Required Infrastructure Investments

In order to achieve the goals and objectives of the Energy sector, Nigeria needs to increase its investment in Energy infrastructure. Estimates using international benchmarks suggest USD 1,000 billion will be required over the next 30 years to achieve the specific sector targets – USD 600 billion for power and USD 400 billion for oil and gas, which include maintenance cost.

For power, the bulk of the investment will be required to increase generation capacity from current levels of about 7 GW to 350 GW (which will be largely funded by the private sector), to build the transmission network to transfer the generated electricity across the country and to distribute electricity to Nigerians (which will be funded by the private sector). The unit cost estimates for generation are expected to decline in the period 2024–43 as Nigeria becomes more efficient at building power plants and economies of scale exert downward pressure on costs. Over the next 5 years, Nigeria needs to spend USD 23 billion in power, of which USD14-16 billion will be required to increase generation capacity from current levels of about 7 GW to 20 GW by 2018, USD 3-5 billion to increase transmission capacity, and USD 3-5 billion to increase distribution capacity.

For oil and gas, the biggest cost drivers will be increasing existing refining utilisation to match the 445 kbpd capacity, increasing refining capacity to meet local crude production capacity, building additional pipelines, increasing oil production capacity and developing the infrastructure to increase production capacity in oil and gas. Over the first 5 years, Nigeria will spend USD 37 billion: USD 12 billion to increase gas production from current levels of 8,000 mcfpd to 11,000 mcfpd, USD 16 billion to increase oil production capacity by 250 000 bpd and USD 9 billion to increase refining capacity by 300 000 bpd. Most of the refining and oil production increase will be funded by the private sector, whereas a significant part of gas expansion will be funded by the public sector.

To ensure that Nigeria reaches its ambitious targets, it will need to ensure an appropriate cost reflective tariff for power, drive transmission and distribution losses down to a reasonable level in order to make the tariff more affordable, put appropriate gas contracts in place to ensure gas is delivered to power stations and make adequate upfront investments in skills and capabilities to deliver and operate the necessary infrastructure.