News

May 17, 2024

Electricity: Most DisCos are technically insolvent— NERC

NERC

By Clifford Ndujihe, Obas Esiedesa & Olayinka Ajayi

LAGOS — The Federal Government yesterday admitted that most of the electricity Distribution Companies, DisCos, in Nigeria are technically insolvent and unable to pay for invoices sent to them from the electricity market and invest in network expansion projects.

Speaking at the 8th Africa Energy Market Place 2024 in Abuja, Chairman of the Nigerian Electricity Regulatory Commission, NERC, Engr. Sanusi Garba, said the poor financial state of the DisCos makes it difficult for them to raise the needed capital to invest.

Garba pointed out that the challenges facing the sector were a culmination of past inactions and missteps by those saddled with the responsibilities of managing the sector, both at policy and operational levels.

According to him, “Today when you look at distribution companies, they are clearly and technically insolvent, and you also want them to raise capital in terms of debt or equity. It’s a herculean task.

“I also want to mention that implementing the power sector reform requires powerful political will to implement decisions that impact the wider public.”

On his part, the Minister of Power, Chief Adebayo Adelabu, said the government is working to get the distribution companies solvent and effective by unbundling their operations along state boundaries.
Adelabu insisted that the areas covered by the current DisCos are too large for them to deliver effective services to consumers.

Speaking on how the government will tackle the N1.3 trillion owed to power generation companies and the $1.3 billion debt to gas companies, the minister disclosed that President Bola Tinubu has approved a plan to liquidate the debts.

He said: “Mr. President has approved the submission made by the Minister of State Petroleum (Gas) to defray outstanding debts owed to gas supply companies by power generation companies.

‘’The payments are in two parts, the legacy debts and the current debts. For the current debt, approval has been given to pay about N130 billion from the gas stabilization fund which the Federal Ministry of Finance will pay.

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“The payment of the legacy debt will be made from future royalties in exchange for incomes in the gas sub-sector which is quite satisfactory to the gas suppliers. This will allow the companies to enter into firm contracts with power generation companies.

“For the power generation companies, the debt is about N1.3 trillion and I can also tell you that we have the consent of the President to pay, on condition that the actual figures are reconciled between the government and the companies.

“This we have successfully done and it is being signed off by both parties now. The majority has signed off and we are engaging to ensure that we have 100 per cent sign-off.

“The debt will be paid in two ways, immediate cash injection and through a guaranteed debt instrument, preferably a promissory note. This assures the companies that in the next three to five years, the government is ready to defray these debts.”

On its part, the African Development Bank, AfDB, said it had so far spent over $450 million to support various power sector projects and programmes with another $1 billion planned to support the power sector reform effort by the government.

Vice President, of Power, Energy, Climate and Green Growth Complex, AfDB, Dr. Kevin K. Kariuki, pointed out that with 90 million out of 600 million people in Africa without access to electricity living in Nigeria, the effectiveness of the reforms will be measured based how much of the over 13GigaWatts of installed capacity Nigeria utilizes for its development.

“The African Development Bank is acutely aware of the extent of the challenge, ranging from addressing the electricity access deficit to rehabilitating and upgrading the power system to meet a load of 20GW which is believed to be the true demand, for Nigeria’s 200 million people, hence, we must have all our hands (i.e. all stakeholders) on the deck empowered by the new Electricity Act, 2023!

“At AfDB, we put our money where our mouth is! As is manifested by the fact, we will be shortly seeking board approval for a one billion US dollars policy-based operation (PBO) with a significant energy component aimed at supporting the ongoing power sector reforms triggered by the new Electricity Act,” he stated.

How Nigeria can overcome energy crisis – Mahama, Nnaji, Obi, Kwankwaso, Duke, Ooni

Meanwhile, eminent Nigerians and leaders, including former Ghanaian President, John Mahama, yesterday, dissected Nigeria’s energy crisis and returned a grim verdict: The country has no business with epileptic electricity supply given her huge resources. They said there is a need for a state of emergency to be declared in the energy sector to address the challenges.

Those who proffered solutions to Nigeria’s energy crisis included founder and chairman of Geometric Power Group, Professor Barth Nnaji; 2023 Presidential Candidate of the Labour Party, LP, Mr Peter Obi; former Cross River State Governor, Mr. Donald Duke; former Kano State Governor and 2023 Presidential Candidate of the New Nigeria Peoples Party, NNPP, Senator Musa Kwankwaso; Ooni of Ife, Oba Enitan Ogunwusi; Chairman of British Tobacco, Chief Kola Kareem; and Dr Dele Momodu among others.

They spoke at the Inaugural Dele Momodu Leadership Lecture held at the Nigerian Institute of International Affairs, NIIA, Lagos.

Held as part of activities to mark the 64th birthday of Dele Momodu, publisher of The Ovation magazine, the event lived up to its billing, drawing participants across political and regional divides.

We can’t continue paying for electricity and getting darkness — Momodu

Welcoming participants, Momodu said the country’s endless energy crisis has become embarrassing and he has elected to encourage dialogue to halt the trend.

His words: “On the occasion of my 64th birthday, you may be wondering why I am starting a lecture series. The reason is not far-fetched. The clock is ticking, and by the grace of God, on my next birthday, I will be 65 years old and will undoubtedly be called an elder statesman. In my moment of soliloquy, I asked what next. I wrote over a thousand articles and spoke endlessly on radio and television, but not much has changed in my greatly endowed country. My verdict is that criticism alone could not do the job. I decided to reach out to our leaders, technocrats, and my fellow citizens in general.

“The next facet of my struggle would be to encourage dialogue and conversation, so I came up with the idea of a national and international lecture. My country is riddled with all the denigrating challenges of which we are all guilty.

Rather than continue to have a blame game, why can’t we end this endless energy crisis? It is the most disturbing and embarrassing thing for a Nigerian. If I want to buy any product, all I need to do is pay, and it will be delivered. So how come we paid for electricity and it cannot be delivered? That is the challenge I am throwing at our leaders today. With all our investment in electricity, it has gone up in smoke. The more we paid, the less electricity we got. It seems that electricity affects all of us; we should propose a solution to it in a non-partisan way.”

Nigeria has all it takes to advance Africa’s collective energy — Mahama

Former President Mahama of Ghana, who chaired the lecture, said the theme of the inaugural lecture: “The Politics of Energy and the Way Forward in Nigeria’’, is the most appropriate and suitable because, despite Africa’s tremendous energy resources, such as hydro, wind, and solar, the continent continues to suffer from severe energy deficit, which undermines the totality of economic growth and development.

Mahama who recalled Ghana’s energy challenges despite generating over 5,500 MW of electricity, said: “The African continent is home to about 17.8 per cent of the world’s population, of which about 600 million people are without access to electricity. And 98 per cent of sub-Saharan Africa and another 940 million people lack access to clean cooking fuels and technology. This calls for bold policies by leaders and pooling resources to achieve Sustainable Development Goal No. 7, which is access to affordable, reliable energy by the year 2030.

“Nigeria can be described as a continental economic leader and powerhouse of Africa. Nigeria has a unique opportunity and potential to achieve energy security and sufficiency for itself and the entire West African sub-region.

“Nigeria and sub-Saharan Africa have to address the critical question of which energy path we intend to adopt. Are we to take the path of a wholesome transition by tapping our gas or must we adopt a customized energy transition that prioritizes climate justice, wealth creation, and inclusive growth? This is the basic question we need to answer. This is the moment Nigeria must show leadership in the global politics of energy.

I wish to call on Nigeria to lead the politics of energy resources in Africa. There’s an urgent need for Ghana and Nigeria to deepen our economic and technical cooperation in harnessing and developing our energy resources for energy security and reliability as a catalyst for industrialization for the entire sub-region. The energy sector is the foundation for economic growth, and Nigeria must take the leadership mantle to build a regional consensus that would provide a more promising future for Africa.

We need emergency in energy sector – Obi

Also speaking, Obi commended Momodu for renovating the NIIA, and providing rugs and air conditioners, and said there is a need to imbibe a maintenance culture in Nigeria.

With Ghana of about 24 million people producing over 5,500Mw of electricity and Nigeria of over 200 million people generating less, he said there is a need to declare an emergency in the energy sector and boost the supply of gas locally.
“We must declare an emergency on power. We need embedded power and the way to go is very simple, I insist on gas supply. Making Nigeria productive and pulling our people out of poverty will give more dollars than export,” he said.

Kwankwaso, Ooni, others speak

Speaking at the lecture, Kwankwaso, who recalled that he did a 35MW power project in 2015 and $43m in Kano treasury for his successor to do the transmission, urged Nigerian businessmen and women to emulate the good work of Professor Nnaji in Aba where his Aba power project is providing power to nine of the 17 local councils of Abia State. “I urge our governors to join forces and ensure we have electricity in Nigeria,” he added.

On his part, the Ooni of Ife, urged Nigerians to join forces, shun partisan considerations and collectively tackle the challenges of the country.

How Nigeria’s rejection of gas pipeline proposal from US hurt us — Duke

On his part, Duke rued Nigeria’s missed opportunities in rejecting the proposal of the United States to build a gas pipeline from the Niger-Delta that would pass through Niger Republic, Algeria to Europe in the 1980s.

His words: “The topic is very important in terms of this continent and where it is going. Nigeria has a $37 billion oil reserve. In 1985, as an intern in the US, an American lady asked me a question in a rebuking manner, asking what was wrong with Nigeria. I was about 23 years old, so I didn’t understand what she meant. She said she just come back from the White House, and she had an interview with the chief of staff, and they proposed a gas pipeline from Nigeria to Europe.

I thought it was a brilliant idea that it was going to be paid for by the Western world, but we gave a condition, and the condition was that the United States would have to pull out of South Africa. She said it was a very stupid decision, that no one gave the United States conditions. It would have made more sense if we agreed, and we would have had a lot more leverage. This is a nation that has been flaring 2.5 billion cubic meters of gas daily for over 40 years. That is equivalent to burning 25 million gallons of diesel.”