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State of Nigeria’s electricity sector worsens —Investigation

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As sector losses hit N25.77bn in two weeks
Consumers, others mobilise against new tariff
Call for reduction in FG’s 40% interest
Cut off franchise areas to enable new investors inject funds

 electricity

With the privatisation of Electricity Generation Companies, GENCOS, Electricity Distribution Companies, DISCOS, expectations were high that it would culminate in improved power supply to Nigerians. But that was not to be. Investigations in many plants by UDEME AKPAN, Energy Editor, showed that operations were constrained by many challenges, including lack of liquidity, damaged components, inadequate gas as well as poor distribution and transmission facilities, thus resulting to huge losses, which stakeholders have promised to tackle this year.

With the privatisation of Electricity Generation Companies, GENCOS, Electricity Distribution Companies, DISCOS, expectations were high that it would culminate in improved power supply to Nigerians. But that was not to be. Investigations in many plants by Vanguard showed that operations were constrained by many challenges, including lack of liquidity, damaged components, inadequate gas as well as poor distribution and transmission facilities, thus resulting to huge losses amounting to N25.77 billion within the first two weeks of 2020.

This showed an increase of 33.56 per cent when juxtaposed against N19.28 billion recorded in the corresponding period of 2019. A compilation of data obtained from the office of Vice President Yemi Osinbajo, confirmed that Nigeria recorded N13.40 billion and N12.36 billion as losses due to constraints from insufficient gas supply, distribution infrastructure and transmission facilities in the first and second week of 2020, thus resulting in a total of N25.77 billion.

Distribution infrastructure

The data also indicated a rising trend in losses as the nation had recorded N10. 59 billion and N8. 69 billion in the first and second week of the corresponding period in 2019, which amounted to a total of N19.28 billion during the period.

One of the reports, stated: “On January 14, 2020, average energy sent out was 4,166 MWH/Hour (up by 256.15 MW from the previous day). 2,632 MW was not generated due to unavailability of gas. 93.6 MW was not generated due to unavailability of transmission infrastructure, while 728 MW was not generated due to high frequency resulting from unavailability of distribution infrastructure. 150 MW was recorded as losses due to water management.

“The power sector lost an estimated N1, 730,000,000  on January 14 2020 due to constraints from insufficient gas supply, distribution infrastructure and transmission infrastructure. The dominant constraint on January 14 2020 was due to unavailability of gas – constraining a total of 2,632 MW from being available on the grid. Peak Generation attained on January 14 2020 – 4,931.3 MW.

Investigation by Vanguard showed that the huge losses could have been harnessed to stimulate investment with the aim of providing adequate and stable power to consumers as expected after privatisation.

Problems

The chairman/CEO, Nigerian Electricity Regulatory Commission, Prof. James Momoh, could not be reached for comments, but a top official, who preferred not to be named because he was not permitted to speak, said: “We are currently meeting with all relevant stakeholders, including Electricity Generating Companies, GENCOs, Electricity Distribution Companies, DISCOs and consumers to review many things. We are looking at the high losses, Tariff, DISCOs reports and claims.”

However, in an interview with Vanguard, the National Secretary, Nigeria Electricity Consumers Advocacy Network, NECAN, Mr. Uket Obonga, said: “Apparently because of the huge losses and other factors, operators and government institutions have lived up to expectation. For instance, TCN is still battling with inadequate and dilapidated transmission infrastructure across the country. The lines are old and need to be changed with new ones, their transformers and stations across the country are equally begging for replacement. Though transmission capacity increased from 5,000MW to 6,000MW, it cannot be relied upon as we have constant system collapse.”

Mr. Obonga, added: “The sector has many problems, which cover transmission infrastructure that is rapidly decaying and needs replacement. It lacks the required liquidity to fund projects. Therefore, the Federal Government has no option but to increase funding for TCN. The GENCOs complain of lack of gas and low water levels. However, we believe that since gas is produced locally and much of it is flared daily, government should consider bringing down the cost from $2.50 to $1.50; to ease the burden on the GENCOs.

“On distribution, we know that the distribution end in the power chain is the weakest link and it is in a very poor state due to lack of investments, the DISCOS have not really invested in their networks. Recently, I was travelling along Calabar – Ikom highway, and within 10km, I counted 42 fault lines. You can see the state of dilapidation of infrastructure.”

Impact

In its latest report, “Solving the Liquidity Crunch in  Nigeria’s Power Sector,” obtained by Vanguard, PwC, stated: “About 40 per cent of the population have no access to electricity and supply is usually epileptic for those that have access.”

The report noted that the poor state of power has affected the nation’s moves to diversify its economy, stressing that economic diversification is needed to ensure inclusive growth that would provide jobs for the rising unemployed Nigerians.

Solutions

However, Obonga, said: “It is my opinion that the Federal Government should organize a nationwide customer enumeration exercise to determine the actual number of electricity consumers in Nigeria as this will help us to know what the DISCOs are actually collecting and remitting. It is our view that the CBN should take over metering customers nationwide and ensure that every consumer is metered in order to eliminate estimated billing.

“The DISCOS must be made to scale down on aggregate technical collection and commercial losses, which now stands at over 50 per cent to maximize revenue collection. The sector needs more transparency and accountability, if it must survive. Load rejection must be stopped and the DISCOs should be compelled to receive loads allocated to them.

“The current payment for 1,100MW of electricity supply out of the 3,700 MW given to them is too poor. The government should consider giving up 20-25 per cent of its 40 per cent equity to other investors in order to attract funds and other resources for the development of the sector. The size of the franchise areas should also be reduced to pave the way for the advent of new investors. We have to domesticate the current model, which we adopted from India, taking into consideration the domestic issues in Nigeria.”

Action

However, in a telephone interview with Vanguard, some stakeholders, including TCN and the DISCOs pledged to intensify efforts, targeted at rehabilitating and installing new equipment in order to increase and stabilise supply nationwide.

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