By Ediri Ejoh
Relevant stakeholders have described as mere political statement the assurance by the Minister of Power, Works and Housing, Babatunde Fashola, that electricity generation in the country would be increased to 7,000 megawatts in 2017.
This is against the background that despite the huge funds that have been expended on the sector since the inception of the current democracy, power generation has failed to show any sign of improvement.
It will be recalled that President Muhammadu Buhari had declared at the opening of the National Economic Council’s economic retreat that in the next three years, the nation would generate 10,000mw of distributable power, adding that 2,000mw of it would be added to the national grid this year.
Similarly, Fashola had on Thursday, March 31, while speaking during the signing of an agreement in Abuja between Geometric Power, Aba and Enugu Electricity Generation Company, reassured Nigerians that the 10,000 megawatts of electricity generation target set by the present administration would be attained by the end of 2019.
However, various stakeholders in the industry have expressed misgivings about the set target considering the multitude of problems facing the sector.
Meantime, the Executive Director, Association of Nigerian Electricity Distributors, ANED, Sunday Oduntan, who spoke with Vanguard Features on the situation, noted that the major problem currently facing the sector was liquidity. According to him, the challenge emanated from when the electricity distribution companies, or Discos, took over as principle owners of the assets.
Removal of collection losses
He explained that at the point of takeover, about N92.2 billion was not cost reflective, thereby creating a gap which is associated with the said amount.
“Most of it was supposed to be addressed by the intervention fund which is N215 billion. That fund was suspended after, I believe, about N64 billion was paid out; so the balance of N151 billion should be paid out also,” he averred.
He said that additional issues arose in 2015 which included the removal of collection losses and the freezing of R2. According to him, this action led to a shortfall of N164 billion, which he noted remains unaddressed, stressing that with the creation of MY2 2015, the first two years were assigned to the Discos as recovery period.
In other words, there is a huge revenue shortfall which has created liquidity crisis in the industry. “It is this short fall that the discos are hoping would be addressed in terms of liquidity bond that NBET is working on, as well as the second intervention fund that CBN is also working on. And so, that is really what the challenges are and there are financial obligations that should be addressed on the value chain,” he said.
Painting a bleak picture of the situation, Oduntan, said: “The Discos cannot access funds from the banks as they are currently operating on a negative without a prospect of improved revenue generation.”
The Discos, he stated, need the money not only to pay for their obligations upstream, but also to commit for their capital investment that is critical for meeting their performance agreement with the Bureau of Public Enterprise, BPE.
Speaking on the possibility of achieving the target set by the President and the Minister, Oduntan said although there was a major demand for power in the country today, the Discos could not access power to distribute.
He identified two important issues that must be tackled which include: “First, the supply of gas to the Gencos(power generating companies)”, stressing that the issue of vandalisation of pipelines should stop while the development of gas infrastructure for the movement of the molecules was completed appropriately.
“I can assure you that the Discos are interested in more power to satisfy consumers and also to make sure that they recover their revenues. When you ask about the Discos capacity, it is tied to TCN capacity. Right now, the generation assumption that has been made under the Discos tariff is approximately 5000megawatts.”
He also identified price imbalance in the electricity tariff structure as the biggest challenge confronting power supply in the country. It was a sentiment shared by a top management staff of one of the Discos who pleaded anonymity. He attributed the challenges hindering development in the power sector to inadequate pricing.
He said: “The government has been in this business for over 50 years and did nothing, and the pricing has not been right all along. From day one, we have lamented the imbalance in price in the electricity chain. Nigerians should be ready to pay more. If the price is right, it is easier for us to work with because that would enable investors have the resources to meet the transformation for the system.
“Very recently, the Manufacturing Association of Nigeria, MAN, took us to court over our billing system. How is it that we will be told what to do?”
With regards to Nigeria’s biggest generating plant, Egbin, he said the management was still studying the financial situation in order to determine what projects to take on to improve capacity, while noting thus: “Without funding, there can’t be equipment, and without equipment there can’t be power. Right now, we can rightly say that there is nothing happening in the industry except we are paid because services rendered must be paid for as we do not run a charitable organisation.”
He also noted that due to the debt owed the company, it is unable to meet output demand. “Now they are saying we must first provide services, but how do we do all of this from the bank without the funds. The government owes us for services rendered, and we are saying they should pay us so we can render quality services to Nigerians.”
He also argued that the lack of political will to enforce tariff increment has hindered the development of the power sector, adding that “the fight against tariff increment is baseless.”
On his part, the Director General of the Lagos Chambers of Commerce and Industry, LCCI, Muda Yussuf, identified the greatest challenge confronting the sector as insufficiency in the system from billing. He noted that the Minister disclosed recently that public agencies owe over N200 billion, adding that the agencies were not paying the Discos such money because the service was not right. “So it would be unfair to say because of that you want to increase tariff. It is only 50 percent that are paying their bills, and they would continue to pay. So, consumers would be bearing responsible losses for the others who do not pay. And that is not fair. Some of those equipment are also old; there are issues of technical losses. We get power from the Gencos.
“Some of the investors are highly indebted to the banks. You know what the cost of funding is, and you are supposed to come to this kind of business with reasonable entity. I’m not sure most of them have a good percentage of STPs. The financing structure of the acquisition is also an issue.
“The fact is these Gencos are different from the government; they are private. If the government owes them, it is a different thing; if the government is the one owing they can decline gas supply to the government. The Gencos are different from the government.”