Concerns Mount Over Stalled FG-Siemens’ Power Deal Worth $2bn

• Deal Still At Paperwork Stage, Energy Consumer Network Laments

There are growing concerns over the stalled Power Project Initiative contract signed between the federal government of Nigeria and Siemens AG by stakeholders in the nation’s power sector.

German Chancellor, Angela Merkel had tapped Siemens to help Nigeria develop a roadmap “to resolve existing challenges in the power sector and expand the capacity for future power needs” after a meeting the German leader had with the Nigerian President.

President Muhammadu Buhari signed the agreement with Siemens, represented by Joe Kaeser, its CEO, in Abuja in May 2020.

The deal with Siemens has the aim of increasing Nigeria’s electricity generation to 25,000 megawatts (MW) in six years.

Checks by The New Diplomat show the $2 billion power project, is structured in three phases; to take Nigeria’s operational capacity of the grid from less than 5,000MW to 7000MW by 2021; further increase the capacity to 11,000MW by 2023; and achieve total operational generation and national grid capacity to 25,000MW by 2025 and it is expected to save Nigeria over $1bn annually.

Structurally, the PPI funding is in the form of 85 percent from a consortium of banks, guaranteed by the German government through credit insurance firm, Euler Hermes; 15 percent of Nigerian government’s counterpart funding; with between two- and three-year moratorium; and 10–12-year repayment, all at concessionary interest rates.

In July, Buhari approved the payment of €15.21 million and N1.708 billion as counterpart funding for the PPI.

However, two years since the contract signing and a year after the approval of the funds for the project, Nigerians are yet to see changes in the power sector.

According to the checks on the official website of the Nigerian Electrical Regulatory Commission (NERC) the available power generation is still pegged at 4,996 MW despite a total installed capacity of 10,396 MW across the country.

As 2021 prepares to wind up, the country is yet to witness an increase in available power generation from 4,000MW to the proposed 7000MW in the power deal.

Commenting on the feasibility of the project timeline, President of the Nigerian Consumer Protection Network (NCPN), Barrister Kunle Kola Olubiyo, said the timeline given to the project was political, noting that, currently, everything is on the paperwork stage.

Speaking about the project delay, Olubiyo said, “We have seen the good intention but everything is on paperwork and the information we have now is that the German company is saying the COVID-19 is affecting the bringing down of transformers and their personnel from Germany.”

The power sector expert also reacted to the local content clause in the Siemens contract stating that, since Nigeria was taking a loan, at a commercial rate from Germany, Nigeria reserves the right to request that a huge percentile of the local content, including the engineers for the project.

“They are not giving us the fund for free, it’s a loan and Nigeria should determine the materials to be used if we can source them locally and even the human capacity,” said Olubiyo.

The New Diplomat also recalls that the National power grid had collapsed several times this year alone, plunging millions of Nigerians and businesses into darkness as citizens continue to hope for a systemic change in the country’s ailing power sector.