Lagos State’s ambitious plan to generate its own electricity

Electricity Market

No responsible government will be confronted with Nigeria’s socio-economic statistics that will not want to think outside the box. Is it the rising unemployment rate, inflation rate, irregular power supply or the worsening insecurity level that will not make a government go the extra mile?

Therefore, it was with high enthusiasm that the business community received the news that Lagos State, Nigeria’s commercial hub had finalised plans to generate its own electricity in order to guarantee regular power supply

According to the policy document released by the Lagos State Government, the state, estimated to have 27 million individual, commercial, industrial and other users including schools, research institutes, religious places of worship currently gets about 1,000MW of electricity from the national grid which lasts for about 12 hours.

As Africa’s largest city, to get 24 hours power supply, Lagos requires about 9,000MW of electricity supply daily. At the current national electricity generation level, there is no way this level of electricity supply could be met. Even with the country’s installed capacity now at 13,000MW, the average electricity generation hovers around 4,000MW.

Worse still, the national power grid suffers from collapse unpredictably. Between January and July 2021, Nigeria recorded four power collapses each of which lasted for about 40 minutes. It is also on record that between 2013 and 2020, the national grid recorded 84 failures and collapsed partially 43 times.

Lagos State, just like Nigeria, is under the pressure of high youth unemployment, which many stakeholders have regarded as a time bomb if not urgently addressed. It is therefore a step in the right direction for the state to have taken this initiative.

The ambitious Lagos State plan is a welcome development for many reasons. If successfully implemented, it will attract billions of dollars in investments into the state, and Nigeria as a country. First, the policy will provide the learning curve to other states in need of 24 hours electricity supply for their industrial and commercial needs especially states like Ogun, Oyo, Kaduna, Kano, Akwa Ibom, Rivers, Anambra and Delta. What’s more, the policy will take an unnecessary financial burden off the central government. Third, the multiplier effects, in terms of the forward and backward linkages are humongous.

On average, it costs about $2 billion to construct a conventional fossil power plant while an advanced fossil power plant will attract about $5 billion. Further, a grid-connected solar-hydrogen power plant will attract about $3 billion while a variant with H2 storage will attract about $4 billion, with plant construction duration ranging from 3 to 10 years. A billion-dollar investment today is about N400 billion.

Nigeria as a country will be the greatest beneficiary if it throws its weight behind the Lagos State Government’s initiative to generate its own power

Lagos State is the home to the majority of Micro, Small, and Medium Enterprises (MSMEs) in the country. Based on the findings from past surveys conducted by BusinessDay, the income level of MSMEs especially those using their homes as offices improved whenever there was stability in electricity supply. This is easily understood when we consider the huge amount of resources that go into electricity generation via generators.

The MSME sub-sector of the economy, proxied by direct assessment tax, generated N17.07 billiontax revenue for the Lagos State Government in 2020 which was higher than the total IGR generated by eighteen states in Nigeria as of 2020. So, if with irregular power supply, MSMEs could contribute this much to the IGR coffers of Lagos State, their level of productivity could best be imagined with the right business environment of which regular power supply is a major requirement.

Meanwhile, some stakeholders still believe that the federal government might scuttle the plan. References were made to acrimonious handling of the Enron Power Project in the state about a decade ago.

With Nigeria in need of initiatives to address her infrastructure challenges, high unemployment rate, insecurity, the time has come for the federal government to treat each state and region in Nigerian on a need-based basis. In other words, Nigeria as a country will be the greatest beneficiary if it throws its weight behind the Lagos State Government’s initiative to generate its own power.

Influx of investments will not only lead to jobs creation which Nigeria urgently needs right now, it will address the steady depreciation of Naira, while also help fast-tracking the restructuring of Nigeria.

In the end, the federal government will realise that most of the items reserved for it on the exclusive list are an unnecessary burden, which ought to be the responsibilities of state governments.

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