Nigeria – a train moving with the brakes on

By Palle Ellemann, Senior Consultant at GES

GES has just returned from a week in Lagos, Nigeria, engaging with companies on behalf of investor clients. Africa’s largest city with about 15 million people shows the potential of this African power country with altogether 170 million people. Despite the 35 degrees Celsius temperatures, people are busy getting around and Indian, Chinese and European business people are trying to “jump on the Nigerian growth train”.

And then you get stuck in traffic or the power just shuts off as it does 10-20 times a day. It is assessed that Nigeria could add another 4 per cent of growth, if the power supply issue was fixed. The unstable – and for some people lacking – power supply is a serious obstacle limiting the possibilities to do business efficiently. Only the generator producers are excited about the situation, as most medium to large businesses and residences have their own back up diesel powered electricity generators, reducing the interruption to 30-60 seconds when the state grid can’t hang with demand. But the huge diesel driven generators are shooting up the CO2 emissions for the country – and also pump smog directly onto the Lagos streets.

The awareness of climate change and the need to reduce the carbon footprint is, however, very much on the agenda of many companies and authorities. Some of the banks GES engaged with had already reduced opening hours and introduced mandatory generator shut-down times in order to reduce the use of energy and CO2 emissions.

The Lagos State Government has recently announced the ambition to reduce green house gases by 45 per cent by 2030. The key focus is on the rapidly growing and polluting transport sector, where the state is planning for better public transport with train lines and water transport.

The Nigerian Government would also like to do something about the power supply issue, but is currently stuck in the dilemma that consumers do not want to see any increases in the subsidized electricity price as long as the supply is working so poorly, yet the government needs to introduce price increases to fund the system overhaul.

Eighty per cent of the government revenues come from crude oil export, but the refinery capacity is so low in Nigeria that this incredibly oil rich country has to import refined oil products such as petrol for domestic consumption! At the same time, the national oil company is losing about 10 per cent of its crude production to theft – both physical and administrative. Revenues missing and millions of barrels of oil flowing out on the black oil market and the land and rivers have devastating environmental, social and governance consequences for the country.

Huge challenges are ahead for Nigeria, but if the country can deal with these issues, it could really be the growth train driving progress in West Africa.

Leave a Reply

Your email address will not be published. Required fields are marked *