As at June this year, the Federal Government has committed the sum of N1.023 trillion in different kinds of bailout packages to Nigeria’s floundering power sector yet Nigerians marinate in darkness with power generation at abysmal levels of less than 4,000MW daily.
In 2015, through the Central Bank of Nigeria (CBN) under the administration of former president Goodluck Jonathan, the Federal Government provided the sum of N213billion as Power Sector MarketStabilisation Fund at concessionary interest rate below market rate to DisCos and GenCos.
Government created a N701 Billion Payment Assurance Guarantee in March last year for the Nigerian Bulk Electricity Trader (NBET) to ensure that payments to GENCOS improved. Fashola explained at the time the Central Bank of Nigeria was proving a payment assurance guarantee for any energy produced by any GenCo, so that they can pay their gas suppliers when they get paid.
Early this year, the Federal Government said it has taken advantage of the new Meter Asset Provider (MAP) regulations to give a grant of N37 billion to a private sector operator to supply meters to interested Distribution Companies (DisCos).
Last month, the Federal Government with 40% interest in the DisCos committed to invest N72 Billion for procurement of equipment and installation to help get the 2,000 MW to consumers, a move that was interpreted as a ploy by the government to raise its stake in the DisCos,
However, the impact of these interventions have not largely been felt by Nigerians, worse still, the operators for whom some of these bailout packages have been made available to either in the form of low interest loans or grants have demonstrated feelings of entitlement or have treated them with disdain.
“Regrettably because of the source of funds, conditions such as the opening of Letters of Credit were attached to secure performance of the purpose for which the money was meant; some DISCOS have not taken the money and instead have gone to court thereby frustrating full disbursement, and recently the NERC has revealed unauthorized use of the money by Ibadan DISCO and taken some regulatory actions,” said Fashola in a press briefing on July 9.
The sector is also bogged down by debts because the presence of a weak regulator makes it easy for market players to flout rules. Since 2015, the DisCos who are meant to pay NBET from which other market operators would be settled has been keeping more for itself from it collected and this has seen its debt ballooned to N859 billion according to Fashola.
DisCos claim they are being owed about N70bn by Federal Government Agencies but after reconciliation, the minister said the figures were exaggerated and it came to only N27bn which he said would be set off from the huge debt, the DisCos owe NBET.
Through the provision of the N701bilion guarantee for GenCos, about 80% of their market invoices were being settled and the,,,,owed them by NBET would be settled. But the government threw a spanner in their works when it began paying Azura Power from the same fund. Fearing, calamity, the GenCos went to court to stop the payment.
“The danger with all these bailouts is that Nigerians will still pay for these money, many which are given without the consent or knowledge of market operators,” said Joy Ogaji, executive secretary of AEGC at a recent workshop for energy reporters.
A possibility of losing these bailout packages is a real and present danger as Nigeria’s electricity market is illiquid with shortfalls of about N1.3trillion, an inefficient revenue collector and uncertain feedstock for power plants.
In comparison, Egypt will have the capacity to export electricity once it completes construction of its 14,400 power plants making the country an electricity transfer and circulation regional hub, It could achieve the feat through tough economic prescriptions including currency devaluation, deregulation and a liberalised electricity market.
This is why it could attract a financing package for the Siemens’ part of the €6bn contracts, which was structured by Siemens Financial Services (SFS) and includes a tailored guarantee concept.
Meanwhile the Federal Government has put a leash on retail cost of electricity, placing currency pegs and meddling with what should have been a free market.
“Critical success factors for the project is in the planning, the structuring of the deal and the availability of a functional market,” says Chuks Nwani, energy lawyer and vice president PowerHouse International. “This is what has been lacking in Nigeria’s quest to build power plants, you need a market.”
