Written by All

Implication of Nigeria’s epileptic power supply

In 2013, the Nigerian government ceded most part of the its power sector to private hands, with the hope of improving power generation and distribution, and to in the long run, end the myriad of problems bedevilling the sector.

 

 

 

 

 

 

 

The then government owned Power Holding Company of Nigeria was unbundled into six generation companies, Gencos, and 11distribution companies, Discos, in a $2.5billion deal in the first phase of the privatisation process. The transaction was considered one of the world’s largest privatisation deals, with 70percent of the transaction being debt financed by local banks.

At the time of the unbundling, power generation in Nigeria was as low as 3,781megawatt, MW, of electricity, yet almost five years after the sale, Nigerians are yet to feel the impact of the privatisation, as the power situation seems to further degenerate.

The country is among the lowest power generation countries in the world, generating an average of 3,8000MW of electricity per day. While less populated countries in Arica like Egypt with about 90million people generates 24,000MW and South Africa, with its 57million population generates 40,000MW of electricity, Nigeria is struggling to generate a paltry 3,8000MW of electricity on the average.

Meanwhile in other parts of the world, the United Kingdom with a population of 66million generates up to 80,000MW, while Germany with its 30million people generates a whopping 120,000MW.

Though the country had experienced an all-time high power generation of 7,000MW, electricity generation had plunged to zero megawatt 11 times in the first five months of May 2016 due to total system collapse. This was again experienced six times in the following month of June.

Successor companies have blamed the nation’s power deficit on issues of inadequate gas for firing turbines, transmission issues, cost recovery challenge due to overpriced power plants, end user tariffs, among sundry issues.

Also, industry players have continued to trade blame among themselves, with the Gencos either claiming no to get enough gas to power their plants or accusing the transmission companies of not having the capacity to transmit what is being generated.

Consumers are subsequently left to grapple with epileptic power supply, estimated billing and high charges, while the companies try to figure out their priorities.

The impact of epileptic power supply weighs heavily on Nigeria’s economic growth, as private businesses struggle to stay afloat. Small business owners have had to consider the cost of providing back-up energy in addition to the high start-up cost, infrastructural deficit, among the pile of challenges connected with running a business in an environment like Nigeria.

With an estimated population of 190million, the National Planning Commission suggest that Nigeria will require an electricity generation capacity of at least 35,000MW of electricity by the year 2020, if indeed its socio-economic goals of alleviating poverty and job creation are to be met.

To realise this, the federal government outlined some policy measures to reposition the sector, including the Power Sector Recovery Plan. The plan initiated with the World Bank is expected to commit up to $2.5billion to reform the power sector in Nigeria. Under the arrangement, the Nigerian Bulk Electricity Trading plc will, using the legal instruments like the Power Purchase Agreements, PPAs, buy power from Gencos and independent power plants, and sell to the Discos.

The Central bank of Nigeria also approved a N213billion Nigeria Electricity Market Stabilisation Facility and another N300billion Power and Aviation Intervention Facility, PAIF. Another N701billion payment assurance guarantee was also approved by the FEC to the NBET to solve the liquidity problems in the industry and guarantee Gencos’ payments for gas supplied.

These interventions seem to be yielding little or no impact, as the myriad of challenges facing the sector persist. Some stakeholders are now calling for a review or even outright revocation of the privatisation deal.

While we commend some of the effort made at repositioning the power sector in Nigeria, government must realise that the provision of adequate and constant power supply is critical to achieving an investor friendly environment and increasing internal productivity and economic growth. The power sector directly impacts all economic activities and so governments should be interested in the development of the sector as no investor will be willing to incur additional cost of providing alternative power when public energy is readily available in neighbouring countries.

Government and other stakeholders should consider constructing alternative independent power projects, like coal fired power plants and renewables. Nigeria must take full advantage of the rich coal reserves in eastern part of the country in boosting power generation if indeed it intends to actualise its vision 2020 objective of generating 40,000MW. We look towards replicating the South African module, where 89percent of their power is generated through coal fired stations.

The Gencos should concentrate in replacing obsolete equipment at their power plants to check their frequent breakdown and ensure uninterrupted power generation.

Issues of corruption have been linked to the slow growth of the sector, the Buhari administration should therefore extend his anti-corruption drive to the sector by ensuring that intervention funds invested into the sector are properly accounted for.

Government should ensure that the interest of electricity consumers are protected at all times by ending the fraudulent attitude of some Discos who have continued to rip-off helpless consumers through estimated billing.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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