How Nigeria can keep the Lights on, by Experts
by JOSEPH JIBUEZE
What is wrong with the power sector? Will tariff increase do the magic? Experts discussed these and more at the Power Nigeria Agenda conference and exhibition, which had several dignitaries and government officials in attendance. Deputy News Editor JOSEPH JIBUEZE reports.
• Synergy among value chain players critical
• More investments needed
• Develop electricity-focused mutual funds/collective investment schemes
• Enhance customer relations to reduce unpaid bills
• Close sector’s financial gap, clea r legacy debt, inject private funding
• Exploit alternative energy sources
• Meter all consumers before tariff increase
• Sustainable model for energy production, consumption needed
DESPITE being the largest economy in sub-Saharan Africa, Nigeria’s economic growth has been constrained by power sector limitations.
The country is endowed with large oil, gas, hydro and solar resource, with the potential to generate 12,522 megawatts (MW) of electric power from existing plants.
However, it is only able to generate between 4,000 to 7,000 megawatts (MW), sometimes below 4,000 MW, which is grossly insufficient.
The problem has been attributed to challenges in the generation/distribution chain.
In a bid to address it, the Federal Government divested its interest in the six power generating companies (GenCos), while 60 per cent of its shares in the 11 distribution companies (DisCos) were sold to private operators.
Despite the privatisation, the Federal Government’s financial intervention in the industry has risen to N1.5trillion, according to Vice-President Yemi Osinbajo. Yet, the problems persist.
At the 2019 Power Nigeria Exhibition and Conference in Lagos, organsed by Informa Markets, experts said more investments and funding are needed.
Dangote Industries Power and Energy Strategy Head Dr Damola Omole said merely increasing electricity tariff would not solve the sector’s problems.
He said consumers should be metered before effecting tariff increase, adding that estimated billing was generally unfair.
Omole, a penalist in one of yesterday’s sessions, urged the government to intensify efforts to encourage more players to invest in the sector.
He urged government to look into the issue of supply and cost of gas to the thermal power plants.
He said there was the need to reduce the over N7.5 trillion lost annually to irregular power supply.
He was of the view that the country’s manufacturing sector was worst hit by the irregular supply.
According to Omole, some 17 million small and medium scale businesses spend over N2 trillion annually on generators.
Omole said: “Manufacturers only get seven hours of supply on average, with the balance of over two-third self-sourced.
“Grid supply should be 20,000MW for manufacturing sector to thrive, but supply is currently less than 4,000MW.
“Grid power supply is irregular and unpredictable for manufacturing processes.”
Omole explained that electricity consumed through alternative means cost N78 per kilowatt while supply from the grid was at N32 per kilowatt.
This, he said, increases the cost of production for manufacturers.
Power shortage has a ripple effect, Omole said. It results in reduced production, job losses, and outright closure of factories or relocation to other African countries where power supply is stable.
The consequences, he pointed out, are job losses and a weak economy.
Omole said the power sector reforms failed to yield the desired result due to generating companies’ alleged failure.
He said the lack of synergy among the players in the energy value chain resulted in over 2,000MW of electricity not being supplied to end users.
Omole also decried the lack of industrial clusters across the country, which he said would have enabled manufacturers compete with their contemporaries.
He said: “Energy strategy is built around energy efficiencies and this is part of our response as stakeholders to the challenge of moving Nigeria to a more sustainable model for energy production and consumption.
“The Nigerian power sector requires investment, technical changes and policy dialogues to promote efficiencies.
“With an integrated view of reducing energy consumption whilst ensuring efficient energy production, the scope of the Nigerian energy strategy will be defined in such a way that the focus on energy generation, distribution and transmission will promote sustainability in the use of energy.”
Director of Procurement at the Federal Ministry of Power, Ahmed Abdu, an engineer, believes the current power generation capacity as impressive.
He said: “It is indeed unfortunate that the power sector was neglected in the past.
“However, when the negative effects of this became evident, the government re-strategised, creating a momentum for improvement in the sector.
“Investment in the procurement process of the sector has impacted projects in the industry.
“Our current power generation capacity is impressive, with a distribution network of 5,000 Megawatts and a transmission network of the 7,000 Megawatts of electricity.”
Wanted: more funding
Experts highlighted the need for adequate financing of the energy sector.
They shed light on the reforms needed in the energy sector to attain its full potential and yield returns on investments.
They also discussed how lack of access to capital is hindering the electricity sector.
Also highlighted were frameworks for assisting companies with funding requests, as well as risk mitigation tools in projects or expansions.
Speakers highlighted the need for electricity-focused mutual funds/collective investment schemes, and how lending rates can be improved.
Ekiti State Commissioner for Infrastructure & Public Utilities, Bamidele Faparusi, who opened the event on Tuesday, called for collaborative efforts between the government, private sector and end-users.
Faparusi explained how good customer relationships are essential.
Using Ekiti as a case study, he said: “Improving the power sector in Nigeria calls for collaborative effort between the government, private sector and end users.
“Unpaid electricity bills affect the proper running of the sector, hence, a need for DisCos to build trust and maintain good relationships with the end users so as to minimise default in payments and address power issues.
“In addition, huge financial investments should be made in distribution networks to attain smartness and profitability while regulatory agencies should ensure compliance with stipulated rules and guidelines.”
FBNQuest Merchant Bank Energy and Natural Resources Head, Rolake Akinkugbe-Filani, said there was a huge financial gap in the sector that must be urgently addressed.
She said: “The Nigerian Power Sector needs to rid itself of legacy debt of over N300billion if any progress is to be made.
“There is a need for private funding to be injected into the system and for an urgent shift in the funding landscape from investment banks to SME initiatives.
“Private sector investment could come in terms of advisory, capacity building for project developers as well as financing for capital projects.”
The organisers said Power Nigeria Agenda exists to serve the West African and Nigerian energy market, and has become an annual hub for suppliers to meet buyers.
Informa Market Group Exhibition Director Gareth Rapley said the event was organised to find solutions to the challenges facing the power sector.
According to him, the energy problem was not peculiar to Nigeria and could be overcome with collaboration between the government and the private sector.
He said the conference, which ends today, was an opportunity for players in the energy sector to exchange ideas on how best to address the issues confronting the sector.