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Nigeria loses N7.5tr yearly to poor electricity supply

By Roseline Okere   |   08 June 2017   |   4:27 am

The Federal Government, which disclosed this through its Power Sector Recovery Programme document obtained by The Guardian, said that the World Bank Group had expressed willingness to assist the power sector with $2.6 billion to settle some of its financial challenges.

• Power sector’s cash deficit hits N931b
• World Bank pledges $2.6b aid to industry

Nigeria is losing $25 billion (N7.5 trillion at the current exchange rate of N305 per dollar) yearly due to irregular electricity supply.Besides, accumulated power sector cash deficits from January 2015 to December 2016 amounted to N931billion ($2.9 billion).

This is the total amount underpaid by all the distribution companies (Discos) to Nigerian Bulk Electricity Trading Plc (NBET) for invoices submitted to each Disco for electricity delivered to their distribution networks. It includes losses incurred by the companies due to lack of a cost-reflective end user tariff.

Operators in the power sector believe that the revenue shortfall will adversely impact the ability of the Discos to make capital investments in metering, network expansion, equipment rehabilitation and replacement that are critical to service delivery.

The Federal Government, which disclosed this through its Power Sector Recovery Programme document obtained by The Guardian, said that the World Bank Group had expressed willingness to assist the power sector with $2.6 billion to settle some of its financial challenges.

It added that International Finance Corporation and Multilateral Investment Guarantee Agency (MIGA) are to mobilise up to $2.7 billion to facilitate investment in the private sector in the country.

Irregular electricity supply due to gas constraint has remained one of the biggest challenges confronting the nation’s economy. For example, on June 2, 2017, average power sent out decreased to 3809Wh/hour, due to gas supply challenges, which constrained about 1718 megawatts of electricity.

According to the Nigerian Electricity Supply Industry (NESI) statistics released at the weekend, the reported line constraint was 147.5MW, while constraints resulting from high frequency were 800MW. NESI added that the power sector lost an estimated N1.279 billion on June 2, 2017 alone due to different constraints.

The total gas supply indebtedness of power plants from January 2015 to December 2016 is N155 billion ($500 million)). Supply has been erratic and low, resulting in 1,400MW of constrained generation.

The vandalism of oil and gas delivery infrastructure has also shut down gas production, resulting in another 2,900MW of constrained generation.To ameliorate the situation, the $1 billion would be expended to NBET to ensure Generation Companies (Gencos) and gas suppliers are paid 100 per cent notwithstanding any shortfalls from the Discos.

According to the report, there would be an initial deployment of $500 million for metering. “Initial deployment should be focused on maximum demand customers. The metering scheme will be tied to clearly defined performance targets for the Discos supported by data and information received during an audit exercise,” it said.

The Transmission Company of Nigeria (TCN) is also expected to invest $486 million in its priority projects.The Executive Secretary of the Association of Power Generation Companies, Dr. Joy Ogaji, said that generating plants could no longer receive revenue that does not cover operating costs.

She stated: “History has shown in the past three decades how generating plants were run right to the ground by the defunct National Electric Power Authority /Power Holding Company of Nigeria without paying attention to scheduled maintenance and overhaul.

“This new breed of determined operators have continued to maintain standards by increasing their national generation capacity without being paid rightly for their services. It is only a matter of time for them to run out of funds to maintain the generation capacities and also to produce the much-needed energy for the nation.”

The Association of Nigerian Electricity Distributors (ANED) Director of Research and Advocacy, Sunday Oduntan, said it was important for the government to take a holistic approach towards resolving the liquidity problem of the power industry.

Oduntan noted that it was impossible to expect Discos that buy power at N68 per kilowatt (kw) to sell at N31/kw and still make enough money to keep the sector liquid. He urged the Federal Government to extend its interventions to all segments of the electricity supply chain rather than focusing solely on the generation segment.

The Chief Executive Officer of Eko Disco, Oladele Amoda, said that the company was still battling to recover over N2.4 billion debt owed by customers, adding that the huge debts had affected the company’s major projects.

“The company has boosted effective power distributions to customers, yet the majority of the customers refused payment. In spite of the quantum of supply distributed to customers in April, large numbers of customers are yet to turn out for payment.”

Dwelling on the challenges in the nation’s power sector in its analysis titled “The Liquidity Challenge in Nigerian Power Sector – Deal or No Deal?” obtained by The Guardian, Banwo & Ighodalo said that the strained liquidity situation in the nation’s electricity market had stunted cash flow, whilst the capital required for medium to long-term investments in the power sector is grossly inadequate.

“In our considered opinion, continuing efforts must be made to boost cash flow in the sector, address shortfall as well as bridge the funding gap. Putting together some form of guarantee that can allow the market issue bonds and create markets where cash flows are possible will guarantee the survival of the system.”




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