Power Purchase Agreement Suspension Halts New Power Plant Development, warns Nnaji

Samuel Mobolaji

The suspension of power purchase agreements (PPAs) in 2015 has severely hindered the emergence of new power plants in Nigeria, according to former Minister of Power, Professor Bart Nnaji.

Speaking at a forum organised by the Udo Udoma and Belo-Osagie law firm in Lagos, Nnaji, who is also the founder and chairman of Geometric Power, explained that the urgent need to reinstate these agreements with private sector investors to enhance the country’s electricity generation capacity.

Nnaji highlighted that since the PPA suspension, no new power plants have been constructed by private investors. Nigeria currently has an estimated nameplate capacity of around 13,000 megawatts, but only generates approximately 5,000 megawatts due to various challenges, including a shortage of natural gas for gas-fired plants, which comprise 80 per cent of the national grid’s electricity supply.

He noted, “Without the resumption of PPAs, it will be very difficult for any investor to provide funding for grid power generation.” He explained that these agreements offer crucial reassurance to investors, citing the 450-megawatt Azura power plant in Edo State, which required around $900 million to develop.

Nnaji pointed out that the partial risk guarantee (PRG) introduced in 2012, during his tenure as power minister under President Goodluck Jonathan, enabled creditors to provide long-term funding for such projects. He also mentioned that major players like ExxonMobil and General Electric have halted plans for a 1,000-megawatt thermal plant in Aba, having already invested hundreds of millions of dollars.

Energy consultant Cliff Eneh noted that constructing just one megawatt of gas power capacity costs between $1.3 million and $1.5 million.

He emphasized that both the Federal Government and various state governments lack sufficient resources to bridge the country’s significant power supply gap of over 50,000 megawatts.

Eneh compared Nigeria’s situation to Egypt and South Africa, which each generate 58,000 megawatts but still face power supply issues. “This demonstrates that even 58,000 megawatts may not be adequate for us,” he asserted, echoing Nnaji’s call for reinstating PPAs.

Nnaji further highlighted the urgent need to address the crippling gas supply crisis, stating that it is unacceptable for Nigeria, the ninth-largest gas producer globally, to struggle with domestic gas provision.

He recounted challenges faced by his 188-megawatt Geometric Power Plant, which has experienced gas shortages since its commissioning on February 26 by Vice President Kashim Shettima on behalf of President Bola Tinubu.

He concluded that the ongoing power sector challenges reflect the broader economic crisis in Nigeria and urged political leaders to adopt a more patriotic approach to resolving these issues. Nnaji reminisced about a time when government officials utilized locally assembled Peugeot vehicles, which fostered job creation and supported local industries, advocating for a return to such practices to promote economic growth.