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Expert charts path to power sector development

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The Chief Executive Officer, GDL, Kola Ayeye

Managing Director, Growth & Development Asset Management Limited (GDL), Kola Ayeye, has emphasized the need for the Central Bank of Nigeria (CBN), and commercial banks to collaborate with the Nigerian Electricity Regulatory Commission (NERC), to reposition the power sector for improved performance.  
   
He said it was time to admit to the failure of the last power privatisation exercise, and recommended a new programme where stakeholders should, on a competitive basis, invite a global player in the caliber of GE (General Electric) or such similar player to commit to generate, transmit, and distribute a minimum of 20,000 MW daily within five years, increasing same to 30,000MW daily by the tenth year. 
  
Ayeye, while speaking at an interactive forum in Lagos said, “We will be contracting to pay for power successfully delivered to the consumer rather than contracting for the execution of power projects. Execution of power projects has produced very poor results after huge investments in excess of $16 billion. 
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“The nation has invested massively in power projects with poor results, so we should change the model. Rather than contracting to execute power projects, let’s contract best-in-class players to deliver power. It is not our business how they generate, transmit or distribute the power. 
 
“They are to deliver power. They will only get paid for the power they deliver to the consumers. Such big players exist and the size of the Nigerian power market is sufficient to attract them.”
   
He advocated that the contract with the new concessionaire will be backed with a 10-year payment guarantee for power delivered to the consumer which will be provided either by AfDB, World Bank, or first-class international banks. 
  
Ayeye added, “Let us find a partner who will take over available power assets across the entire value chain. But our commitment will be to pay for power delivered to the consumer. This contract will be between $8-12 billion, and is definitely of a sufficient scale to attract a global best-in-class operator.” 
  
Ayeye, a former Executive Director of Asset Management Corporation of Nigeria, (AMCON), decried the level of default of both electricity generation companies (GENCOS), and distribution companies (DISCOS), to the banks stating that such entities should be put up for reconcessioning/reprivatisation either through voluntary collaboration with CBN/NERC/banks or through receivership where the operator refuses to cooperate. 
  
He said this radical reform in the power sector is necessary to address the abysmal performance of the present players who have failed to deliver constant power to users in Nigeria.
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“Current operators should be compelled to either liquidate their debts or participate in a better-managed programme of ceding management and control to a best-in-class operator. The debts provide a platform for inviting new operators through either voluntary negotiation with the existing owners or receivership. The hitherto privatised entities should not be renationalised. 
  
“However, the CBN, banks, and NERC should initiate a programme of using these debts as a basis for re-concessioning underperforming operators to a world-class operator. This operator will be responsible for the entire value chain covering feedstock production, generation, transmission, distribution, and collection.”

Speaking on the country’s tariff structure, he said investors should not use the nation’s current tariff as an excuse for the underperformance of the sector. 
  
“Tariffs are no longer a big problem. The current tariffs are already close to international parity. Existing tariffs are very close to international averages. Across the 11 Power Distribution Companies, if you add the estimated bills, they may, in fact, be billing paying customers more than international averages.”   

Ayeye lamented the failure of the power sector to deliver regular electricity several years after privatization. “The power sector is a major failure in the civilian dispensation. We have gone 20 years and the power situation has only marginally improved. If we do not introduce radical reforms, another 20 years will lapse, and the sector will not record any change, he said.

He identified the power sector as an essential requirement for output growth in Nigeria’s manufacturing sector. 
 
“Unless the manufacturing sector grows, unemployment will continue to grow. We must solve the power problem. We are making incremental progress but what we need is a quantum leap. We must radically change our approach otherwise the power sector and manufacturing sector will not grow,” he added.


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