Nigerian President Muhammadu Buhari approved counterpart funding for a deal that will see Siemens AG upgrade the nation’s dilapidated power infrastructure. Nigeria, Africa’s most populous nation, last year contracted the German engineering company to rehabilitate and expand its electricity grid. Only about two-thirds of Nigerians have access to power and that’s plagued by constant blackouts.
Buhari, 76, granted “anticipatory approval” for 18.94 million euros ($22.2 million), or 15% of the cost, as counterpart funding for the project, Finance Minister Zainab Ahmed said. The balance will be provided by Euler Hermes Group SAS, backed by the German government, on concessionary terms with a three-year moratorium, a 12-year repayment period at “an interest rate of Libor-plus 1% to Libor-plus 1% to Libor-plus 1.2%.”
The project will be implemented in three phases to be completed by 2025, when Nigeria estimates its on-grid transmission capacity will reach 25,000 megawatts. The West African nation has an installed capacity of 13,000 megawatts, of which a daily average of only 4,500 megawatts is dispatched to consumers due to a poor transmission and distribution network.
In the first phase the system’s operation capacity will be increased to 7,000 megawatts while reducing the sector’s commercial and collection losses, Siemens said in a statement.
In June, lawmakers halted a hike in electricity tariffs meant to help state-owned traders repay power producers, who had threatened to halt operations. Originally planned for April, the hike was delayed by the electricity regulator over disruptions caused by the coronavirus pandemic.
The World Bank in June approved a $750 million loan for the government to overhaul its power sector. Electricity shortages have an economic cost of around $28 billion, or the equivalent of 2% of Nigeria’s gross economic product, according to the lender.