Stakeholders ask govt to address commercial bottlenecks in power sector 

Stakeholders in the Nigerian power sector and financial industry have urged the federal government to address bottlenecks to unlock investment opportunities in the country’s electricity sector.

Privatised over a decade ago with the intention that the sector would survive on its own, the federal government has spent trillions of naira to save the industry, currently on the verge of bankruptcy.

While the performance of the sector is crippling the economy as manufacturers and small businesses are shutting down, President Bola Tinubu, earlier this month, said the distribution segment of the market alone would require about $2 trillion to function optimally.

Sadly, most of the people who bought over the assets of the sector, contrary to information they provide to the government to validate their financial capabilities, lack the financial power to invest in the sector.

Besides, regulatory challenges, harsh operating conditions, lack of cost reflective tariff, unnecessary interference from the government, tightening investment climate across the world and other issues have worsened the liquidity in the sector.

The Electricity Law, 2023, signed by President Bola Ahmed Tinubu, is a landmark legislation that establishes a comprehensive legal and institutional framework for a fully privatised, cost-reflective tariff, contract-based competitive electricity market in Nigeria aimed to reform the electricity sector, promote renewable energy integration and attract essential investments to fuel industry growth.

The act introduces mechanisms to incentivise investment in renewable energy projects, including feed-in tariffs that guarantee a fixed price for renewable electricity fed into the grid. Additionally, it offers various incentives, including tax benefits, to investors in the power sector.

Recall that the Minister of Power, Adebayo Adelabu, underscored the critical role of technology and metering in bridging the sector’s gaps.

Proper metering for instance could enhance accountability, ensuring that consumers pay for the power they consume. Adelabu asserts that Nigeria’s power sector demands long-term investments, with profitability awaiting those who invest patiently.

“A lot of investment is required in the power sector. In three weeks of assuming office, I have seen humongous investments that have come into this sector. But what are the steps that are required for those investment opportunities to reap the benefit of those investments, additional investments in the form of equity and capital expenditure (CapEx) need to come into this industry,” he said.

New investments can come from a variety of sources, including foreign direct investment (FDI), multilateral development banks, private equity firms, and impact investors. Creating attractive incentives, offering reasonable returns, and ensuring transparent governance will be essential in attracting these potential investors.

National Coordinator of the All Electricity Consumers Protection Forum (AECPF), Adeola Samuel-Ilori, mentioned that the failure of privatisation and the absence of investors resulted from a lack of substantial sector improvement, despite the belief that it was for private ownership, which wasn’t entirely the case.

“Those who won the privatization deceived everyone, claiming they would bring capital and technical expertise. However, the technical experts were borrowed from abroad, and after obtaining privatisation licenses, they disappeared, turning the expected capital inflow into a mirage,” he said.

Samuel-Ilori further noted that the excuse of a cost-reflective tariff hindering serious investors with investment funds is deceptive and a case of putting the cart before the horse.

He highlighted the presence of dilapidated equipment, misplaced substations, and obsolete line materials like transformers.

Importantly, he emphasized that the current owners show no intention of investing, leaving consumers to grapple with these issues.

Electricity Analyst Lanre Elatuyi said addressing the challenges faced by the power sector and attracting new investments require strategic planning, policy reforms, and effective collaboration between the government, private sector, and international partners.

He added that by tackling these issues head-on and creating a conducive environment for investments, the power sector can regain its momentum and contribute significantly to the country’s economic growth and development.

The Executive Director of PowerUp Nigeria, Adetayo Adegbemle, said the dissolution of PPI would help in curbing some challenges faced in the sector or at best become an office within the Ministry of Power tasked with engaging entities to upgrade electricity infrastructure in Nigeria.

“Unless the metering issue is resolved, the power sector value chain will be continually starved of funds, while growth in the sector will be stultified. Establishing a local meter manufacturing ecosystem will ultimately increase our local meter manufacturing capacity.

“Beyond establishing a local meter manufacturing ecosystem, we need to also establish local Transformers manufacturing and repairs. We need to develop this local capacity,” he said.

Adequate metering solutions are essential to unlock funds and stimulate growth in the power sector. Establishing a local meter manufacturing ecosystem and enhancing transformer manufacturing and repairs are vital steps in this direction.

On his part, the Executive Coordinator of NEPA WAHALA NG, Emeka Ojoko, said accurate data is crucial for informed decision-making in the sector.

He calls for more precise data to drive policies effectively. He also suggests consolidating existing regulations to enable manufacturers to source power directly from generation companies, reducing production costs and leading to more competitive pricing for consumers.

Nigeria’s power sector holds immense potential, but overcoming its challenges requires strategic investments, innovative solutions, and a long-term commitment from both the government and private investors. By comprehensively addressing these issues, Nigeria can unlock its power sector’s potential and provide stable, affordable electricity to its citizens while contributing to regional energy security.

Navigating Nigeria’s power challenges requires strategic investments aligned with the ongoing reforms. The country’s commitment to enhancing its power sector presents a unique opportunity for investors to contribute to accelerated economic growth while reaping substantial returns on their investments. By addressing the challenges and capitalizing on the available prospects, Nigeria can build a robust, efficient, and sustainable power sector, setting the stage for a prosperous economic future.