Four years after the electricity sector privatization programme, Nigeria’s power cannot not attract Foreign Direct Investments (FDI), because politics and narrow minded considerations were allowed to mar the process, experts say.
Nigeria’s power sector suffers from poor infrastructure, gas supply constraints, absence of cost reflective tariff and transmission challenges and politicisation of the a business where market rules should suffice.
Chima Mouneke, managing director of the Schimatic Blue Energy (SBE), an Abuja –based energy business, told BusinessDay that the power sector privatization from the onset was programmed to face current challenges because of intricate web of politics and vested interests in the process.
“Nigerian power sector is 99 percent politics and 1 percent economics. They played politics with the power sector. For example, who are the people that bought these companies? They are cronies of the government – that is politics. Do they have the technical competence to handle these companies that they bought? Do they have the financial wherewithal to run these companies? No.
“They borrowed money from commercial banks and commercial banks were willing to give as at that time. So technically they were not qualified, financially they were not qualified and they are all cronies to the people running the government,” he lamented.
Ransom Owan, Group Managing Director of AITEO Power Infrastructure and Red Estate the velocity of power inflow is not equal to the velocity of revenue coming back to the system because it is not being treated as a business because gas supply receipts are not honoured as they should. “That is why ten NIPP plants have been struggling to get gas because the international oil companies say ‘ I can get my gas abroad and sell it abroad and collect my money but if I sell the gas to you under the domestic gas obligation you won’t pay me the correct price, therefore I will not do that I am not a charity organization.’ Therein lays the difference.”
The National Integrated Infrastructure Master Plan estimates that $900 billion will be required to develop the country’s energy sector in the next 30 years, with private sector participation needed to mobilize such large annual funding levels.
But the right structures are not in place. Mouneke said liquidity problem in the sector is worsened by poor collections from DisCos.
“The efficiency in revenue collection has been bad. In one of the power dialogue programmes that I attended we have the players, the Gencos and Discos, and the TCN. The generating companies said that out of the 100 percent energy that they sent out into the grid to the distribution companies to distribute, less than twenty per cent of the money that was collected came back to them.
Barth Nnaji, a former minister of Power, at a recent Power Dialogue in Abuja re-echoed these concerns. “If you are coming to buy a distribution company and you don’t have money to invest and you don’t have the technical competence, you have no business being there.”
Nnaji described the non-credit worthiness of the companies, the poor reflective tariff, the imbalance in value chain as big constraints in the flow of foreign investment into Nigeria’s power sector. He argued that gas supply should be liberalised to enable producers sell at market price, stressing that Nigeria must make a choice between light and darkness.
Innocent Odoh
