Exploring Investment Opportunities in the Electrical Power Generation Sub-sector in

Nigeria: An Overview of Kano Electricity Distribution Company (KEDCO)

Mustapha Sani Sumaila*1 and Ahmad Tijjani Dahiru2

1, 2 {Electrical/Electronic
Technology Education Department
School of Secondary Education Technical
Federal College of Education (Technical) Bichi, Kano – Nigeria; [email protected];
+234 803 0604 0787 & [email protected]; +234 806 9595 623}

ABSTRACT

The paper examined the investment prospects of a Regional electrical power distribution company in
northern Nigeria for private sector large scale/commercial electric power generation. In addition to a
brief outline of the general national power requirements, the paper exposed the viability of the region
for commercial energy generation by highlighting the population density (18,776,202 in 2006 to an
estimated 34,000,000 by 2020) and the resultant power demand (an estimated 50,000 MW+/Day) and
inadequacy (305.7 MW/Day maximum). It also outlines the various prospective energy sources
available in large quantities within the region and presented the guidelines and requirements for the
establishment of Independent Power Plants as endorsed by the regulating authorities. Conclusions
were drawn and recommendations were made.

Keywords: Electrical Power Demands; Power Generation; Energy Resources

INTRODUCTION

There is no doubt that “access to electricity is fundamental to opportunity in this age. It is the light
that children study by; the energy that allows an idea to be transformed into a real business. And it is
the connection that is needed to plug Africa into the grid of the global economy” [1]. Electrical power
has to be made available, assessable and affordable. Nigeria has the largest population and economy
on the African continent (Population is the seventh largest in the World - 160 million people and still
growing at over 6% per annum) [2] and is well endowed with enormous deposit of conventional
energy resources like coal, oil, natural gas, tars and uranium ore [3]. It is even more richly endowed
with renewable energy resources of solar, wind, hydro and biomass/biofuels. As at today, only oil and
gas; and hydro sources are seriously being exploited in the country.
Despite this, a wide gap exists between electrical energy demand/expectations and production in the
country. Nigeria has an installed electricity generation capacity [4] for supply to the national grid of
12,522MW, with available capacity of only approximately 4,500 MW (see figure 1) [5]. The Kano
Electricity Distribution Company (KEDCO) is one of the eleven Distribution Companies privatized
by the Federal Government of Nigeria as part of the electricity power sector reform program
implementation. Located in the north western geopolitical zone of Nigeria, the Company has license
to generate, distribute and market electricity in the three states of Kano, Jigawa and Katsina covering
an estimated area of 67,128 KM2 [6].
Figure 1: Daily Peak Power generated

(Source: FGN, 2013)

The total off-grid electricity generation capacity as approved by the Nigerian Electricity Regulatory
Commission (NERC) is still less than 5000MW. Considering Nigeria's plans to increase generation
capacity in the coming years and the low level of access to electricity in the rural areas; there is need
for significant investments in off-grid generation.
As an example, Bangladesh is one of the world's most densely populated countries with a population
of over one hundred and fifty eight million and has made a success story from implementing off-grid
power solutions. This then means that same approaches can be adopted in Nigeria with a view to
boosting energy generation capacity, and private sector investment from within the country and
without is therefore very imminent. Currently, the electricity market remains an attractive long term
investment opportunity. In the medium term, it is expected that “the biggest investment inflows to
come into the generation segment which offers the highest risk-adjusted returns at the moment, as the
overall systemic risk appears to be skewed in favor of the Gencos largely due to sovereign guarantees
backing contracts in that segment” [7].
This paper, briefly traces the history of Electrical power generation dating back to pre-colonial era
and the various development efforts made by successive regimes aimed at expanding the generation
capacity; made a brief analysis of the current energy demand as it affects the sub-region cum the
current available energy supplied to the region; explore the various alternative energy sources that can
be easily harnessed to boost the generation capacity; before drawing conclusion and making
recommendations.

HISTORY OF ELECTRICAL POWER GENERATION

Electricity generation started in Nigeria in 1896, but the first electric utility company known as the
Nigerian Electricity Supply Company, was established in 1929. By the year 2000, a state-owned
monopoly power industry, the National Electric Power Authority (NEPA), was in charge of the
generation, transmission and distribution of electric power in Nigeria. The organization operated as a
vertical integrated utility company and had a total generation capacity of about 6, 200 MW from 3
hydro and 4 thermal power plants. This resulted in an unstable and unreliable electric power supply
situation in the country with customers exposed to frequent power cuts and long period of power
outages and an industry characterized by lack of maintenance of power infrastructure, outdated power
plants, low revenues, high losses, power theft and non-cost reflective tariffs.
In the year 2001, the reform of the electricity sector began with the promulgation of the National
Electric Power Policy which had as its goal the establishment of an efficient electricity market in
Nigeria. It had the overall objective of transferring the ownership and management of the
infrastructure and assets of the electricity industry to the private sector with the consequent creation of
all the necessary structures required to forming and sustain an electricity market in Nigeria.
In 2005 the Electric Power Sector Reform (EPSR) Act was enacted and the Nigerian Electricity
Regulatory Commission (NERC) was established as an independent regulatory body for the electricity
industry in Nigeria. In addition, the Power Holding Company of Nigeria (PHCN) was formed as a
transitional corporation that comprises of the 18 successor companies (6 generation companies, 11
distribution companies and 1 transmission company) created from NEPA. In 2010, the Nigerian Bulk
Electricity Trading Plc (NBET) was established as a credible off-taker of electric power from
generation companies. By November 2013, the privatization of all generation and 10 distribution
companies was completed with the Federal Government retaining the ownership of the transmission
company.
The Electric Power Sector Reform (EPSR) Act was signed into law in March 2005, enabling private
companies to participate in electricity generation, transmission, and distribution. The government
unbundled PHCN into eleven electricity distribution companies (DisCos), six generating companies
(GenCos), and a Transmission Company (TCN). The Act also created the Nigerian Electricity
Regulatory Commission (NERC) as an independent regulator for the sector.
At present, the Federal Government has fully divested its interest in the six GenCos while 60% of its
shares in the eleven (11) DisCos has been sold to the private operators. The Transmission Company
still remains under government ownership. The generation companies created following the
unbundling of PHCN are as indicated in Table 2:
Table 2: Generation Companies, Types and their respective installed capacity (MW)
S/N Facility Type Installed Capacity

1 Kainji Hydro 760

2 Jebba Hydro 540
3 Shiroro Hydro 600
4 Olorunshogo Thermal 304
5 Egbin Thermal 1320
6 Sapale – FGN Gas 720
7 Delta Thermal 900
8 Afam I - V Gas 726
9 Afam VI Gas 450
10 Afam (Shell) Gas 120
11 Omotoshu Gas/ Thermal 304
12 Geregu Thermal 414
13 AES Gas 294
Total 7488

(Source: FGN, 2013)

AVAILABLE ENERGY SUPPLIED TO THE REGION AND THE CURRENT ENERGY
DEMAND

From table 2, the overall installed capacity of the generation companies’ stand at 7488 MW. Also
from the same table, it can be seen that none of the generation companies is located within or even
near the area under review, that is, the Kano Electricity Distribution region. Kano Electricity
Distribution Company (KEDCO) is located in the north western geopolitical zone of Nigeria. The
Company generates, and distributes and market electricity in the three states of Kano, Jigawa and
Katsina. Geographical coverage of the company is 67,128 Km2. The company has the largest
potential in terms of customer population with the combined population of the three states at
19,564,000 people [8]. The current distribution capacity of the Kano Electricity Distribution Company
stands at 788 GWh [9].

Kano Electricity Distribution Company gets its bulk power supply from the following Transmission
Stations:
1. Kumbotso Transmission Station 4x150MVA, 330/132KV Transformer. Ex-Kaduna Regional
Transmission Station.
2. Zaria Town Transmission Station 1x60MVA, 132/33KV Transformer feeding Funtua Town in
Katsina State.
3. Jos Transmission Station 30MVA, 132/33KV Transformer feeding Tudun Wada and Doguwa
Local Government Areas of Kano State via Saminaka 33KV feeder.

The bulk power supply from the Transmission Station is wheeled to a number of Sub-Transmission
Stations located at different areas within the geographical area of Kano, Katsina and Jigawa States.
The Sub transmission station wheels power to various Distribution Injection Substations.

The electricity peak projection for Nigeria was categorized based on speculated Gross Domestic
Product (GDP) growth rate of 7% referred to as reference growth; 10% (high growth) and 11.5%
(optimistic growth). The projection speculated that the nation would require 28,360MW at reference
growth rate; 30,210MW and 31,240MW at high and optimism growth rate respectively in 2015. It is
however expected that access to electricity in the country would grow from less than 50 per cent in
2014 to between 75-86 per cent base on the growth criterion in 2015 and peak at 90-95 per cent by
2030.
The combined estimated population of the Kano (16 million), Katsina (10 million) and Jigawa states
(8 million) is over 36 million people [9]; and the projected energy consumption for a city with a
population of 1 million people is 10,000 MWh. Therefore, the estimated energy requirement of the
Kano Electricity Distribution Company may stands at about 3600 GWh. This is short of 2812 GWh
(3600 – 788), which means less than 30% of the energy requirements of the region is been met. This
creates a wide gap which the current Generating Companies are unable to fill, and which requires the
involvement of more investment by other private Generation companies

AVAILABLE ENERGY SOURCES IN NIGERIA

In order to fill the gap so created and even make adequate provision for the future; and project
expansions, this paper explore the energy potentials with excellent proximity within the Kano
Electricity Distribution Company region. Table 3 shows the locations of small and medium Hydro
power projects in Nigeria and their projected capacities and estimated costs [10). From the table, four
locations, that is, Challawa and Tiga (Kano State) and Zobe and Jibia (Katsina State) are within the
region under study; and the four stations can generate an estimated 21.8 MW of electricity.

Table 3: Small and Medium Hydro Power Projects in Nigeria

Dam State Capacity (MW) Estimated Cost ($)

Oyan Ogun 10 7,500,00.00
Ikere Gorge Oyo 6 4,275,000.00
Bakolori Zamfara 3 11,000,000.00
Challawa Gorge Kano 7.5 33,500,000.00
Tiga Kano 10 44,562,000.00
Kampe Kogi 3 8,125,000.00
Owena Ondo 0.45 1,287,500.00
Doma Nasarawa 1 4,900,000.00
Zobe Katsina 0.3 1,531,250.00
Jibia Katsina 4 91,250.000.00
Source: FGN, 2013)

For Gas powered generation, the Nigerian Power Reform Strategy has set a Long Term Goals (2015
and beyond) of ownership for this sector. Table 4 presents the required configuration.

Table 4: Required Configuration for the Ownership and control of Gas Power

Gas Gas Power Power Power

Production Transmission Production Transmission Distribution
Ownership Mixed Mixed Largely FGN Fully Private
Private
Operational Largely Largely Fully Private Fully Private Fully Private
Control Private Private
(Source: FGN, 2013)

Similarly, renewable energy (RE) resources, like solar, wind, hydro, geothermal, biomass etc, they
are, in principle non-exhaustible as they are always available on a cyclic or periodic basis and they do
not emit greenhouse gases. Studies have shown that there is a large deposit of numerous renewable
energy resources in the country (see Table 5). The region under review, that is, Kano, Katsina and
Jigawa states of Nigeria have sufficient resources for solar (3.5 – 7 KW/m/day from the wild and
available sun shine (4 – 8 hours/day. The region also sufficient wind power (2 – 6 m/s @ 10m height)
to drive wind turbines. Again, there is a large deposit of Biomass from the large collection of
municipal and agricultural waste (estimated more than 61 million tons/year).

Table 5: Renewable Energy Resources

S/N Resource Potential
1 Large Hydropower 11,500 MW
2 Small Hydropower 734 MW
3 Solar 3.5 7.0 KW/m/day
4 Sun shine 4 -8 hours/day
5 Wind 2 -6 m/s @ 10m height
6 Biomass – animal waste 61 million tons per year
7 Crude oil 36.2 billion barrels deposit
8 Natural Gas 187 trillion scf
9 Coal and Lignite 2.7 billion tons
(Source: SERC – UDUS)

The Sokoto Energy Resources Center (SERC) of Usmanu Danfodio University has identified the
numerous opportunities available in the generation sub-sector (see table 5). If multinational power
generating companies can be involved, significant progress can be made in utilizing the numerous
energy sources in this region in particular and the country in general. Therefore this resources,
coupled with various enabling laws for the private sector to gainfully embark on both grid and off-
grid generation undertakings. And with this, with a short period of time the issue of energy
inadequacy will be thing of the past.
CONCLUSION
Socioeconomic development in emerging economies such as Nigeria requires an adequate and huge
investment in the power sector to meet key developmental needs. Nigeria represents over 65% of the
effective West Africa market and remains the most competitive destination for the establishment of
medium and large manufacturing industries. The largest of any country in Africa, it accounts for
nearly half the total population of West Africa and more than 15% of the total population of the entire
African Continent. In addition, the country have a very broad range and quantity of fuels available for
power generation (gas, hydro, coal, wind, solar, etc.). With all this, Nigeria can only boast of installed
Generation Capacity 10,000MW by December 2013 and a paltry Peak Generation of 4,500MW.

This situation, regrettably, creates a huge widening gaps between demand and supply; massive
industry flight leading to worsening unemployment; and high suppressed demand throughout the
country. This leads to a large number of manufacturing and industrial operations grounded or
relocated to neighboring African Countries and a subsequent painful loss of economic dominance in
the west coast. The area under the Kano Electricity Distribution region can be said to be most affected
by this unfortunate situation. The city has over the years has been left behind as many industries have
continuously closed down [11].

It against this background that this paper made a brief analysis of the current energy demand as it
affects the sub-region cum the current available energy supplied to the region; explore the various
alternative energy sources that can be easily harnessed to boost the generation capacity; before
drawing conclusion and making recommendations. This is with the view to inviting investors to tap
from this opportunity by harnessing the available resources especially in the Kano Electricity
Distribution region.

RECOMMENDATIONS

The paper therefore make the following recommendations:

1. The Challawa and Tiga (Kano State) and Zobe and Jibia (Katsina State) should privatized to
enable their completion, operation and full utilization.
2. The age long Katsina Windmill farm should also be privatized to enable its completion,
operation and utilization.
3. The processing of the bulk municipal waste from the major urban areas within the region
should also be privatized through a strong MOU to enable its utilization for biomass
electricity generation.
4. The Nigerian Electricity Regulatory Commission (NERC) should convene an international
colloquium with international energy producers and showcase the abundant resources
available as well the enabling market environment.

REFERENCES

1. Obama, B. Cited in Latham & Watkins. Nigerian Power Sector: Opportunities and Challenges
for Investment in 2016, assessed from https://www.lw.com/thoughtLeadership/lw-nigerian-
power-sector-opps-and-challenges, (2017)
2. Federal Republic of Nigeria. Investment opportunities in the Nigerian power sector.
Downloaded from www.power.gov.ng, (2013), 2.
3. Abubakar S. Sambo. Exploring alternative energy resources for sustaining the paradigm shift
from an oil-based economy in Nigeria. Presentation delivered at the Federal College of
 Education (Technical), Bichi, Kano State as the inaugural lecture of the College Bi-Annual
Lecture Series on 31st October, 2016.
4. Financial Nigeria International Limited. Opportunities for off-grid solutions in the Nigerian
power sector. http://www.financialnigeria.com/opportunities-for-off-grid-solutions-in-the-
nigerian-power-sector-sustainable-293.html
5. Nigerian Electricity Regulatory Commission (NERC). Generation.
http://nercng.org/index.php/library/industry-statistics/generation (2017)
6. United Capital Plc group. Nigerian Power Sector …Is there light at the end of the tunnel?
www.unitedcapitalplcgroup.com 2017, 3.
7. Uche Aneke. Exploring Investment Opportunities in the Power Sector Thisday Live.
https://www.thisdaylive.com › Business (2018).
8. National Population Commission. National population census. Federal Government Press,
Lagos, 2006.
9. Codedrock. Most Populated States In Nigeria 2017(estimates), 2017
http://www.takemetonaija.com/2017/02/most-populated-states-in-nigeria.html
10. Federal Republic of Nigeria. Investment opportunities in the Nigerian power sector.
Downloaded from www.power.gov.ng, (2013), 33
11. Shuaibu, I. Nigeria: The Untold Stories of Collapsed Industries in Kano. Thisday Live.
http://www.thisdaylive.com/, 2009