Sector debts mount amid poor power supply

Nigeria’s electricity sector has recorded a shortfall of N1.7 trillion in the first quarter of 2020, amid irregular supply of power. This is as key operators in the value chain ­— generation, distribution and transmission — battle to improve their liquidity to provide power nationwid.

AMID poor supply, the power sector is going from bad to worse. Assessing its performance, the Chairman, Nigerian Electricity Regulatory Commission (NERC), Prof James Momoh, said recently that the shortfall in the sector in the first quarter of the year increased to N1.7 trillion, from N1.4 trillion in the fourth quarter of last year.

The declaration, like others in the past, has thrown the sector into a frenzy as stakeholders wondered why and how the industry recorded such a huge deficit, despite that it was unable to provide uninterrupted electricity six years after it was privatised.

According to Momoh, the shortfall was caused by the inability of consumers to pay tariffs for over five years. The period, he said, is between 2015 and last year. He added that the issue had impacted negatively on the sector. Expectedly, it has generated controversy as stakeholders are divided on how the industry incurred such huge debts.

While some reasoned that the sector was in a dire strait and, as a result, was unable to record productivity, despite the huge funds committed into it by several organisations, such as the World Bank, International Monetary Fund (IMF) and the Federal Government, some stakeholders disagreed, saying the funds were not well managed.

The mismanagement, they said, is having a negative effect on the sector, which operates on less than 5,000 megawatts (mw). The trio of the World Bank, IMF and the Federal Government were believed to have provided the funds to the sector as long-term loans.

Records have shown that World Bank approved $486 million for the upgrade of transmission lines and sub-stations in 2018, coupled with the $3 billion facility, which the Federal Government was to take from the World Bank last year to galvanise the sector.

The Minister of Finance and National Planning, Mrs. Zainab Ahmed, gave impetus to this during a stakeholders’ forum in Abuja recently. The facility, she said, was meant to improve the activities of the three main operators – the generation, distribution and transmission arms – stressing that the facility would help to reposition the sector for optimal performance.

She added that the Federal Government approached the World Bank to take the facility in two tranches of $1.5 billion to ensure it was judiciously spent. While this lasted, there is the need to examine the operation of the stakeholders in the value chain vis-a-vis their contributions to the growth of the sector.

Govt’s role

The Vice-President, Prof Yemi Osinbajo, said the Federal Government provided intervention funds of N1.5 trillion to the sector in the last two years. The funds, he said, were meant to improve the operation of the sector, which for years generated less than 5,000 megawatts (Mw) of electricity.

Investigations revealed that the Federal Government provided a loan of N700billion to the sector recently. The loan, which was in line with the intervention programmes of the government, was given to settle the operation of the market, in which power generation and distribution companies are players.

According to the Executive Director, Research and Advocacy, Association of Nigerian Electricity Distributors (ANED), Mr Sunday Oduntan, the shortfall recorded in the sector was caused by the operators in the sector, not DisCos alone.

In an interview with The Nation on phone, Oduntan said it would be wrong to conclude that the energy distribution companies recorded a shortfall of over N1trillion and that the shortfall represents the debts owed by the sector’s operators.

He said the challenges were affecting the three key operators in the value chain, including power generation firms, distribution companies and the Transmission Company of Nigeria(TCN).

He said there was no truth in the claims by the government that it spent N1.5 trillion in the last two years. The government, he said, had not paid subsidies to the power distribution firms as alleged by the government. He said the government instead owed the electricity distribution companies for the services rendered to it.

Oduntan said: “The Federal Government owes the DisCos a lot of money. This is evident by the debts owed the DisCos by the Ministries, Departments and Agencies (MDAs) in form of unpaid bills.

TCN’s views

Stakeholders, such as the power distribution and generation companies, have on several occasions blamed the Transmission Company of Nigeria for the incessant collapse of the grid. The issue, they argued, made it difficult for the power firms to pick electricity from the grid for onward distribution to consumers across the country.

In his reactions, the Managing Director, TCN, Mr Usman Mohammed, said the agency is working assiduously to improve the operation of the sector. On the issue of funding, he said TCN is seeking loans from multilateral agencies in order to improve its transmission capacity and by extension supply of electricity.

TCN, Mohammed said, is planning to buy a technology known as Supervisory Control and Data Acquisition (SCADA) to prevent the collapse of the grid in the future.

GenCos’ position

The Executive Secretary, Association of Power Generation Companies of Nigeria (APGCN), Dr Joy Ogaji, said shortage of gas had threatened the growth of the sector, urging the Federal Government to wade into the matter.

According to her, liquidity is a problem in the sector, adding that the issue was compounded by policies implemented by the government, in recent times.

He said the decision by the Federal Government to introduce Value Added Tax (VAT) of 7.5 per cent had affected electricity generation firms, adding that the issue is having undesirable effects on the output of the power sector.

Other operators

The Chief Executive Officer, Power Cam Nigeria Limited, Mr Biodun Ogunleye, said the sector is facing enormous problems, adding that liquidity is a major problem, which is besetting the growth of the industry. He said operators need to have enough funds at their disposal if they want to produce megawatts of electricity that would be enough to improve the growth of the economy.