Liquidity, governance, others may worsen Nigeria’s electricity supply in 2020

There are indications that the challenges facing electricity supply in Nigeria might persist through this year, as stakeholders were cynical about projected improvement, stressing that the current situation might not offer any relief, especially in terms of liquidity and governance crisis. Though the federal government has staked about N1.3trillion in the past three years to bail out the sector, the French Agency for Development (FAD) reported that financial losses in the sector was growing by at least N474billion yearly, just as stakeholders insisted that prevailing realities showed that the challenges might worsen.

While the experts believe a number of interventions, which were planned last year, particularly the cashless policy deadline announced by the Nigerian Electricity Regulatory Commission (NERC), strict remittance enforcement against the Distribution Companies (DisCos), Meter Asset Provider (MAP) policy, minor review in tariff, as well as expected overall review of the sector could usher in changes, they expressed doubt over the implementation strategies on the policies. Though the Managing Director of Transmission Company of Nigeria (TCN), Usman Mohammed, has said the country would record a wheeling capacity of 10,000 megawatts (MW) by July this year, the improvement could only become meaningful if there is commeasurable improvement in the capacity of Distribution Companies (DisCos) to enable them evacuate more power to consumers.

While about N130 billion has been earmarked in this year’s budget to be spent on capital projects in the sector, with indications that the Taraba State Government has received initial funding survey of Mambilla power projects, stakeholders are divided on the immediate benefits of such move. In 2013 when the federal government embarked on the privation exercise of the sector, expectations were that the change in ownership would address the despondent nature of the sector, which affected standards of living and crippled economic growth, with only a miserable 4,000 megawatts of power to a population of about 180 million people. Though NERC had said that “by implementing reforms, Nigeria targets 40,000MW generating capacity by this year and would need to spend approximately $10billion yearly on the power sector for the next 10 years,” power generation from the country’s generating companies stood at an average of 3,781MW last year from a yearly average of 3,807MW in 2018, according to data from the office of the vice president.

This development justified the views of renowned energy economist, Prof. Adeola Adenikinju, of the Department of Economics, and Centre for Petroleum, Energy Economics and Law, and pioneer managing director of the Nigerian Bulk Electricity Trading (NBET) Plc, Rumundaka Wonodi, who told The Guardian that the sector is retrogressing, equally cast shadow on significant improvement in the sector. Wonodi raised concern over investment climate in the sector, stressing that the situation did not get better last year, as the sector continued to face bankability issues, saying: “In terms of performance and operations, last year was a dismal year for the power sector. The performance was poor. You could see the number of systems collapses that we had. It was not a year that added any significant value to the sector.”

While stressing the need to improve the liquidity challenges and address governance issues this year, Wonodi, while acknowledging that cost reflective tariff remained critical in the sector, faulted the current tariff methodology, just as he regretted that electricity supply in the country has never been predictable. This, he noted, affects consumers and would continue to lead to importation of power generating sets, since consumers cannot predict when there would be power supply or interruption. With a weak NERC and lack of coordination in the government, worsened by the current power play among the Presidency, Minister of Power, Sale Mamman, and some agencies in the sector, as well as an extreme volatile nature of the country’s electricity grid, which propelled as much as 13 system collapses last year, Segun Ajibola, former chairman of Council, Chartered Institute of Bankers of Nigeria and Dean, College of Postgraduate Studies, Caleb University, insisted that electricity supply could only improve this year if the problems of transmission and distribution are addressed.

“The DisCos are not coping with the challenges of distribution. Consumers are still weighed down by estimated bills, extortion, forceful demand for provision of cables, transformers, etc to resolve teething problems of supply,” he said. Worried over the bankability of the sector, Ajibola said the sector is highly indebted, both in naira and dollar terms, adding that far-reaching, legislative, regulatory and operational reforms need be taken to reverse the dwindling fortunes of the sector. Partner, Nextier Power, Emeka Okpukpara, said there are a few things done last year that would propel the power sector this year, adding, however, that unless the policies spur improvement in liquidity to improve the sector, the prevailing situation in the sector could persist. In this regard, he said cashless regulation of NERC would help the flow of funds, especially ensuring that the collection of revenue becomes transparent at a time when stakeholders had accused DisCos of failing to remit collection. Former president of the Nigerian Association for Energy Economics, Prof. Wumi Iledare, noted that the situation in the sector would not be any different from last year, unless the federal government comes to full realisation that it has no resources to meet the energy requirements to sustain Nigeria’s economy.

Seeing governance as a critical bottleneck, Iledare called for decentralisation of power governance and the adoption of comparative advantage schemes for energy supply mix, adding: “The solution to power problem is decentralisation, and it is a policy issue. Price framework and standard are policy issues, while access, affordability and sustainability are commercial issues. Distinct responsibility, but interdependent decision-making process, with mutuality of interest goals, are needed.” PricewaterhouseCoopers’ Associate Director, Energy, Utilities and Resources, Habeeb Jaiyeola, expressed the need for a quick turnaround of the sector this year, especially with quick policies that would address lingering challenges. Asking government to face the realities of the sector, particularly in ensuring that the sector is able to sustain itself, Jaiyeola stressed the need for cost reflective tariff as leeway for solving liquidity challenges.

“Cost reflective tariff will attract investment and limit government interventions. We can’t continue to have a power sector that cannot sustain itself. There is need for money to allow the sector run by itself,” he said. Jaiyeola also called for careful implementation and encouragement of the policy on willing buyer and willing seller in a manner that is competitive and profitable for the betterment of all the stakeholders. President of Nigeria Association for Energy Economics, Prof. Yinka Omorogbe, noted that the performance was equally miserable last year, adding: “The performance was certainly suboptimal, and unfortunately, this has become the norm. I don’t see how it can get better without decisive efforts to restructure the sector.”

 

Source: The Guardian

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