• Thursday, February 29, 2024
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BusinessDay

Power matters: Beyond funding

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There is no doubt that resolving Nigeria’s age long power supply issues are top on the agenda of needs of all Nigerians. And any government that seeks to win the hearts of Nigerians must put power matters top on its agenda. Thus it is not surprising the huge financial resources the federal government is committing to addressing power issues.

It is against this background that the recent allocation of an additional $550 million to the Nigeria’s Sovereign Wealth Fund (NSWF) to improve power sector financing by the federal government is remarkable. According to Ngozi Okonjo-Iweala, minister of finance and co-ordinating minister for the economy, who disclosed this on Monday, $200 million has been transferred to the infrastructure component of the NSWF to help it leverage gas to power investments with the private sector.

Also, a liquidity facility of $350 million allocated to the Nigerian Bulk Electricity Trading company (NBET) out of the $1 billion Eurobond proceed, aimed at backing up the bulk trader is expected to give confidence to the international community that it has the needed resources to be an intermediary in the power sector.

The announcement of the allocation came on the heels of reports of plans by the Nigerian Petroleum Development Company (NPDC) to invest $6.1 billion in its oil and gas operations, which is expected to boost gas production and supply to the power sector.

The NPDC plans to grow its gas production to 900 million standard cubic feet per day (scfpd) as well as ramp up its crude oil production to 300,000 barrels per day between now and 2018.

While we commend the efforts of the government towards resolving the challenges hindering stable power supply in the country, we cannot but stress the need to make the climate more attractive for public sector investors to increase their involvement.

Over the years, oil companies and other investors have been reluctant to make investment in gas production because of the low price of domestic gas and lack of other incentives, fuelling the gas supply shortage to power plants in the country.

Nigeria, with a population of about 170 million people, is estimated to need about 40,000 megawatts (MW) of electricity over the next decade, but current generation capacity falls far short of the almost 13,000 MW required to meet peak demand.

The national grid has remained a weak link along the electricity value chain, with a wheeling capacity of about 4,500MW.

As a result of the inadequate supply from the national grid, two of the new private owners of electricity distribution companies (Discos), Eko and Kano Discos, are reportedly making plans to open up a bid process for the supply of off-grid power through embedded generation to improve electricity supply to their customers.

It was no doubt a welcome development when total national power generation rose beyond the 4,000MW mark last Saturday for the first time in a while, but hapless Nigerians still cannot rejoice because the system is still bedeviled by age-long problems of gas pipeline vandalism and a decrepit transmission network. Peak generation level of about 4,517.6MW was achieved in December 2012.

The more than 1,000MW improvement in the electricity generation level came on the back of the much-awaited repairs of the Escravos gas pipeline which collapsed under the weight of frequent vandalism, dealing a severe blow to power generation in the country.

Last year, the finance minister had said that a sum of $1.5bn in financing from various sources had been mobilised for investment and upgrade of the transmission network in 2014 and beyond.

But beyond the several announcements of financial commitment to rebuilding the transmission network and enhancing gas supply to the power sector, Nigerians expect the government to ensure that the monies are properly used and that the impact of such huge funding be felt in the actual supply of reliable power for their homes and businesses.