The African Development Bank (AfDB) to focus on Power

By on September 17, 2015 in Access to Energy, Development, Power with 0 Comments

The African Development Bank (AfDB) will focus in coming years on tackling Africa’s chronic power shortages to try to unlock its economic potential and end its vulnerability to fluctuations in commodity prices, its new president is quoted in a Reuters Africa report as saying. Though it boasts nearly a billion people, sub-Saharan Africa consumes about as much power as Spain, with less than 5% that number, due to poor generating capacity and limited transmission networks. Two-thirds of Africans have no access to electricity. The lack of reliable power grids is a major obstacle to industrialising the continent’s economies at a time when Africa hopes to make a transition from commodities producer to a manufacturing hub and challenge Asia where labour costs are rising.

As of 2013, the bank – founded in 1964 and funded by African nations and shareholder countries outside the continent – had lent a total of 67.22bn Units of Account or about $94bn. A development economist with a doctorate from Purdue University in the US, Akinwumi Adesina, a former Nigerian agriculture minister was elected in May to head the Ivory Coast-based institution for a five-year term.

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Nigeria moved closer to finishing a power plant expected to boost the country’s supply by almost 10% when it recently signed a financing agreement with the World Bank. Bloomberg reports that, according to the Nigerian Bulk Electricity Trading (NBET), a government-owned entity that buys power from generation companies and sells it to distributors, the Washington-based lender partially guaranteed $237m of debt being used to build the Azura electricity plant in Benin City in the south. The privately owned facility will provide 450 megawatts of electricity when it starts in 2018, NBET said.

President Muhammadu Buhari has said that boosting Nigeria’s chronically unreliable power supply will be one of his economic priorities. Generation in Africa’s biggest economy peaks at 4,600 megawatts, the power ministry said this month. That’s about eight times less than in SA, which has a third of Nigeria’s population. The agreement ‘represents a major milestone in the evolution of the Nigerian electricity market and provides an exemplary illustration of the commitment shown by the Buhari administration to accelerating investment in the country’s power sector,’ NBET said.

Adesina said, meanwhile, African nations, stung by plunging commodity prices, should set up more sovereign wealth funds to help withstand the next downturn. Business Day reports that Adesina said the funds ‘will allow countries to have fiscal buffers and liquidity buffers to this kind of shock… It’s not the only one we’re going to see, there’s still going to be a lot of disquiet in the market going forward.’ The report says Adesina replaced Donald Kaberuka as low oil prices threaten to deepen economic crises in Nigeria and Angola, the continent’s largest crude producers, African currencies are trading near record lows, and stock and commodity markets are reeling after China devalued the yuan this month.

The West African nations of Nigeria, Angola and Ghana, also an oil producer, have sovereign wealth funds, while countries including Kenya and Tanzania, in the east, are considering the idea to store savings from oil and gas exports as they develop deposits on a commercial scale. But critics of wealth funds argue the revenue can be squandered for political gain by governments that often are not transparent, rather than invested over decades for future generations, or the money is better spent on immediate spending priorities such as infrastructure and social programmes.


Sources: Reuters Africa, Bloomberg, Business Day

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About the Author

About the Author: Eugene Obiero is the founder of The Africa Resources Post and its predecessor The East African Energy Blog. Eugene has been writing and blogging on energy and extractives in Africa since June 2012. He is based in Nairobi, Kenya and works for Camco Clean Energy ( ) as Senior Manager Africa Projects. He specializes in market entry strategy, research, financial advisory and project management. Eugene has an MBA from The Warwick Business School, University of Warwick (UK). The posts on this blogsite are Eugene's and do not necessary reflect the thinking of his employer, Camco Clean Energy. .


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