• Wednesday, February 28, 2024
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Regulatory framework in power sector is stifling investments

power-sector

Regulatory framework in the power sector is stifling investments rather than encouraging it, Chukwueloka Umeh, executive director of Nestoil, has said.

He bemoaned the situation in which only one power plant has been built despite issuance of licenses to at least 100 licensees, a reflection of poor regulation and dis-incentive to investors.

He noted that government has been trying to regulate the power sector into existence despite having not done true privatisation.

According to him, many of the licensees were not building plants due to the unfriendly regulations that make it difficult to recoup investments in the power sector.

In a chat with journalists on the sidelines of the ongoing Nigeria Oil and Gas (NOG) conference in Abuja

The Nestoil boss who on the sideline of the just  concluded Nigeria Oil and Gas (NOG) conference in Abuja noted that quick fixes will not address the issues in the power sector but a review of regulations that will drive investments.

“Generating companies need to be able to charge a tariff that allows them to generate power by gas and the government should not be telling private companies this was what they should charge and then competition should be what drives the price and tariff down.

“Let Gencos compete amongst themselves, likewise Discos. Market forces will drive down the prices, just like it happened with the deregulation of the telecoms sector. The government simply needs to create an enabling environment and then step out of the way to let private companies compete for business.

“The government believes that they are helping the masses by fixing prices. In reality, they are not. The government should not be the one telling us how much to sell our power because you know, it would never be a question of capacity anymore”, he added.

Speaking in the same vein Ernest Azudialu-Obiejesi, Nestoil’s group managing director said the Nigerian power deficit will not improve if the Federal Government does not take the drastic step of completely allowing market forces to determine costs.

He said a willing-buyer-willing-seller scenario that allows gas producers to sell to off takers at commercially viable rates is what will encourage investments in the gas sector. He said the successful deregulation of the Telecommunications sector in Nigeria was a good case study that the Oil and Gas industry should emulate in order to stimulate exponential growth in that sector.

According to Azudialu, the Telecoms sector is growing in Nigeria because Government regulations are relaxed enough to allow competition to drive pricing and product offerings.

He gave the example of China which significantly turned round the fortunes of the country in over 20 years by investing in Power and other infrastructure. ‘The primary catalyst for China’s growth was the country’s strong stance to invest in building a robust infrastructure. They built large base load power plants in many locations to provide reliable power to its growing manufacturing industries. With these power plants that run primarily on coal, China is able to produce goods at competitive prices’ he concluded.

 

 Olusola Bello