Four days ago, Nigeria’s electricity grid collapsed again.
This meant that the available energy dropped to 9 MW which is barely enough to power a large estate like VGC.
Yes, that bad.
If you are tired of wondering why the grid continues to collapse, keep reading. ⚡
1/13
The major cause of grid collapse is grid instability.
This happens when electricity demand does not equal electricity supply.
2/13
Electricity is a commodity like any other and the tariff is the price.
The generation companies produce electricity from gas, the TCN transmits it and the distribution companies make sure it gets to our homes and offices.
3/13
But electricity can’t be stored.
If you have power in your office right now, it’s because a generation company miles away is producing that electricity in real-time.
4/13
To understand why the grid keeps collapsing, let’s replace electricity with oranges in this transaction, because remember electricity is a commodity.
5/13
Generation companies produce and send out 10 oranges through TCN to the discos who sell that to their customers.
However, at the end of the month, customers end up paying for only five oranges.
6/13
But the discos must pay the gencos and the TCN for producing and transmitting 10 oranges.
The gencos must also pay their gas suppliers for supplying enough gas for 10 oranges.
7/13
Furthermore, the gencos, TCN and discos must pay their staff and have enough left over to improve their infrastructure.
Without the money for 10 oranges, none of this is possible.
8/13
Since customers will only pay for five oranges, the discos ensure that customers only get five oranges even though they can supply 10.
But this is electricity, and it’s tricky to keep demand stable.
9/13
This affects the supply side as gencos can’t meet up with gas payments.
10/13
These issues in the power sector are quite deep.
But, it’s worth remembering that the key to solving the challenges is to fix the commercial issues and improve revenue along the value chain.
11/13
For instance, consumers need to pay for electricity but they also need to be billed accurately.
This will aid institutions like TCN, whose job is to keep demand and supply stable.
12/13
To further understand why discos don’t receive the full price of electricity supply and other commercial challenges plaguing Nigeria’s electricity sector read #StearsPremiumToday’s breakdown.
Nigeria’s current debt to GDP ratio is currently 22%, far less than the @IMFNews's recommendation of 35%, and much less than international counterparts.
2/18
However, Debt-to-GDP as a measure of a country’s debt sustainability has its flaws.
For example, the US and Ghana have high debt-to-GDP ratios, but while the US can get away with it, Ghana required a bailout from the IMF to settle creditors.
This week, the news broke that Total was selling off its 10% stake in a Joint Venture with Shell, NNPC and Eni that holds twenty onshore and shallow water permits in Nigeria.
Nigeria’s oil sector is in a precarious situation.
THREAD 1/24
Total isn’t exiting Nigeria’s onshore assets just yet; it still has stakes in other assets.
But there are reasons to be concerned about IOCs leaving Nigeria.
2/24
Shell, Chevron, and ExxonMobil are leading the exodus of international oil companies (IOCs) from Nigeria’s onshore assets.
🇳🇬 Nigeria’s budget is about to get even more bloated than it already is and we should all be concerned.
It’s been reported that our budget deficit is likely to hit 4.5% of our GDP this year. 🤯
This is up from the 3.5% that was announced earlier in the year.
THREAD 1/24
There are two major reasons for the adjustment according to the revised 2022 fiscal framework.
The first is lower oil production volumes.
2/24
Nigeria has the capacity to produce over 2 million barrels of crude oil per day but last month, our average production was less than 1.5 million barrels per day (mmbpd) including condensates.