…as operators decry debt, demands strict regulation
By Ediri EJOH
Activities in Nigeria’s power sector may be deepened as the World Bank has made available $224.7 million for investment, a development expected to enhance the financial capacity of operators.
The board of the World Bank Group reportedly approved the fund for the Regional Off-Grid Electrification Project (ROGEP) in West Africa and the Sahel region.
The breakdown showed that $150 million would come in the form of credit and grant from the International Development Association, IDA, and $74.7 million as contingent recovery grant from the Clean Technology Fund.
The World Bank stated that the fund would assist the West African Development Bank and ECOWAS’ Centre for Renewable Energy and Energy Efficiency expand off-grid access to electricity for countries, including Nigeria, Benin, Burkina Faso, Cabo Verde, Cameroon, Central African Republic, Chad, Cote d’Ivoire, The Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Mauritania, Niger, Senegal, Sierra Leone and Togo.
Speaking on the fund, Coordinating Director for Regional Integration in West Africa, Rachid Benmessaoud, stated: “So far, only three per cent of households in West Africa and the Sahel are served by stand-alone solar home systems, and 208 million people in the sub-region do not have access to electricity.
“The new project will help adopt regional standards and regulations to establish a regional market with harmonised policies that will attract larger market players for the benefit of all participating countries.”
It stated that although stand-alone solar systems have a large market potential in West Africa and the Sahel, investments in off-grid renewable energy have lagged behind in the sub-region.
Meanwhile, the Chairman, OPTS, Paul McGrath, said to realise the full benefits of gas as a catalyst for economic growth and diversification, several challenges across the entire gas value chain needed to be resolved.
According to him, the challenges include inadequate infrastructure along the value chain; regulated low prices, legacy debt related to gas and power supply and the challenging business environment.
He said: “The commercial and financial structures of the gas-to-power commercial value chain remain weak with growing arrears and uncertainty in the payment system which disincentivises gas investors.
“To date, Nigeria’s domestic gas prices are kept at a regulated low price, which does not cover the cost required to fully develop its gas resources.” He said of the 162 trillion cubic feet reported gas reserves in the country; about 75 per cent would require the building of new infrastructure to deliver the gas resources to the domestic market.
“The current regulated gas price of $2.50 for one million British thermal units falls short of the price required to attract investment for these new gas developments.
“The gas sector should transit into a liberalised market based on the ‘willing buyer, willing seller’ principle and ensure the existence of a competitive fiscal regime to support upstream gas development.”
Similarly, the Electricity Generation Companies, GENCOs, lamented that the Nigerian Electricity Supply Industry, NESI, despite its huge potential, is yet to demonstrate sustainable returns to investors, across the electricity supply value chain.
In a report obtained by Sweetcrude, it stated: “It is no news that the flow of money within the industry is the fundamental problem preventing Nigerians from enjoying continued and sustainable improvement in electricity supply and thus the gains of the Nigerian power sector reforms or privatisation.
“The reason for this liquidity squeeze we feel in the sector is that the sector is working against the established principles of electricity supply value chain. The first principle being that while energy flows from the left to the right (via the fuel (gas or water) supplier to the fuel transporter (NGPTC), to the GENCOs, to the power transmitter (TCN), to the power Distribution Companies, DISCOs and then to our homes or industry/commercial enterprises.”
It added: “If power output must improve, the transmission and distribution arms of the power chain must be strictly regulated. The transmission grid must be upgraded to ensure 8000MW available capacity from GenCos is put on the grid. The distributors (DISCOS) must be strictly monitored to ensure revenues collected for electricity supplied is remitted. This is the link to infrastructure development and future investment along the power chain.
“The power sector is key to recovering the economy of this country and putting on the right track. Finally, one major problem I personally believe we are faced with is lack of dimensioning our problems and also separating politics from critical sectors like power to enable the country make progress. Another reason is too much interference and over regulation. We must learn to allow the market forces drive the market. The role of government is to put in place an enabling environment with a firm monitoring and benchmarking process to drive efficiency and implementation.
“With privatisation, the role of government is reduced to policy making. Another problem is inadequate policy in place to back up regulations. Policy forms the bedrock upon which regulation and orders are based and its absence portends unsustainable plans and programmes.”