Nigeria needs US$5.2 billion in financing from the World Bank to strengthen its power industry, the country’s Power, Works, and Housing Minister Babatunde Fashola said in an interview. The money would go towards boosting Nigeria’s power generation capacity, including from solar energy.
Of the total, the International Finance Corporation could provide US$1.3 billion that would be used for power generation and distribution projects, and the WB’s political risk insurance unit, the Multilateral Investment Guarantee Agency could add US$1.4 billion, to be invested in solar and natural gas power generation projects.
The other US$2.5 billion will be spent on improvements of Nigeria’s power transmission and distribution system, including an expansion of the transmission capacity and a boost of electricity penetration in rural areas. The current transmission capacity of Nigeria’s grid is just 6,200 MW, which should be raised to 10,000 MW by 2019, according to the minister.
The loans will help Nigeria get its economy back on track after the 2014 oil price rout caused the first economic contraction in more than two decades. What’s more, Nigeria’s power output currently stands at about 4,000 MW, compared with 35,000 MW in South Africa, whose population is only a third of Nigeria’s.
Insufficient power supply affects local businesses’ competitiveness adversely because it increases their production costs by forcing them to set up their own power-generating facilities, commonly using diesel generators.
Last year, Nigeria’s economy slipped into recession, with GDP shedding 1.5 percent for the 12 months, with contractions in each quarter. The recession was largely caused by the sharp drop in oil prices, but the situation was additionally aggravated by militant activity in the Niger Delta, which took thousands of barrels off daily production.