Nigeria Reaches Deal with China’s Exim Bank to Build $5.8bn Hydro Plant

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largest economy Nigeria plans to begin work on a $5.8 billion hydropower plant in the Eastern Mambila region this year, after it agrees on loan terms with China’s Export-Import Bank, the Minister for Power, Works and Housing, Babatunde Fashola has said.

“We hope to break ground this year if we can conclude the financing,” he said as quoted by Bloomberg. “Contracts are in place. We are good to go.”

In August last year, the Minister said that the Chinese lender would finance 85 percent of the cost, and the Nigerian government the remaining 15 percent. China Civil Engineering Corp. will build the 3,050-megawatt power station over five years, and the facility will include four dams measuring 50 meters (164 feet) to 150 meters high, and 700 kilometers (435 miles) of transmission lines.

Nigeria, a country of 180 million people living with daily power cuts, is seeking to expand electricity generation to drive growth after the economy contracted in 2016 for the first time in 25 years.

Fashola, a former governor of Lagos State, the nation’s bustling commercial hub, was appointed in 2015 by President Muhammadu Buhari to take charge of the troubled power sector.

The government expects power-production capacity to increase to 8,600 megawatts in a year from 7,000 megawatts currently, Mr. Fashola added. In comparison, South Africa, with a third of Nigeria’s population, has a power-generating capacity of more than 40,000 megawatts.

Power Distribution Capacity

Nigeria also plans to improve distribution capacity, currently at about 5,000 megawatts. Since the country is able to produce more electricity than it can distribute, some production-capacity will remain idle until the government expands the network.

The government is looking to partner with private companies to invest in mini-grid projects and generate an additional 3,000 megawatts of electricity over five years, Fashola said. Investors are showing interest, he said, without further details.

A number of planned solar power projects have failed to secure funding and should be reassessed, according to the minister. State-controlled Nigeria Bulk Electricity Trading Plc signed preliminary power-purchase agreements in 2016 with private companies for 14 solar projects meant to generate 1,125 megawatts of electricity, but there have been issues over payment-related guarantees, Fashola said.

These should be redesigned to sell electricity not only to the government via the national grid but to customers in remote areas directly, according to the minister.

“They should rethink their models and begin to look at estates and communities,” he said.

The government is also working on regulations to license suppliers of electricity meters to stop some distribution companies from billing arbitrarily, Mr. Fashola noted.

 

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