BusinessDay

Power sector in Nigeria: Time for a complete overhaul

No successful economy runs on generators and lanterns

Since “privatisation” of the power sector in 2013, Nigerians have been battling with one challenge or the other regarding electricity supply. Realities on ground are disturbing. The challenges within the power sector are complex and man-made. Initially, these challenges weren’t expected. But corruption and low ethical standard of conducting business when privatising state-owned enterprises in our society are mainly responsible.

Truth be told, the power sector has been under “severe” stress because the stakeholders have fallen short of their contributions towards achieving an efficiency in the sector. Experts say that tariff paid by electricity consumers do not cover the cost of generation, transmission and distribution of electricity supply. For some time, there has been lack of trust between stakeholders and the general public.

After “privatisation,” huge funds have been sunk into the power sector but not much has been achieved in the provision of electricity to consumers. Nigeria, for instance, has a total domestic electricity generation capacity of roughly 12,500 Mega Watts (MW) with a population of about 200 million people compared to South Africa’s 51,000 MW and almost 58 million people.

The World Bank in a recently published report revealed that Nigeria’s unreliable power sector is seriously affecting the country’s economy causing a huge loss estimated at about N10.0 trillion yearly. The World Bank report described the power sector, particularly the distribution segment as “operationally inefficient with high losses.”

This is the time to carry out a complete overhaul of the power sector in Nigeria. If we fail to overhaul the sector now, the country will keep losing huge sums of money, move from darkness to darkness; and the cycle of poverty will continue in a sustained fashion

Additionally, the annual economic losses caused by Nigeria’s unreliable power supply is about 2 percent of Gross Domestic Product (GDP), according to the World Bank Report. In the same report, Nigeria ranks 131st with respect to overall ease of doing business in the year 2020 during which access to electricity ranked as one of the major constraints.

With respect to electricity supply, Nigeria ranked 171st globally out of 191 countries surveyed, and 33rd among 46 sub-Saharan countries. Also, it was reported that 40 percent of households with access to electricity still use generators.

Though many Nigerians rely on generators and non-grid sources such as solar panels, battery-operated lamps, lanterns and the likes. With the number of those who are poor gradually increasing, no nation achieves poverty alleviation without its citizens having access to reliable electricity supply. In fact, hardly can one find a successful economy running on generators and battery-operated lamps in this age and time.

But how has the inefficiency in the power sector contributed to poverty in Nigeria? In so many ways namely, debts, policy and regulatory flip-flops, corruption, corporate governance, cost of gas, arbitrary billing, metering, and personal interest among others. The list is endless.

Statistics show that out of the output from power generating companies (GENCOs) of about 12,500 MW, only 7500 MW can be delivered. The Transmission Company of Nigeria (TCN) in turn takes about 4000MW of the power produced to deliver to the Distribution Companies (DISCOs). It is unfortunate to know that the country is generating power at a loss, when the bulk of the power generated cannot be transmitted to electricity consumers.

The Multi-Year Tariff Order (MYTO) which came into operation in 2015 to gradually phase out electricity subsidy in order to make the power sector commercially viable has not been implemented for political reasons, according to some experts.

Furthermore, some analysts say that electricity tariff is not cost reflective. To avoid a total collapse of the power sector, the Federal Government (FG) established a company known as Nigerian Bulk Electricity Trading Company (NBET) which buys power from GENCOs and sells to DISCOs. NBET is funded by the Central Bank of Nigeria (CBN). Today, NBET is allegedly owing the CBN roughly N2.0 trillion. Yet, millions of Nigerians don’t have access to electricity.

So, the NERC wants to embark on the forensic audit of only DISCOs. Methinks it is legal and legitimate for NERC to ask for a forensic audit of DISCOs. But what about a forensic audit of the GENCOs, TCN, and NBET? Or are we saying that these organisations including NERC and CBN cannot audited. How then can we know how much has been spent and for what in the power sector? May be Nigerians don’t need such information.

In the midst of the operational challenges, the NERC wrote a letter to DISCOs for increase in tariff. But electricity consumers expressed concerns that increase in tariff will not translate to an improved supply of electricity to various households, offices and the industry generally. DISCOs have rejected increase in electric tariff now until the year 2021.

Policy flip-flop on metering is another challenge. At the initial stage of the “privatisation”, DISCOs were responsible for providing meters to electricity consumers. Meters were expensive then. To relieve DISCOs of financial burden, they have been mandated not to issue meters to electricity consumers by the Ministry of Power, Works and Housing. “Metering is now government business.” It is called the Meter Asset Provider (MAP).

But most consumers use electricity and are not willing to pay for power consumed. Why? They are not metered. There are reports that imported meters are in containers at seaports in Lagos because of FG directives that 35 percent import duties have to be paid by importers.

As simple as those meters are, one would have expected Nigeria to completely manufacture these meters in the country. This isn’t so because local manufacturers are equally having challenges importing some components from abroad. It is because they are to pay 10 percent duty on all electronic/electrical components imported from abroad for the local production of meters.

From press statements issued by all stakeholders in the power sector, one can see that there is less collaboration among DISCOs, GENCOs, TCN, NBET, NERC and the electricity consumers. They are in business to make profit. Every company is fighting for its survival.

The forensic audit recommended by NERC for the DISCOs has created disharmony among stakeholders in the power sector. DISCOs have gone to court seeking to know why they are to be audited alone. The DISCOs claim they have nothing to hide. They see the selective forensic audit ordered by NERC as an act of victimisation.

There are reports that the FG has set a goal of achieving 7000MW and 11,000 MW of reliable power supply by 2021 and 2023 respectively through a contractual agreement with Messrs Siemens. There are allegations that the FG wants to hand over electricity distribution to Messrs Siemens. The FG has since denied this allegation.

The foundation on which the “privatisation” of PHCN was built is weak. To solve the complex web of problems in the power sector, there will be need for more investments. But which investor will invest in a power sector that doesn’t generate appropriate revenues from electricity supplied to most consumers? The power sector is neck-deep in debt!

In summary, this is the time to carry out a complete overhaul of the power sector in Nigeria. If we fail to overhaul the sector now, the country will keep losing huge sums of money, move from darkness to darkness; and the cycle of poverty will continue in a sustained fashion. Mr President, over to you sir! Thank you!

 

Get real time updates directly on you device, subscribe now.