The World Bank Board of Directors Wednesday approved the Power Sector Recovery Operation (PSRO), an operation of $750 million in International Development Association (IDA) credit to improve electricity supply, achieve financial and fiscal sustainability, and enhance accountability in the power sector in Nigeria.
The Breton Woods institution estimated the economic cost of power shortages in Nigeria at around $28 billion is equivalent to two percent of the nation’s Gross Domestic Product (GDP).
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The amount in power loss in a year is sufficient to build double standard rail tracks from Ibadan to Kano, Lagos to Calabar and Port Harcourt to Maiduguri based on current contract estimates by the ministry of transportation.
The development finance institution stated: “Getting access to electricity ranks as one of the major constraints for the private sector according to the 2020 Doing Business report.
“Hence, improving power sector performance, particularly in the non-oil sectors of manufacturing and services, will be central to unlocking economic growth post COVID-19.”
According to the bank, about 47 percent of Nigerians do not have access to grid electricity and those who do have access face regular power cuts.
Commenting on the power situation in the country, World Bank Country Director for Nigeria, Shubham Chaudhuri, said: “The lack of reliable power has stifled economic activity and private investment and job creation, which is ultimately what is needed to lift 100 million Nigerians out of poverty.
“The objective of this operation is to help turn around the power sector and set it on a fiscally sustainable path.
“This is particularly urgent at a time when the government needs all the fiscal resources it can marshal to help protect lives and livelihoods amidst the COVID-19 pandemic”, the banker added.
By its estimation, the World Bank projected that the PSRO would ensure that 4,500 MW/hour of electricity is supplied to the distribution grid by 2022 by strengthening the regulatory, policy and financing framework.
In addition, it also forecasts that the recovery operation will enhance the accountability and financial viability of the sector, helping the sector create a track record of sustainable operation necessary for unlocking much needed private investments in the future.
IMF Projection
The International Monetary Fund (IMF) has reversed its earlier prediction on Nigeria’s economy saying the economy will contract by 5.4 percent far removed from its earlier forecast of 3.4 percent.
The latest forecast came from IMF’s World Economic Outlook update released on Wednesday.
The IMF also said Sub-Saharan Africa’s gross domestic product is expected to shrink by 3.2% this year due to the impact of the COVID-19 pandemic.
The IMF said Nigeria faced economic distress not only from the coronavirus outbreak but also from a sharp fall in crude prices.
A few weeks ago, the Minister of Budget and National Planning, Mrs. Zainab Ahmed had earlier said the FG projected that the economy would decline by 8.9 percent in the worst case scenario.
However, the monetary authorities had said Nigeria can avert negative economic growth if the right policy interventions were intensified.
The CBN Governor, Mr. Godwin Emefiele, said after the May 2020 Monetary Policy Committee’s meeting that Nigeria must open its economy and move aggressively to implement policies that will halt economic decline and engender growth to save jobs and livelihoods.
He had said the government must not in the bid to save lives, destroy livelihoods with sustained economic lockdown.
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