N1.3 Trillion Throws Nigeria’s Sector Into Major Crises

Yemisi Izuora 

Fresh crises is looming in Nigeria’s the power sector following the rising liquidity crises which is currently put at N1.3 trillion.

Speaking on the state of the industry while addressing the media in Lagos, spokesman of the Association of Electricity Distributors, ANED,  Sunday Oduntan said that inability of government to execute its obligations as contained in the agreement prior to the 2013 takeover of power assets by New investors has weakened the entire industry chain.

Oduntan recalled that the privatisation of the Power Holding Company of Nigeria, PHCN,  successor companies was based on government acknowledgement of a significant truth that the only way to attract investments and the resultant increase in power supply was to remove the commercial risk of non payment of power invoices to the power developers by guaranteeing payment for delivery of energy by the Nigerian Bulk Electricity Trader, NBET based on a tarff structure that covers the cost of all stakeholders along the value chain.

This arrangement, Oduntan noted was exported to serve as a catalyst that would drive both an increase in energy and create a commercial framework that allows the parties to recover their cost of doing business.

He said the expectations is that after the first phase was stabilised the result would have been an evolution of the market into a contract driven market in which Distribution Companies, Discos are able to buy energy directly from Generating Companies, Gencos creating bilateral contracts which is a phase known as Transitional Electricity Market, TEM. 

Unfortunately, the evolution into TEM,  was truncated by politically induced regulatory restrictions and actions by removal of collection losses,  freezing of tariff for R2 residential class for 18 months,  non payment of N100 billion subsidy for 2013 and 2014, under recovery of required revenue, non implementation of minor and major tariff reviews. 

He also blamed non full implementation of metering project to liquidity in the sector.

According to him,  the currently identified approximately 4.1 million meter gap is a legacy of 62 years of government underinvestment and PHCN inefficiency, adding that this gap continues to grow as Discos enumerate and identify their customers l,  convert illegal consumers into customers, reduce non functional and aged meters and make new connections.

Oduntan disclosed that the gap not only exceeded the 1.7 million metering obligations specified in the Discos performance agreement out of which the Discos have delivered 88 per cent of their metering obligation and the 2.7 million metering gap at the handover of the Discos, but exceeds the allowance for total capital expenditure of N305 billion for the 11 Discos over five years for all metering, network expansion, rehabilitation and replacement of transformers, injection stations when compared with estimated N299 billion required to address the gap. 

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