Identifier
Created
Classification
Origin
07LAGOS5
2007-01-05 15:53:00
UNCLASSIFIED
Consulate Lagos
Cable title:
NIGERIANS SUFFER HUGE LOSSES FROM POWER OUTAGES
how-toVZCZCXRO0740 PP RUEHMA RUEHPA DE RUEHOS #0005/01 0051553 ZNR UUUUU ZZH P 051553Z JAN 07 FM AMCONSUL LAGOS TO RUEHC/SECSTATE WASHDC PRIORITY 8328 INFO RUEHZK/ECOWAS COLLECTIVE PRIORITY RUEHUJA/AMEMBASSY ABUJA PRIORITY 8166 RUEHWR/AMEMBASSY WARSAW PRIORITY 0058 RUEHCD/AMCONSUL CIUDAD JUAREZ PRIORITY 0032 RUEHIT/AMCONSUL ISTANBUL PRIORITY 0039 RULSDMK/DEPT OF TRANSPORATION WASHDC PRIORITY RUEKJCS/SECDEF WASHINGTON DC PRIORITY RUEAIIA/CIA WASHINGTON DC PRIORITY RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY RHMCSUU/DEPT OF ENERGY WASHINGTON DC PRIORITY RUEATRS/DEPT OF TREASURY WASHDC PRIORITY RHEFDIA/DIA WASHINGTON DC PRIORITY
UNCLAS SECTION 01 OF 02 LAGOS 000005
SIPDIS
SENSITIVE BUT UNCLASSIFIED - HANDLE ACCORDINGLY
SIPDIS
DEPT PLEASE PASS TO JAMES WILLIAMS, OPIC
E.O. 12958: N/A
TAGS: ECPS ECON EINV EIND PGOV PREL NI
SUBJECT: NIGERIANS SUFFER HUGE LOSSES FROM POWER OUTAGES
REF: 05 LAGOS 806
LAGOS 00000005 001.2 OF 002
UNCLAS SECTION 01 OF 02 LAGOS 000005
SIPDIS
SENSITIVE BUT UNCLASSIFIED - HANDLE ACCORDINGLY
SIPDIS
DEPT PLEASE PASS TO JAMES WILLIAMS, OPIC
E.O. 12958: N/A
TAGS: ECPS ECON EINV EIND PGOV PREL NI
SUBJECT: NIGERIANS SUFFER HUGE LOSSES FROM POWER OUTAGES
REF: 05 LAGOS 806
LAGOS 00000005 001.2 OF 002
1. (U) Summary: Despite the GON,s moves to privatize and
restructure the power sector, Nigerians continue to suffer
from inadequate power. Industrial and domestic consumers
decry the state of the power sector in the last five months.
Most Nigerians involved in small-scale enterprises spend
naira 30,000 (USD 231) per month on diesel generators to
sustain their businesses, yet they also pay the PHCN monthly
for services not rendered. The GON attributes the dismal
state of power supply to unrest in the Niger Delta and damage
by militant groups to gas pipelines that feed power
generating plants. This excuse has not been generally
accepted by consumers. The average citizen and many experts
argue that problems in the sector are due to poor
infrastructure development and GON mismanagement. Septel will
outline GON's plans to address these problems. End summary.
--------------
Power Reform and Investment No Panacea
--------------
2. (U) As part of a program to overhaul the power sector, the
GON transformed the state-owned National Electric Power
Authority (NEPA) - into the Power Holding Company of Nigeria
(PHCN). PHCN was charged with privatizing 11 power
distribution companies (discos),6 generation companies
(gencos) and 1 transmission company (transco) by the end of
2006. The privatization program is far behind schedule as
this deadline passes. Nor has a major program of government
investment in power projects yet had an impact.
3. (U) Power generation has failed to increase despite
billions of dollars invested by the GON on building new power
plants and refurbishing old ones. In its drive to deliver on
electoral promises of providing 10,000 MW of electricity by
2007, the present administration invested naira 1.3 trillion
(USD 9.6bn) in the sector in the past seven years. Since
December 2005, the PHCN's output has plummeted by almost 50%,
from an already insufficient 4,000 megawatts (MW) to a meager
2,000 MW. Effective demand is estimated at 10,000 MW. The
production cuts resulted in massive load shedding to curtail
a wave of aggressive protests from millions of urban
customers nationwide. The GON attributed the decline to the
disruption of gas production and pipeline facilities in the
Niger Delta since December 2005. This, according to the GON,
had curtailed the volume of gas input to PHCN's thermal
generating plants. The Egbin, Sapele, Delta IV and Afam
thermal plants were affected.
4. (U) The Manufacturers' Association of Nigeria (MAN),in
its recent survey on the impact of power outages on industry,
found industrial estates around the country enjoyed an
average of 7.5 hours of electricity per day in 2005. The
report, which in other words, put total power outages to
industries at 16.5 hours per day, reported that the Ikeja
industrial estate in Lagos had the highest power supply at
12.5 hours per day. Edo and Delta States suffered the
greatest energy scarcity, receiving only 4 hours of power
supply per day. The Bureau of Public Enterprises (BPE)
estimated that Nigeria loses about naira 135bn (USD 1.03bn)
annually to inefficiency in the power sector.
5. (U) MAN member companies run on diesel generators to meet
targets. Resort to generators increases production costs
significantly. One manufacturer claimed he could double his
profits if he could rely on the public power supply.
Sensitive manufacturing processes are hard hit by inadequate
power supply. Even with the use of back-up generators, there
is a gap of several seconds before power is restored, harming
sensitive equipment, according to business owners and
aviation industry officials.
-------------- -
Power Outage Takes a Toll on Average Nigerians
-------------- -
6. (U) Power outages have taken a financial toll on business
LAGOS 00000005 002.2 OF 002
and private life. Many small- and medium-scale business
owners claim they spend naira 30,000 (USD 231) per month to
power their operations. For many, the price of electricity
accounts for most of their overhead costs, undermining the
competitiveness of their products and services. While a
small-scale hairdresser in Ketu, Lagos spends naira 15,000
(USD 115) per month on diesel-powered generators, her
customers have responded negatively to her attempts to raise
charges to cover these costs. The owner of a printing press
claimed to have been running his press exclusively on power
from a diesel generator for several months. According to him,
extra funds that could have been used to expand the business
or maintain machinery were being used on fuel.
7. (U) Domestic consumers suffer similar hardships. Many have
resorted to using small gasoline generators, which power
appliances such as fans and televisions. Most middle and
upper-middle class households have two generators. Many
residents pine for the arrival of the cooler temperatures of
the rainy season so they can reduce generator use and relieve
pressure on household finances.
--------------
Nigeria's Power Company Loses Capacity
--------------
8. (U) A visit to PHCN offices at Magodo and Ilupeju in Lagos
revealed the company's offices also run on diesel-fueled
generators. At the Magodo office, customers paid electricity
bills and lodged complaints about inadequate power supply
above the muffled sound of a 250 KVA F.G. Wilson diesel
generator. In Ilupeju, a 35 KVA Perkins diesel generator was
in use. At both locations, customers challenged PHCN
personnel on the accuracy of their bills and questioned
whether PHCN was overcharging them.
9. (SBU) Poor infrastructure and gross mismanagement of
revenue allocation by the GON and PHCN officials are the
true, underlying reasons for the abysmal state of power
supply in the country. However, according to many industry
sources, if NEPA had properly done its homework the
dislocation caused by the militants would have been a
nuisance but not catastrophic. Over the years, however, NEPA
and PHCN officials inflated contract costs to extract profit.
Some contractors, in collaboration with NEPA/PHCN officials,
were said to have imported used turbines and transformers at
a cost that could have purchased brand new machinery.
--------------
Comment
--------------
10. (SBU) Since 1999, President Obasanjo's administration has
spent more funds on the PHCN than on any other government
enterprise, yet improvements in power supply remains elusive.
Many have attributed this to sabotage and conspiracy between
government officials and importers of generators. Several
target dates for the transfer of power generation and
distribution to the private sector have come and gone without
progress being made. This casts doubt on the GON's political
will to reform the sector, which is believed to be a major
source of patronage for the federal government.
BROWNE
SIPDIS
SENSITIVE BUT UNCLASSIFIED - HANDLE ACCORDINGLY
SIPDIS
DEPT PLEASE PASS TO JAMES WILLIAMS, OPIC
E.O. 12958: N/A
TAGS: ECPS ECON EINV EIND PGOV PREL NI
SUBJECT: NIGERIANS SUFFER HUGE LOSSES FROM POWER OUTAGES
REF: 05 LAGOS 806
LAGOS 00000005 001.2 OF 002
1. (U) Summary: Despite the GON,s moves to privatize and
restructure the power sector, Nigerians continue to suffer
from inadequate power. Industrial and domestic consumers
decry the state of the power sector in the last five months.
Most Nigerians involved in small-scale enterprises spend
naira 30,000 (USD 231) per month on diesel generators to
sustain their businesses, yet they also pay the PHCN monthly
for services not rendered. The GON attributes the dismal
state of power supply to unrest in the Niger Delta and damage
by militant groups to gas pipelines that feed power
generating plants. This excuse has not been generally
accepted by consumers. The average citizen and many experts
argue that problems in the sector are due to poor
infrastructure development and GON mismanagement. Septel will
outline GON's plans to address these problems. End summary.
--------------
Power Reform and Investment No Panacea
--------------
2. (U) As part of a program to overhaul the power sector, the
GON transformed the state-owned National Electric Power
Authority (NEPA) - into the Power Holding Company of Nigeria
(PHCN). PHCN was charged with privatizing 11 power
distribution companies (discos),6 generation companies
(gencos) and 1 transmission company (transco) by the end of
2006. The privatization program is far behind schedule as
this deadline passes. Nor has a major program of government
investment in power projects yet had an impact.
3. (U) Power generation has failed to increase despite
billions of dollars invested by the GON on building new power
plants and refurbishing old ones. In its drive to deliver on
electoral promises of providing 10,000 MW of electricity by
2007, the present administration invested naira 1.3 trillion
(USD 9.6bn) in the sector in the past seven years. Since
December 2005, the PHCN's output has plummeted by almost 50%,
from an already insufficient 4,000 megawatts (MW) to a meager
2,000 MW. Effective demand is estimated at 10,000 MW. The
production cuts resulted in massive load shedding to curtail
a wave of aggressive protests from millions of urban
customers nationwide. The GON attributed the decline to the
disruption of gas production and pipeline facilities in the
Niger Delta since December 2005. This, according to the GON,
had curtailed the volume of gas input to PHCN's thermal
generating plants. The Egbin, Sapele, Delta IV and Afam
thermal plants were affected.
4. (U) The Manufacturers' Association of Nigeria (MAN),in
its recent survey on the impact of power outages on industry,
found industrial estates around the country enjoyed an
average of 7.5 hours of electricity per day in 2005. The
report, which in other words, put total power outages to
industries at 16.5 hours per day, reported that the Ikeja
industrial estate in Lagos had the highest power supply at
12.5 hours per day. Edo and Delta States suffered the
greatest energy scarcity, receiving only 4 hours of power
supply per day. The Bureau of Public Enterprises (BPE)
estimated that Nigeria loses about naira 135bn (USD 1.03bn)
annually to inefficiency in the power sector.
5. (U) MAN member companies run on diesel generators to meet
targets. Resort to generators increases production costs
significantly. One manufacturer claimed he could double his
profits if he could rely on the public power supply.
Sensitive manufacturing processes are hard hit by inadequate
power supply. Even with the use of back-up generators, there
is a gap of several seconds before power is restored, harming
sensitive equipment, according to business owners and
aviation industry officials.
-------------- -
Power Outage Takes a Toll on Average Nigerians
-------------- -
6. (U) Power outages have taken a financial toll on business
LAGOS 00000005 002.2 OF 002
and private life. Many small- and medium-scale business
owners claim they spend naira 30,000 (USD 231) per month to
power their operations. For many, the price of electricity
accounts for most of their overhead costs, undermining the
competitiveness of their products and services. While a
small-scale hairdresser in Ketu, Lagos spends naira 15,000
(USD 115) per month on diesel-powered generators, her
customers have responded negatively to her attempts to raise
charges to cover these costs. The owner of a printing press
claimed to have been running his press exclusively on power
from a diesel generator for several months. According to him,
extra funds that could have been used to expand the business
or maintain machinery were being used on fuel.
7. (U) Domestic consumers suffer similar hardships. Many have
resorted to using small gasoline generators, which power
appliances such as fans and televisions. Most middle and
upper-middle class households have two generators. Many
residents pine for the arrival of the cooler temperatures of
the rainy season so they can reduce generator use and relieve
pressure on household finances.
--------------
Nigeria's Power Company Loses Capacity
--------------
8. (U) A visit to PHCN offices at Magodo and Ilupeju in Lagos
revealed the company's offices also run on diesel-fueled
generators. At the Magodo office, customers paid electricity
bills and lodged complaints about inadequate power supply
above the muffled sound of a 250 KVA F.G. Wilson diesel
generator. In Ilupeju, a 35 KVA Perkins diesel generator was
in use. At both locations, customers challenged PHCN
personnel on the accuracy of their bills and questioned
whether PHCN was overcharging them.
9. (SBU) Poor infrastructure and gross mismanagement of
revenue allocation by the GON and PHCN officials are the
true, underlying reasons for the abysmal state of power
supply in the country. However, according to many industry
sources, if NEPA had properly done its homework the
dislocation caused by the militants would have been a
nuisance but not catastrophic. Over the years, however, NEPA
and PHCN officials inflated contract costs to extract profit.
Some contractors, in collaboration with NEPA/PHCN officials,
were said to have imported used turbines and transformers at
a cost that could have purchased brand new machinery.
--------------
Comment
--------------
10. (SBU) Since 1999, President Obasanjo's administration has
spent more funds on the PHCN than on any other government
enterprise, yet improvements in power supply remains elusive.
Many have attributed this to sabotage and conspiracy between
government officials and importers of generators. Several
target dates for the transfer of power generation and
distribution to the private sector have come and gone without
progress being made. This casts doubt on the GON's political
will to reform the sector, which is believed to be a major
source of patronage for the federal government.
BROWNE