Stories by Ediri Ejoh
Operators in the power sector have identified lack of synergy and other factors as the major bane on the development of Nigeria’s power sector.
Speaking with Vanguard over the weekend, in response to president Muhammadu Buhari’s independence speech, Executive Secretary, Generation Companies of Nigeria, GENCOs, Dr. Joy Ogaji, said: “First and foremost, I believe it is too early to expect the President’s plans to have been utilized, considering when the Memorandum of Understanding, MOU was signed and the proposed timelines.”
She said: “However, if the plans are properly implemented by engaging all the major players; GENCOS, Transmission Company of Nigeria, TCN and DISCOS, there would be a fundamental improvement in the power sector. I believe that a major challenge in the power sector is the lack of synergy between the players in the value chain, by this, I mean the regulator, policy makers and the licensees, and this is a major problem affecting not just the sector, but also the Country at large.
“There is a serious leadership and coordination gap. The various agencies and stakeholders all operate in a silosized manner. For the past five years, there had been bulk passing among power stakeholders within the value chain each blaming the other for poor electricity supply in the country.
“Each player is viewed as a competition rather than a partner in ensuring the success of the sector. There is need to put efforts and hopefully, if there is synergy across the chain, the issues will be solved. The realization that if there is a problem with one part of the value chain, it affects the whole chain is lacking. There is little or no synergy between the Power Sector and other interrelated MDAs, such as the Ministry of Finance and the Ministry of Petroleum. By virtue of Sections 62(7) and 75 of the Act, NERC is empowered to discipline or penalize any licensee that is contravening or violating the terms and conditions of its license, the market is not sure whose duty it is to bring about market discipline in the sector.”
She stated: “Another issue is the ineffectiveness of the industry agreements. There is lack of clear policy directions, which is evidenced by an absence of leadership and coordination in the Sector. As a result, there is no compliance with the laid down sector regulations, policies and governance codes. Unfortunately, there seems to be no framework for monitoring and implementation of these policies and regulations.”
Ogaji argued that the issue of liquidity in the power sector cannot be overlooked, adding that “The DISCOS constant poor remittance to the market, especially with regards to GENCOS Invoice has resulted in overwhelming debts, as GENCOS are being owed over a trillion naira, which has greatly inhibited their operations, as well as their expansion plans. The issue of liquidity in the market has brought about loss of investors’ confidence, and unwillingness by financial institutions to grant loans to power sector investors.”
She explained that a stable long-term policy framework is needed to ensure a continued scale-up in investments and project deployment as necessary to make the Nigerian Electricity Supply Industry (NESI) bankable; more flexible; capable of providing long-term signals to investors and other stakeholders by establishing a clear long-term vision for the development of the power system.”
On way forward, Ogaji said: “TCN and DISCOS network and infrastructures would be strong enough to fully maximize the power generated by the GENCOS, thereby eliminating the problem of load rejection by the DISCOS, and increasing the wheeling power of the grid. Another critical point is to ensure full involvement of the regulator, especially in view of the fact the market is regulated and as such as CAPEX introduction by way of assets need to be well captured and updated in NERC’s regulated asset base.
“The NESI like any other electricity sector has unusual physical and economic attributes which make wholesale and retail market design a significant technical and institutional challenge. Arguably, the Nigerian power market is substantially dissimilar from power markets in the world. Its structure, nuances and nature pose unique challenges in the development of the market.
“In my opinion, one of the short term plan should be the engagement of experts who have the requisite qualifications and years of experience, to solve the problems plaguing the sector. What we currently have is everyone calling his or herself a power expert who do not have the depth of knowledge and experience and because of their connections; they seem to be the advisers, thereby compounding the issue leading to a plethora of policies, directives here and there.
“Another solution I will suggest is the need to constitute an apolitical task force or enforcement team, fully on merit and capability to drive the post privatisation challenges in the power sector, referencing the Presidential Task force formed under the Jonathan’s administration which monitored the planning and execution of various short-term projects in Sector.”
She added: “The issue of synergy between the interrelated agencies should be addressed. For instance, about 83 percent of power generated comes through gas sources, which is under the Ministry of Petroleum, yet there is no correlation between the Ministry of Power and Petroleum, or between their regulators. This also is the case with the Ministry of finance, who bank rolls the guarantees. When all these are considered, it can lead to a smooth operation of the power sector.
Meanwhile, an energy expert and Chair in Petroleum Economics and Management at the University of Cape Coast, Prof. Wunmi Iledare, is optimistic of little or no development to be experienced giving sector’s operational framework.
He said: “The President’s independence speech is planned in phases. Whether achievable in 2023 is conjectural under the current governance structure of the power sector and pricing framework.
“Honestly, without an appropriate understanding of the market structure, it won’t work under the current power governance structure. Different end users require different pricing mechanism. Power is an economic good not a public good.
“Centralized planning would not work. Certainly, evacuation of generated power is a big challenge now, but the distribution network is a potential issue. Decentralizing the governance structure and restructuring the electricity market are two critical elements going forward.”
In a recent interview with Vanguard, the Director, Modec International, Inc, Oise IIhonde, had said: “The solution to solving Nigeria power supply is to set up a long term program and not trying to solve it within a tenure of a politician or political class.”