The crisis in the Nigerian power sector is as a result of persistent revenue shortfalls arising from the inability of DISCOs to pay fully for electricity generated by GENCOs since the conclusion of the privatization of the PHCN successor companies.
Currently, monthly revenue shortfalls in the electricity value chain are over N20 billion and will rise further once electricity tariffs are adjusted upwards to reflect the effects of the floating of the Naira (particularly on the price of natural gas) and rising inflation.
According to the Data from distribution loss studies conducted by DISCOs and provided to NERC show that average aggregate distribution and non-distribution losses across all DISCOs are over 50 per cent.
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What this implies in the opinion of power sector experts is that more than 50 per cent of the power generated is theoretically lost, stolen or simply not paid for.
Experts are concerned that with the current state of the Nigerian economy, there are indications that the monthly revenue shortfall to GENCOs and other market participants will cross the N30billion.
The report shows that power sector has more often than not grappled with issues of inadequate generation capacity as a result of poor gas supply arising mainly from vandalism of oil and gas infrastructure; limited transmission infrastructure and lack of new generation capacity.
Nigeria power sector has struggled to meet 7,000 MW projections. There is also a lack of cost-reflective electricity tariffs and arising customer resistance to the new electricity tariffs.
While industry experts acknowledged that revenue shortfalls are typical in a transitional electricity market, they maintain that the federal government’s role is overarching and critical to the stability of the market and also in stimulating investments in the sector.
According to them, government’s predominant role is to create market confidence and ensure the viability and creditworthiness of the power sector particularly during the transitional phase of the market.
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Experts are concerned that huge transmission and distribution losses in the power sector, the possible occurrence of Availability Events under the PPA (weak transmission infrastructure and gas constraints), foreign exchange uncertainties arising from the floating of the Naira, potential tariff rate shocks and a weak economy will continue to push revenue of the sector downwards.
Olayemi Anyanechi, an energy investment adviser is of the view that resolving the revenue shortfalls has proved a bit of a challenge, and a long-term and sustainable solution will take time and significant investments by the private operators and the Government.
She noted that government, through NBET, must stand ready to firmly assure investors across the power value chain and the banks who are behind these investors that such investments in the power sector will be fully recoverable.
According to her “Without the deployment of NBET’s $800 million capitalisations to meet the revenue shortfalls, as well as the full disbursement of the N213 billion CBN facility to the power sector, GENCOs as well as their gas suppliers, may have no other option than to shut down operations and plunge Nigeria into darkness”.
KELECHI EWUZIE
