Report: Nigeria Will Find it Extremely Difficult to Industrialise with Poor Power Supply

With power supply in the country at less than 300-kilowatt hour (kWh) per capita, Nigeria and some other frontier markets (FMs) will find it extremely difficult to industrialise, analysts at Renaissance Capital (RenCap) have stated.

The research and financial advisory firm stated this in its latest report titled; ‘Frontier and emerging markets macro outlook- Electric power to the people,’ that was obtained on Monday. According to the report, among the FMs, only Kenya has the literacy rate needed to industrialise.

The report was however optimistic that new measures being introduced in Nigeria this year will make a positive difference in terms of power supply and Nigeria’s output can double by 2020-2025.

“It therefore can sustain four to five per cent growth, but seven to eight per cent sustainable growth is probably a post-2025 step change, coinciding with adult literacy topping 70 per cent,” the report added. It, however, noted that rising oil prices can of course lift growth in Nigeria to the high single-digits level for a few years, even without a big increase in electricity.

“Nigeria has neither the electricity, nor the adult literacy rate, required to industrialise – but localised success is possible in Lagos (which has the literacy and is expanding the electricity).

“Our basic premise in writing this piece is that you cannot industrialise (i.e have a manufacturing sector that is sustainably above 20% of GDP) without a decent amount of electricity.

“We looked at 5,249 data points, where we had manufacturing as a percentage of GDP, in 125 countries, over 1960-2015, and compared this with electricity consumption per capita data from the International Energy Agency (IEA) and EIA. “We assumed there would be no cases of high manufacturing in countries with very little electricity (eg less than 300 kWh per capita).

“We also expected that manufacturing would peak in countries with ‘middle income’ levels of electricity, and that rich countries with the most electricity would have left manufacturing behind, but still be intensive users of electricity,” the report stated.

Furthermore, findings showed that since 1960, no country with electricity consumption less than 50 kWh/ per capita, has ever had a manufacturing sector of 22.5 per cent of GDP or more.

According to the report, there were few cases of manufacturing above 20 per cent of GDP in countries with less than 300 kWh/per capita and none of these were sustainable.

“Of the 1,193 data points, half are already achieved by countries with less electricity

consumption per capita than 2,000 kWh. “The biggest increase in data points is when countries are in the 500-1,000 kWh range (19% of all of them), followed by 1,000-1,500 kWh (13%) and then 300-500 kWh (11%).

“Just four per cent are achieved by countries with less than 300 kWh,”it explained.

Furthermore, the report showed thatNigeria’s credit growth was also deeply negative in real terms, which it stated, reflected an economy still shrinking in per capita terms and where government borrowing may be crowding out the private sector