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Nigeria’s power sector dismal performance in 2019

By Kingsley Jeremiah
01 January 2020   |   3:37 am
From so many regulatory and operational flip-flops, the Nigerian power sector failed to progress in 2019, ending the year with the usual discordant voices instead of leeway

From so many regulatory and operational flip-flops, the Nigerian power sector failed to progress in 2019, ending the year with the usual discordant voices instead of leeway. KINGSLEY JEREMIAH highlights some of the climaxes of the year.

The year 2019 started with heightened uncertainties due to the general elections, as stakeholders worried about the expected review of the privatisation exercise, five years after the sector was unbundled and the political risks, which may emerge from the election.

The re-emergence of President Muhammadu Buhari at the poll became dicey to many stakeholders as some players, expected a new political atmosphere for the rejig of the sector and others, that expected continuity had their expectations settled or dashed.

A few days into the year, Executive Secretary of the Association of Power Generation Companies (APGC), Dr. Joy Ogaji, already said the investment made by operators, especially power generation firms, was under threat. This, she, said was due to a regulation introduced by the Nigerian Electricity Regulatory Commission (NERC) to favour electricity distribution companies (DisCos).

With warnings that the sector was heading for bankruptcy and no longer bankable, the complaint from her was not new. The sector had remained in limbo for the past five years while stakeholders in the sector appeared to be confused and perpetually engage in the blame game, leaving the industry with a step forward and 10 backward.

In 2013, the Federal Government took a bold step of privatising the power sector. The change in ownership was against the backdrop of the despondent nature of the sector, which affected standards of living and crippled economic growth with only a miserable 4,000 megawatts of power to a population of about 180 million people.

It is important to note that in terms of generation, there was no significant improvement in 2019. Though the generation companies stated that current generation capacity hovers around 12, 000 megawatts, industry statistics from the Market Operator showed that the average generation remained around 4000MW.

While the Transmission Company of Nigeria had trumpeted that the nation’s transmission capacity significantly improved as the frequencies were strengthened, 2019 witnessed a very persistent grid collapses, which left the country in darkness.

The distribution companies were worst hit by complaints from consumers, the regulators, and other stakeholders. Challenges of metering remained despite the introduction of Meter Asset Providers. Accusations of non-remittance of fund and lack of investment continued against the DisCos. With DisCos as the primary target, at some point, Market Operator (MO) had to penalise operators found to have repeatedly failed to abide by the Market Rules guiding operations in Nigeria’s electricity market.

With an allegation that DisCos were owing N231 billion energy service debt, market operator, an arm of the TCN, tried to suspend – Eko, Enugu and Ikeja distribution companies for failing to renew their security cover. Similar disconnection noticed was served on Kano DisCos.

From indications, the approach of TCN worked largely in helping to force the erring DisCos remit fund. The development was also an indication that with discipline, the sector could perform better.

Maybe an elixir to make the allegedly docile Nigerian Electricity Regulatory Commission (NERC) perform better, shortly after TCN commenced disciplinary actions against erring players, NERC issued a directive to terminate licences of some DisCos.

NERC notified the eight power distribution companies (DisCos) on its intent to cancel their licences in 60 days after they accumulated N30.1 billion energy invoice debts for July 2019. But NERC is yet to disclose its since the 60 days deadline elapsed sometimes in early December.

Seen as a bold step ahead of the scheduled final performance review of the sector, the Federal Government had equally given an indication of repossessing 10 electricity distribution firms as one of the options to rescue the electricity industry.

One of the highlights of the year also included the signing of Electricity Road Map agreement between the Federal Government of Nigeria and Germany-based company, Siemens at the State House, Abuja. The agreement was seen as an outcome of a meeting Buhari held with German Chancellor, Angela Merkel on August 31, 2018.

Though the deal generated criticism, especially against the Germany based firm, which reportedly contributed to the current failure of the nation’s power sector, particularly the national grid, stakeholders would keenly watch the take-off of the agreement and its impact.

Another remarkable event was the passage of a bill seeking to criminalise estimated billing of electricity consumers by distribution companies at the House of Representatives.

The proposed law if passed at the Senate and assented to by the President, will become criminal for service providers to issue estimated bills, also known as ‘crazy bills’, issuance of which would attract either a one-year jail term or a fine of N1m or both.

Similar, NERC had also increased the tariff payable by power consumers across the country, which from this year, power consumers in Nigeria will have to pay an additional sum of between N8 and N14 for every kilowatt-hour of energy provided by their respective distribution companies.

Most stakeholders equally watched the drama that went on and led to the suspension of the Managing Director of the Rural Electrification Agency (REA), Damilola Ogunbiyi and the forceful eviction of Nigerian Bulk Electricity Trading Plc (NBET) counterpart, Marilyn Amobi.

Minister of Power, Sale Mamman announced the decision, which came after a series of alleged infractions and power play in the agencies. Amobi had been enmeshed in the indictment regarding violation of the Procurement Act 2007 and had been under investigation by the Independent Corrupt Practices and other Related Offences Commission (ICPC).

Ogunbiyi was also accused of infractions, which led to her suspension, just as Spokesman to the minister, Aaron Artimas, confirmed that Ogunbiyi’s suspension followed infractions in the REA.

Apart from the dearth of investment into the power sector, for instance, the industry witnessed the persistent collapse of the national grid, which left the country in a country in darkness intermittently, regulatory challenges, discordant Voices among the sector, weak bankability, retrogressing quality of supply and others.

Renowned energy economist, Prof. Adeola Adenikinju, of the Department of Economics, and Centre for Petroleum, Energy Economics and Law believed that the performance of the power sector was below par.

Adenikinju stressed that the power sector could be best described as heading towards retrogression as the transmission, distribution, and generation performed woefully.

“The power sector did not perform as it should. The various segment of the power sector did not record significant progress. It should be called retrogression instead of progression. It failed to attract investment in the last four year,” he said.

Pioneer Managing Director of the Nigerian Bulk Electricity Trading (NBET) Plc, Rumundaka Wonodi said 2019 remained a dismal year for the power sector especially in terms of performance.

According to him, the investment climate did not get better, stressing that the sector continued to face bankability issues.

“In terms of performance and operations, 2019 was a dismal year for the power sector. The performance was poor. You could see the number of systems collapses that we had. It was not a year that added any significant value to the sector, Wonodi stated.

Chair in Petroleum Economics and Management at the University of Cape Coast, Ghana, Prof. Wunmi Iledare, stated that the power sector remained epileptic in the year.

“There is no reason for it to be so but for amorphous institutional governance structure. This is similar to the experience in the petroleum sector. Let the regulator be distinct from the policy institution and commercial,” he said.

President, Nigeria Association for Energy Economics, Prof Yinka Omorogbe, noted that the performance was equally miserable in 2019.

She said: “The performance was certainly suboptimal, and unfortunately this has become the norm. I don’t see how it can get better without decisive efforts to restructure the sector.”