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The Impact of Electricity to Business and National Development (a Case Study of Sokoto State)




2.1 Conceptual Framework & Review

The conceptual framework of the study will extensively review concept identified in the study, energy consumption, electricity, coal, crude oil and national development will be review broadly in this section.


2.1.1 Energy Consumption in Nigeria

Energy is ability of matter to perform work as the outcome of its motion or its position in relation to forces acting on it (Onakoya, Onakoya, Jimi – Salami and Odedairo, 2013). We use energy for the whole thing we do, from creating a jump to sending astronauts into space. The same concept according to Tejada-Bailly (1981) can be expressed as the amount of heat that must be transferred, exchanged or used up to effect a process or deliver a good to a particular point in the economic system. Energy exists in various forms, including atomic, electrical, chemical, mechanical, nuclear, radiant and thermal. Although energy can be transferred from one form to another but it cannot be created or destroyed. Energy can be extracted from a variety of resources that can be categorized as primary and secondary; commercial and noncommercial; conventional and nonconventional; renewable and non-renewable and traditional and non-traditional (Aminu and Aminu, 2015).

Energy is widely regarded as a driving force behind any economic activity and indeed industrial production. Therefore, high grade energy resources will increase the influence of technology and create tremendous national development (Onakoya et al., 2013). The significance of energy lies in other aspect of development – increase in foreign earnings when energy products are exported, transfer of technology in the process of exploration, production and marketing; increase in employment in energy industries; improvement of workers welfare through increase in worker’s salary and wages, improvement in infrastructure and socio-economic activities in the process of energy resource exploitation (Onakoya et al., 2013).

Nigeria had been a lucky nation to have huge energy resources, which possibly give the country an ample opportunity to transform her economy and the lives of her citizens. Nigeria sits astride of over 35 billion barrels of oil, 187 trillion cubic feet of gas, 4 billion metric tons of coal and lignite, as well as enormous reserves of tar sands, hydropower and solar radiation, amongst others (Adenikinju, 2008; Odularu and Okonkwo, 2009). Today, Nigeria is seen as one of the highest developing nations in Africa with highly endowed natural resources with potential energy resources. However, increasing access to energy in Nigeria has proved to be not only a nonstop challenge but also a persistent issue with the international community. The significance that the country has placed on crude oil is relatively very high. The over reliance of crude oil in Nigeria is a major encounter because it has failed to spread its energy consumption and ensure a fitting energy mix. The consumption of oil is highly essential because there is no alternative to it presently (Odularu and Okonkwo, 2009). Fossil fuels like coal are insignificantly extracted in the country. The coal located in eastern Nigeria is subbituminous which means that it burns slowly and gives out a lot of heat. Subsequently, it is also low in Sulphur and ash content. Coal has been the oldest commercial fuel used in Nigeria in since it was discovered in 1916.

Since the discovering of oil in Nigeria, coal has been relegated to less importance and became highly dormant. With a reserve of over 2 billion metric tonnes, Nigeria produces about 200000 to 600000 tonnes yearly. Per capita power consumption in Nigeria is estimated at 82KW which gross inadequate where as other African counterparts like South Africa has a per capita consumption of 3793KW. Nevertheless, with vast abilities, energy can be adequately supplied in the country if well tapped. If consumption is positively related to national development, the benefits of increased consumption includes generating more income, increasing economic activities which will boost national development and increased growth especially poverty reduction (Odularu and Okonkwo, 2009).


2.1.2 Overview of Energy Resources investment in Nigeria

Nigeria with a population of over 140 million people is endowed with enormous energy resources, such as, petroleum, natural gas, coal, nuclear, tar sand. Others include solar, wind, biomass and hydro.However, development and exploitation of such energy sources have been skewed in favour of the hydro, petroleum and natural gas.At independence in 1960, agriculture was the dominant sector of the economy contributing about 70%. This trend changed with the discoveryof oil in 1970.

The exploitation of the Nigerian energy resources began with coal in 1916. There are nearly three billion tonnes of indicated reserves in seventeen identified coalfields and over 600 million tonnes of proven reserves in Nigeria (Anaekwe, 2010). Following the Nigerian civil war, many coal mines were abandoned and coal production never completely recovered. This is evident by coal production levels becoming erratic as both the resuscitation and maintenance of imported mining equipment proved troublesome (Godwin, 1980). As a result, coal production dropped insignificantly from 50% in 1960 to less than 1% in 1990. This decline in coal production was hastened by the discovery of crude oil in commercial quantities in Otuabagi / Otuogadi, Oloibiri district in Bayelsa state by Shell Darcy on 15 January, 1956. Between 1970 and 1980, petroleum products were cheap and readily available as premium motor spirit (PMS) otherwise known as petrol assumed the role of main source of energy in Nigeria. As a result, all other energy sources were neglected (Oji, Idusuyi, & Kareem, 2012

With proven oil reserves exceeding 9 billion tons, Nigeria is one of the largest hydrocarbon feedstock producers in Africa, and ranks twelfth place worldwide.The country relies heavily on its petroleum industry for national development, the sector accounts for about 80% of government revenues and provides 95% of foreign exchange (Iwu, 2008).Nigeria is a member of the Organisation of Petroleum Exporting Countries (OPEC). Also, the countrynatural gas reserves account for 5.2 trillion cubic metres, making it the world’s seventh biggest natural gas reserve.Although, natural gas occur in associated form with crude oil, Nigeria’s gas reserves are three times greater than its oil reserves. The government is committed to increasing gas production for domestic supply as well as for export evident by The Trans-Saharan Gas Pipeline currently in development. This will enable Nigeria to supply the continent of Europe with gas. The country provides 10% of the world’s LNG (Corporate Nigeria, 2012). Despite this potential, gas flaring has continued unabated over the years (Eboh, 1998).

Currently, the Nigerian energy crisis has stymied the socio economic activities of the country which has brought untold hardship on the people of the country. At the moment,the electricity supply in the country does not meet national demand. While the estimated daily power generation was about 3,700MW as at December 2009, the peak load forecast for the same period was 5,103MW. This is based on the existing connections to the grid which does not takeinto accountthe suppressed demand.Also, theprojected electricity demand has been translated into demand for grid electricity and peak demand on the bases of assumptions made for transmission and distribution losses, auxiliary consumption, load factor and declining non-grid generation (Energy Information Administration, 2012). The demand is projected to rise from 5,746 MW in 2005 to 297,900MW in the year 2030 which translates to construction of 11,686MW every year to meet this demand (Sambo, 2008). While the government owned monopoly company (Power Holding Company of Nigeria) has been unbundled, in its stead, three hydro and seven thermal generating, a radial transmission grid (330kV and 132kV); and eleven distribution companies (33kV and below) that undertake the wires, sales, billing, collection and customer care functions within their area of geographical monopoly have been set up. Except for the transmission function, the others have been privatized.

The epileptic nature of electricity has led to scarcity of petrol and kerosene because the citizens have resulted to using generators and kerosene powered equipment to provide energy for use at homes. Also, import content of our domestic fuel usage has grown over the years to about 75% (International Energy Agency, 2012).This has resulted in the use and overdependence on fuel-wood which has led to deforestation and attendant degradation of the environment and worsening desertification (Babanyara & Saleh, 2010).They report an average annual deforestation rate of 2.38% between 1990 and 2000 in Nigeria due in part to the change to the use of wood fuel as a result of hikes in prices of kerosene and cooking gas. Other alternative energy sources including solar, wind, wave are largely underdeveloped in the country. Furthermore, as a result of domestic fuel prices which have gone up several times with attendant upsurge in transport fare and prices of goods and services. Bamikole (2012) reports that industrial capacity utilization has plummeted from 78.7% in 1977 to 30.1% in 1987 before resurgence to 53.3% in 2007 and 53% in 2010.In the next section, a review of the literature is presented.


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