Author : Nathaniel lowbeer-lewis
Affiliated organization : The Center for International Governance Innovation (CIGI)
Type of publication : Nuclear Energy Futures Paper
Date of publicaton : Januray 2010
Introduction
It is one of the great ironies of the world energy business that a major oil exporter such as Nigeria suffers from chronic power shortages. indeed, the tenth largest exporter of oil in the world and africa’s second largest economy has a grid capacity of only 6,000 Mw. Despite five domestic refineries, Nigeria imports 75 percent of domestically consumed oil products. suffering from years of mismanagement, lack of investment and general neglect, the domestic energy industry in Nigeria has consistently failed to meet the demands of consumers. aware of the integral role that energy supply plays in development, President Umaru Musa Yar’adua designated energy as one of seven key priorities of his administration. In order to meet Nigeria’s Millennium Development Goal obligations and the self-imposed policy objective of becoming one of the 20 biggest economies in the world by 2020 articulated in “Vision 2020,” which was adopted following Yar’adua’s election in 2007 massive investment is required in energy infrastructure.
Country Profile
The Federal republic of Nigeria is the most populous country in africa, with an estimated 144.7 million people in 2009. the second largest economy on the continent, this west african country remains plagued by poverty and underdevelopment. Despite a booming oil industry, which has netted the government more than Us$150 billion over the last decade, Nigeria suffers from below-regional-average life expectancy and widespread impoverishment. the Nigerian economy is heavily dependent on oil extraction. The tenth largest exporter of oil in the world, Nigeria has proven reserves of over 35 billion barrels and a production capacity of 2.5 million barrels a day.
Recent average production has been considerably lower, however, due to militant action in the Niger Delta, Nigeria’s principle oil-producing region. the Niger Delta has long been plagued by economic underdevelopment and environmental degradation, encouraging politically motivated insurgency and criminal activity. Militant groups such as the Movement for the Emancipation of the Niger Delta (MEND) continue to fight for a more equal distribution of oil rents, often targeting oil facilities and kidnapping foreign workers.
Fiscally, Nigeria has benefited immensely from the oil boom of the last few years. a landmark agreement with the Paris Club of lending countries in 2005 and a similar agreement with the london Club in 2006 all but eliminated Nigeria’s foreign obligations: external debt fell from Us$34.7 billion in 2003 to Us$8 billion in 2007.
Despite the oil windfall, infrastructure development remains problematic. roads, railways, ports and power infrastructure all suffer from chronic neglect. Endemic corruption has hampered improvements, despite large investments. Government offices are often used for personal enrichment, undermining efficient service delivery, development and economic equality. the world bank estimates that 80 percent of energy revenues benefit only one percent of the population. the Corruption Perception Index, authored by transparency international, ranks Nigeria 121 out of 180 countries.
Nigeria, a federation with 36 states, has had a turbulent political history. after achieving independence from the british in 1960, the government has remained predomi- nantly in the hands of the military until recently. in 1966, General Yakubu Gowon took power in the first of a series of coups that have been endemic to Nigerian politics. A year later, civil war broke out after the igbo leader, lieutenant-colonel Ojukwu, declared the independence of the biafran republic in the Eastern region of Nigeria. After three years of fighting, Nigeria emerged, its territorial integrity intact, as a centralized republic with power con- centrated in the hands of the federal government there has been only one successful transfer of power from one civilian leader to another in 2007. Despite the dubious character of those elections, norms of civilian rule have been entrenched over the past ten years: the army has taken a backseat to civilian politicians and the re-emergence of a military government is considered unlikely by many analysts.
Nigeria is an ethnic mosaic, with over 200 different languages and countless tribal groupings. there are three major ethnic groups in the country: the Muslim hausa in the North; the Yoruba in the west; and the igbo in the East, both predominantly Christian. Nigeria, like many composite african countries, has a history of ethnic and religious tension. although the biafran war has been the only conflict to threaten the territorial integrity of Nigeria, religious and tribal strife has often turned violent. the recent clash between domestic Muslim fundamentalist groups and government forces in the North is just one example.
With sub-saharan africa’s largest army, Nigeria is a regional power. the country has a standing army of 85,000 troops and spent about Us$768 million in 2006 on its military.
Perhaps due to a preponderance of power, Nigeria enjoys relatively benign relations with its neighbours. one of the principal regional security flashpoints, a long-running border dispute with neighbouring Cameroon over the oil-rich bakassi peninsula, was diffused in 2008. Nigeria agreed to hand over the disputed land and cooperate on regional security following a decision of the international Court of Justice in 2002.
History of the Nigerian Nuclear Industry and Rationale for Continued Development
The Nigerian nuclear program emerged tentatively in the 1976 with the establishment of the NaEC, primarily as a response to south africa’s acquisition of nuclear weapons and india’s test of a nuclear device. Negotiations were undertaken with west Germany and Canada to explore the purchase of a nuclear power plant. The development of nuclear weapons was also briefly considered. with a view to achieving nuclear autarky, the Nigerian Uranium Mining Company (NUMCo) was founded in 1978, a partnership between the Nigerian federal government and the French mining company Minatom. the results of this partnership were aerial radiometric surveys of about 617,000 km2 of land surrounding the Jos Plateau, which is thought to contain uranium reserves.
Two nuclear research centres were founded under the auspices of the NAEC: the Centre for Energy research and Development (CERD) at Obafemi Awolowo University (formerly the University of Ife) and the Centre for Energy research and training (CERT) at Amadu Bello University in Zaria. These centres have mandates to conduct research and build a critical mass of indigenous nuclear expertise.
Rationale for Developing Nuclear Power: energy Diversification and Independence
Currently, Nigeria’s power generation infrastructure is insufficient to supply the demands of the country. For a country of over 140 million people, Nigeria’s installed generating capacity is about 6,000 Mw. actual power generation, however, fluctuates between 1,500 and 3,000 Mw. This pales in comparison, for example, with south africa, a country of 44 million people and installed generating capacity of 46,000 Mw. the United arab Emirates, a country of four million inhabitants, has a generating capacity of 4,740 Mw. As a consequence, power outages are frequent and auto-generation is a necessity for industry and consumers who can afford it. Future economic growth will exert more pressure on an already inadequate system.
Surprisingly, there was no significant investment in the power sector between 1979 and 1999. During that time, the sector was fully owned and operated by the notoriously inefficient National Electric Power authority (NEPa). A privatization scheme started under the Obasanjo administration with support from the world bank has since transferred ownership of Nigeria’s generating stations to the Power holding Company of Nigeria (PHCN).
The world bank has undertaken small-scale projects in the energy sector since its re-engagement with Nigeria in 2000. The bank has focused on projects designed to ensure energy reaches consumers, as opposed to increasing overall generating capacity. Us$600 million dollars have been spent over the past nine years to upgrade Nigeria’s transmission and distribution capacity, develop small- scale renewable energy projects in rural areas and build capacity.
Despite its complexity and cost, nuclear power has four specific attractions for the Nigerian government. First, nuclear power would provide base-load generation at relatively stable prices, avoiding the inherent price fluctuations of oil products. Second, a reduction in the domestic demand for petroleum would increase foreign exchange earnings from the oil industry. Third, the depend- ence of a large share of generating capacity on natural gas from the Niger Delta has left Nigeria’s energy stability at the mercy of militants in the region. recurrent natural gas supply problems can also be attributed to the failure of the government to price natural gas at cost-reflective levels, encouraging gas-flaring and waste. Nuclear power would reduce the country’s dependence on the volatile Niger Delta for its power needs. Finally, if a long-term supply of domestic uranium could be secured, nuclear power would contribute to national energy self-sufficiency by reducing Nigeria’s reliance on fossil fuels and water resources emanating from neighbouring states.
Current Status and Recent Developments
During the first phase of development, the pre-project phase, a state entertains the idea of pursuing a nuclear power program. Upon entry into the second phase of development, a state is considered aware of the various obligations and commitments involved in pursuing nuclear power. states have studied their energy needs and the appropriateness of nuclear power to address those needs, and instituted a strategy for developing a nuclear power program. Finally, a state should have in place infrastructure for radiation, waste and transport safety as well as an established nuclear energy implementing organization with the necessary human capital to effectively coordinate the development strategy.
During the second phase, the country is expected to carry out the work required to prepare for construction of a first nuclear power plant: this includes developing a regulatory body with the capacity to certify nuclear power plants and ensure their safe and secure operation; establishing procurement and bid processes; and identifying the owner/operator.
First, nuclear power would provide base-load generation at relatively stable prices, avoiding the inherent price fluctuations of oil products
Based on available information, it is clear Nigeria is in phase two of the three-phase IAEA assessment framework. Nigeria has made a policy decision to pursue nuclear power and is currently undertaking preparatory work to set the ground for an eventual bid and construction of a nuclear plant. It has adopted policies to build up human and regulatory capacity, but is not yet ready to invite calls for construction. significant work remains before Nigeria will achieve the second milestone and enter into the construction phase.
National Nuclear regulatory agency (NNra)
Establishing regulatory infrastructure is a key step towards developing a national nuclear energy program. in 1995, the Nuclear safety and radiation Protection act established the NNra. the agency began operations in 2001 and has subsequently worked to develop regulations pertaining to nuclear energy. the Basic Ionizing Radiation Regulations, issued in 2003, implement international best practices as contained in the International Basic Safety Standard for Protection against Ionizing Radiation and the International Basic Safety Standards. in 2006, the NNra developed regulations for transporting radioactive sources, the safety and security of radioactive sources, and the safety of industrial radiography, nuclear medicine and radiotherapy. The NNRA has 50 technical staff in three departments: radiological safety, nuclear safety and inspection. This system coincides with general guidelines outlined by the IAEA for a competent regulatory agency.
International agreements
Nigeria was among the first countries to sign and ratify the 1968 Nuclear Non-Proliferation treaty (NPT) and is therefore committed to using nuclear energy exclusively for peaceful purposes. in recent years, Nigeria has made an effort to sign and ratify the panoply of international agreements pertaining to nuclear energy safety and security. In 2007, it ratified the IAEA Convention on Nuclear safety. In the same year, Nigeria signed but has yet to ratify the 1997 Joint Convention on safety of spent Fuel Management and safety of radioactive waste Management, the Convention on the Physical Protection of Nuclear Materials, and the Vienna Convention on Civil liability for Nuclear Damage. Nigeria has ratified the 1986 Convention on Early Notification of a Nuclear accident, the revised supplementary agreement Concerning Provision of technical assistance by the IAEA, and the 1968 Convention on assistance in Case of a Nuclear accident or radiological Emergency.
Limitations and Future Prospects
Nigeria has made progress over the last six years towards its stated policy goal of bringing 1,000 Mw of nuclear power online by 2017. Significant challenges remain, however, and there are numerous obstacles Nigeria will need to address before constructing a nuclear power plant.
The National electricity Grid
The size and configuration of the national power grid is essential to the implementation of a nuclear power plant. according to the iaEa, a single plant should consist of no more than 5-10 percent of the total installed generating capacity of a national grid. Nuclear plants are most efficiently run as baseload generators, and thus require constant demand. second, reliable independent power is necessary to safely operate a nuclear power plant; an electric grid that can guarantee the supply of stable, offsite power is required to begin construction.
Improvement of the national grid and increased generating capacity are imperative for the development of a nuclear program in Nigeria. Regardless of Nigeria’s decision to pursue nuclear power, these investments must be made at some point to accommodate forecasted growth. The principal question is whether they will be completed in time to stay reasonably close to the NAEC roadmap; without significant investment in the national electricity grid, nuclear power will remain a distant dream.
Security Concerns
Nigeria’s relative stability belies its ethnic composition. Despite isolated incidents of ethnic strife, there has been little widespread political instability over the last decade. For example, the federal elections of 2007 were relatively peaceful, despite claims of vote rigging and fraud. Furthermore, international terrorist groups have not traditionally operated in Nigeria. the religiously motivated violence that often plagues the northern states of Nigeria is predominantly domestic in character. Unless a nuclear plant was situated in the Niger Delta about 10 percent of Nigeria’s territory which is unlikely, it does not represent a significant target for the militias. Moreover, nuclear power can be seen as a way of removing the leverage that Delta militants currently wield over the national power supply. The thematic and geographical isolation of militancy and religious and ethnic strife in Nigeria, coupled with the probable location of Nigeria’s first nuclear power plant in the south-west near lagos, reduce, but do not eliminate, security concerns.
Financing electricity market reform
The Nigerian energy sector has long been characterized by vertical integration and government control, which led to inefficiency. the industry is plagued by below-cost tariffs and poor revenue collection; an estimated 30-40 percent of the electricity supply is never billed, and theft and illegal power connections are endemic. attempts to privatize the sector and solicit private investment were initiated under the obasanjo administration. a world bank loan was issued to finance the necessary infrastructure to unbundle NEPa and facilitate an efficient wholesale power market. Since NEPA was restructured in 2001, little progress has been made with regard to privatization of existing assets; most new investment has been undertaken by the federal government (haider, 2009). of the 23 independent power producers granted licences by the National Energy regulation Commission (NERC) for developing 8,237 Mw of generating capacity, only one had started work as of 2008, although there has since been limited progress.
To complicate matters, Nigeria has a history of strong public reactions to government-initiated increases of energy prices. rapid reform could be politically unpalatable as electricity tariffs are highly subsidized. Finally, reform has often been stymied by entrenched interests, such as those who control fuel imports and generator sales, which enjoy considerable political power in the country.
The government’s reliance on oil revenues to fund a large percentage of its budget could make or break investment in nuclear energy. Falling oil revenues could extinguish government interest in large, complex and costly projects. Conversely, higher oil prices could stimulate investment in nuclear energy despite dubious long-term economic rationales.
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