Energy Sector Economic Reform Program


Overview

  • Reference: P-NG-FA0-002
  • Approval date: 28/10/2009
  • Start date: 19/10/2012
  • Appraisal Date: 10/08/2009
  • Status: OngoingOnGo
  • Implementing Agency: FEDERAL MINISTRY OF FINANCE
  • Location: NIGERIAN TERRITORY

Description

The proposed operation of UA 100 million is aligned with the second pillar of the CSP 2005-2009 - i.e. to stimulate private sector-led growth in the non-oil sector, through enhanced infrastructure, agricultural and rural development. The primary importance of the physical infrastructure, particularly the power sector, was highlighted in the Mid-Term Review of the CSP. The main goal of the programme is to support the Nigerian government in its effort to provide access to affordable and reliable electricity supply to all Nigerians and sustain non-oil growth, alleviate poverty and create jobs. The purpose of the programme therefore, is to support the government to improve the electricity system in a sustainable manner and the business environment for active participation of the private sector in the medium term.


Objectives

1. sustain macroeconomic stability

2 Sustain non-oil sector growth

3 Improve the electricity system in a sustainable manner

4 Improve the business environment for active private sector participation in the medium term


Rationale

The gap in Nigeria's power sector has far reaching implications for sustained economic growth and social wellbeing of Nigerians. About 45% of the population has access to electricity, with only about 30% of their demand for power being met. The sector is plagued with recurrent outages to the extent that some 90% of industrial customers and a significant number of residential and other non-residential customers provide their own power at huge cost to themselves and the Nigerian economy. The total capacity of self-generation units in Nigeria is estimated at about 2,500MW. Some industrial customers choose not to use the public system even when it is available because of the poor quality of power. The major gaps in power seriously impede the growth of the non-oil sector and, as a result, job creation and poverty reduction.

Empirical findings on Nigeria suggest that investing in infrastructure is compatible with both the non-oil private sector development and the attainment of MDGs. However, high growth rate in the non-oil sector is seriously constrained by weaknesses in power and transport infrastructure. This result was confirmed by the Investment Climate Assessment of Nigeria, completed in 2008 with the joint support of the World Bank and the Bank. Electricity was found to be by far the most binding constraint to doing business in Nigeria for more than 80% of firms surveyed.

The rationale for the project is that a reliable power system will underpin rapid non-oil GDP growth, poverty alleviation and job creation.


Benefits

Access to affordable and reliable supply of electricity is fundamental for the development of any country and the general wellbeing of a country's population. The Investment Climate Assessment of Nigeria revealed the electricity-induced indirect losses of firms account for 61%, followed by transportation (26%), bribery (11%), theft, robbery and crime (2%). Urgently bridging the power gaps will therefore accelerate positive outcomes in non-oil growth, poverty incidence (which is estimated at 54.7% of the population) and job creation


Key contacts

NJERU Anthony Karembu - ONEC1


Costs

Finance source Amount
ADFUAC 100,000,000
TotalUAC 100,000,000