Nigeria Power Report Q3 2016 - New Market Research Report

From: Fast Market Research, Inc.
Published: Mon Jul 04 2016

The ongoing economic malaise has compounded our already negative outlook for the Nigerian power sector. We expect a combination of sabotage to gas pipelines, a scarcity of access to foreign exchange and a lack of liquidity in the distribution segment to weigh on much-needed private investment in the sector - entrenching slow growth in capacity and generation.

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The outlook for the Nigerian economy is bleak as the country undergoes a painful multi-year adjustment to lower oil prices. We are retaining our view that the ongoing economic crisis will undermine efforts to draw private capital into the domestic power sector.

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We also emphasise that problems across the power sector supply chain - particularly gas shortages due to pipeline vandalism in the Niger Delta - have compounded our negative outlook for the power sector. Militants, known as the Niger Delta Avengers (NDV), have launched a series of attacks on pipeline infrastructure, which has cut gas supply to power plants dramatically.

These attacks were behind the collapse of Nigeria's grid on March 31 2016 - an incident know as a 'zero power' event. No grid-based electricity supply was available for around three hours.

In line with the gas shortages, we now forecast that gas-fired electricity generation will contract by a significant 20% in 2016 and remain flat in 2017. We caution, however, that we cannot rule out further downgrades to our forecast. The rhetoric from President Buhari towards the NDV has been characteristically hardline. It is therefore likely violence will escalate as the government increases its military presence in the Delta and the NDV respond with further attacks.

We emphasise the distribution sector has been hit particularly hard in the last few months as Distribution Companies (DISCOs) struggle to access power (due to gas shortages at generation companies) and collect payment for what little electricity they can provide. DISCOs are reported to be suffering from a revenue shortfall of NRN300bn (USD1.5bn) since privatisation, due to a culture of non-payment for electricity.

In June 2016, Nigeria is reported to have made a final investment decision on an USD80bn Russian-led programme to build four new nuclear power plants. The plants will cost USD20bn each and will be financed by Rosatom, which will construct them under a build, operate and transfer (BOT) agreement.

The Nigeria Power Report features BMI Research's market assessment and independent forecasts covering electricity generation (coal, gas, oil, nuclear, hydro and non-hydro renewables), electricity consumption, trade, transmission and distribution losses and electricity generating capacity.

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