Siemens: How Nigeria's electricity deal with German firm will work

On August 31, 2018, as German Chancellor Angela Merkel arrived Nigeria for a meeting with President Muhammadu Buhari, she had a business delegation in her corner.

The global CEO of Siemens, Joe Kaeser, and some members of his team, were part of the delegation.

Nigeria and Germany would go on to agree to explore cooperation in a number of areas, including in power.

Now, like you know, Nigeria’s power supply from the grid is erratic and unreliable. An absolute shambles and embarrassment.

There have been promises to fix the sector and ensure a modicum of steady electricity supply to homes and businesses since 1960, but the situation hasn’t improved.

How bad is Nigeria's power sector?

Very bad. We can tell you that much for free.

In July of 2019, Siemens AG, which is a German engineering firm, agreed to upgrade Nigeria’s dilapidated power infrastructure and expand the nation’s power grid.

In Nigeria, only about 60 percent of residents have access to electricity. This 60 percent has to deal with blackouts every other day.

Let's just say most adult Nigerians have never experienced 12 hours of uninterrupted power supply in their lifetimes.

Nigeria has more than 13,000 megawatts of installed electricity generation capacity.

Of this amount, only 7,500 megawatts is available for dispatch to homes and businesses.

That means Nigeria’s archaic and decrepit electricity grid can only handle 7,500 megawatts at the best of times.

Now, the Distribution Companies (DisCos) have only been able to wheel out about 4,000 megawatts from the grid each day.

It could get worse most times as figures below 4,000 megawatts are dispatched to the grid amid complaints of inadequate gas, malfunctioning hydro-electric plants and ruptured gas pipelines.

So, what's Siemens going to do about this?

The partnership with Siemens will modernize the existing network before enlarging it until Nigeria can produce and distribute 25,000 megawatts of electricity. Look, this may take a while...let's tentatively leave the completion date at 2022 or 2023 at the most.

The work will be rolled out in three phases and the first phase has just kicked off.

Buhari has directed power minister Sale Mamman and the finance ministers to “commence the pre-engineering and concessionary financing aspects” of the project with Siemens.

The project will be financed by concessionary loans covered by Euler Hermes Group SAS, a large provider of credit insurance.

The government will then “on-lend” the funding to the shareholders of the DisCos.

And yes, Siemens will select the contractors it chooses to work with. No Nigerian middlemen and all of their greedy accomplices will be allowed to come anywhere near this deal.

The privatized power sector shareholders would have no part to play in what Siemens does with the money or who it hires to get the job done.

Gorrit?

Good.