microfinance branches

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The newly constituted NNPC board is made up of six members from each of the geo-political zones in the country. The members include the following individuals:

  • Mallam Mohammed Lawal, representing the North West
  • Dr Tajudeen Umar from North East
  • Adamu Mahmood  Attah from North Central
  • Senator Magnus Abe from the South-South
  • Dr Stephen Dike from the South East, and
  • Chief Pius Akinyelure from the South West geo-political

READ MORE: Boko Haram: A protracted battle yet to be won?  

Of the six members, three are returning members on the board – Chief Pius Akinyelure, Mallam Mohammed Lawal, and Dr Tajudeen Umar from North East.

Note that the constitution of the new board is considered a welcome development, as it balances the representation of the six geo-political zones on the board. The previous constitution of the board was faulted for not being “balanced”.

READ ALSO: Full text of President Muhammadu Buhari’s 58th Independence day broadcast

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Note that the former board included the late Chief of Staff to the President, Abba Kyari as a member. Stakeholders have since expected the President to reconstitute a new board to take over.

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