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Nigeria's national electricity grid woes show no signs of abating with the grid collapsing again on Monday, leaving many parts of the country without power. Nigeria’s national power grid has collapsed at least four times this year, with the authorities blaming technical problems for the breakdowns.
A month ago, workers from the Transmission Company of Nigeria (TCN) went on strike, temporarily shutting the grid. Nigeria has an installed capacity of 12,500 megawatts but only manages to produce about a quarter of that thus forcing many Nigerians and businesses to rely on diesel-powered generators. Back in July, the grid suffered another meltdown, with national output crashing from 3,921.8 megawatts to a mere 50MW.
As is the case in many African countries, Nigeria’s decrepit energy supply has been a key obstacle for economic growth in Africa's most populous country. Nigeria’s power and energy sectors are currently in very bad shape, with the country facing a record reduction in oil production. Indeed, as per OPEC reports, Nigeria has dropped from being Africa's largest oil producer to fourth place, behind Angola, Algeria and Libya with theft and sabotage at production sites hampering output.
Last month, Nigerian National Petroleum Company Limited (NNPCGROUP) CEO Melee Kyari revealed that Nigeria is losing nearly all the oil output at oil hub Bonny, the town after which its premium oil grade Bonny Light is named. Bonny Light is a light-sweet crude oil grade produced in Nigeria, and an important benchmark crude for all West African crude production. Bonny Light has particularly good gasoline yields, which has made it a popular crude for U.S. refiners, particularly on the U.S. East Coast.
Relying largely on estimates, the NNPCL and the ministry of petroleum have variously put the total quantity of barrels stolen at between 200,000 to 400,000 per day. Those are enormous figures considering that Nigeria only managed to produce 1.083 million b/d in the month of July, way below its OPEC quota of 1.8 million b/d.
With a barrel of Bonny Light currently changing hands at $87.60, Nigeria is losing billions of dollars every year to oil theft. Back in June, NNPC revealed that it had lost $1B from oil theft in the first quarter of 2022 alone, with Shell Plc. (NYSE: SHEL) subsidiaries in the country claiming that illegal seizures now pose an existential threat to the entire market.
By Alex Kimani for Oilprice.com
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Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com.