Nigeria: Oil, Electricity & IT
Market Analysis

Nigeria: Oil, Electricity & IT

IDC Analyst Babatunde Afolayan speaks from Lagos 

“When I get home, I will open my door and the first thing I will do is switch on my [electricity] generator.  Nobody can rely on the national power supply here. It is the same for everyone.” I am speaking to IDC analyst Babatunde Afolayan on the phone from his office in Lagos. He is telling me about the situation on the ground in Nigeria, Africa’s biggest oil exporter and second largest economy.

Fuel lies at the heart of the country. Yet large swathes of income from ordinary Nigerians is thrown into keeping the lights on. “Your average house would probably use 80 litres of fuel (petrol) a week,” he estimates. And the cost of petrol has risen exponentially since the government cut subsidies. Over the last year the price has gone up by approximately 50% and whilst petrol is still less than 1USD per litre (so cheap by US/ UK standards); it is still extremely expensive when everyday electricity has to be generated in the home.

“The power supply and infrastructure are the biggest problems holding back Nigeria,” says Afolayan. The situation is so bad “many new estates being built today simply set up their own power supply outright and ignore the public source entirely. [Obviously] this make it more expensive for organisations to maintain a local office and means it is more difficult for offices that exist on the ground to assemble products. [In practice this means] products often come in from China, Dubai and SA to be sold within Nigeria.”

This fact has not stopped increasing numbers of enterprise businesses from moving into Nigeria - the central hub for West Africa. Generally the way the process works is that vendors begin by getting large government contracts and then when they have a foothold within the country they secure deals with private sector clients. The majority of foreign bodies come from global enterprises which target both the local market and use Nigeria as a base to look to other neighbouring counties. Places like Liberia and Sierra Leone which have been previously afflicted by wars are now receiving interest outside. There has been a lot of emphasis on Senegal, Côte d’Ivoire, and especially Ghana.

IBM has been heavily involved in infrastructure development initiatives and has been very effective in Nigeria, “most of the banks around the region are managed by IBM.” Other vendors include “HP and Oracle [which] are doing big enterprise business. And SAP opened on-the-ground offices in Lagos recently.” There has also been serious Chinese interest, especially from Huawei, which has a presence in 14 African countries, but there has been far less attention from Indian companies. “A lot of the IT departments here are run by Indians. They’re not necessarily the CIO, but they are key members of the department.”  

“One of the big growth areas,” explains Afolayan “is data centres.” However, a main challenge – predictably enough - is the power supply. This means, “some organisations are setting up secondary data centres outside of Nigeria in other [cheaper] countries. These are often used for backup and disaster recovery.”

In April, “Broadband, Data Centres and the Question of an Inclusive Society” looked at the implications of an increased demand for bandwidth within the context of where all the extra data generated should reside. As Don Pedro Agambi, Managing Director of Technology Africa stated: “The availability of broadband precipitates the establishment of data centres just as the latter enhances the provision of broadband services. We believe it is imperative to continue to encourage the development of robust reliable and affordable IT infrastructure to drive broadband penetration and deepen data centre establishment in Nigeria.”

IT and power run hand in hand, but like the rest of Africa IT is fundamental to Nigerian development. For example, “ePayments are being actively encouraged. [Whilst] in the consumer sector the main growth area is the PC market.” This is also being pushed to schools via government lead CANI (Computers for All Nigerians Initiative). Moving forward, a solid infrastructure is being built in from the word go: “large volumes of investment in real estate, driven by oil money mean new builds are putting IT infrastructure in place from the ground up.” However, none of this solves the problem of power.

“Are there no opportunities in solar power?” I ask. This seems pertinent as last week Zimbabwean company Econet - which was selected as one of Forbes’ ‘Ten Most Innovative Companies in Africa” - launched its first prepaid solar device, the HomePowerStation. The publicity material claims that one unit can provide light for up to four rooms and can also charge a cell phone simultaneously. But the answer is, “No - it is too expensive for people. The state government tried solar panels for street lighting and is popular in some areas, but ultimately for ordinary people it comes down to affordability.”

Nigeria may be described as the ‘Powerhouse of West Africa,’ yet here, the much touted tension between ‘developing’ and ‘keeping the lights on’ has never been truer.

 

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Comments

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Chido Al Dike on June 10 2013

This is a very good piece highlighting Nigeria's main problem. Imagine the level of production without power and compare it to what would happen if there was adequate power supply. This is something that needs focus and attention and discipline as well.

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Nenrot on June 10 2013

Quite interesting piece and very true about the NIgerian Situation, Most ICT Professionals are actually groaning with this problem. Effort should be made by the Government of the day to fix this challanging situation.

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Rev. Ukaegbu Ogwo on June 10 2013

Grid-tied Backup power using inverter/chargers are becoming quite popular in Nigeria as an option in solving the power problem. Much of the electricity outages in Nigeria is due to the load shedding policy of PHCN. They try to distribute the available power to different areas in about 5-6 hours intervals. Those that own inverter/charger backup power systems take advantage of this to charge up their battery banks during the short period of supply and use this to bridge their gaps during outages. It works quite well, especially with energy saving and conservation practices in place. The snag again is the high infrastructural capital outlay required. Recurrent costs are quite minimum where quality products are used. Another limitation of this option is that it is not very cost effective for industrial use beyond the small scale level. However, China and India have introduced a lot of cheap substandard and unsafe inverters and Balance of Systems that make this option appear unworkable. Over the years, we have installed inverters made by Xantrex (Schneider Electric Renewables), Outback Power, Magnum and Victron Energy (Netherlands) which work with little or no attention required when properly installed. Of course, no option is better than grid power but in an era of such poor supply this inverter backup option has been quite valuable.

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obrien uzoechi on June 10 2013

Nigeria really has to be focused and solve this light issue once and for all time. That is if she is serious about development.

no-images

Harry Okwampah on June 15 2013

I must admit the energy situation is an unending crises i find difficult to decipher when the country upstream production hits the roof. The Nigerian government i believe has not done much with the oil wealth the country is endowed with. If the government sees no business reason to channel natural gas from its upstream fields into energy production to power the economy or expand gas industry to compliment other energy production for the country, investors will look else where to setup their businesses and the economy will certainly miss-out on the economic boom. Nigeria needs a visionary leader who can spot the enormous business opportunities from afar and initiate aggressive economic programme to attract the investors. Mr. President! please! please please! take take immediate steps to put the power rationing exercise rest. The irrational supply of energy to businesses is draining your economy of billions of Dollars of revenue.

no-images

Chido Al Dike on June 10 2013

This is a very good piece highlighting Nigeria's main problem. Imagine the level of production without power and compare it to what would happen if there was adequate power supply. This is something that needs focus and attention and discipline as well.

no-images

Nenrot on June 10 2013

Quite interesting piece and very true about the NIgerian Situation, Most ICT Professionals are actually groaning with this problem. Effort should be made by the Government of the day to fix this challanging situation.

no-images

Rev. Ukaegbu Ogwo on June 10 2013

Grid-tied Backup power using inverter/chargers are becoming quite popular in Nigeria as an option in solving the power problem. Much of the electricity outages in Nigeria is due to the load shedding policy of PHCN. They try to distribute the available power to different areas in about 5-6 hours intervals. Those that own inverter/charger backup power systems take advantage of this to charge up their battery banks during the short period of supply and use this to bridge their gaps during outages. It works quite well, especially with energy saving and conservation practices in place. The snag again is the high infrastructural capital outlay required. Recurrent costs are quite minimum where quality products are used. Another limitation of this option is that it is not very cost effective for industrial use beyond the small scale level. However, China and India have introduced a lot of cheap substandard and unsafe inverters and Balance of Systems that make this option appear unworkable. Over the years, we have installed inverters made by Xantrex (Schneider Electric Renewables), Outback Power, Magnum and Victron Energy (Netherlands) which work with little or no attention required when properly installed. Of course, no option is better than grid power but in an era of such poor supply this inverter backup option has been quite valuable.

no-images

obrien uzoechi on June 10 2013

Nigeria really has to be focused and solve this light issue once and for all time. That is if she is serious about development.

no-images

Harry Okwampah on June 15 2013

I must admit the energy situation is an unending crises i find difficult to decipher when the country upstream production hits the roof. The Nigerian government i believe has not done much with the oil wealth the country is endowed with. If the government sees no business reason to channel natural gas from its upstream fields into energy production to power the economy or expand gas industry to compliment other energy production for the country, investors will look else where to setup their businesses and the economy will certainly miss-out on the economic boom. Nigeria needs a visionary leader who can spot the enormous business opportunities from afar and initiate aggressive economic programme to attract the investors. Mr. President! please! please please! take take immediate steps to put the power rationing exercise rest. The irrational supply of energy to businesses is draining your economy of billions of Dollars of revenue.

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