Prof. Barth Nnaji, Nigeria’s former power minister has expressed deep concern about the future of Nigeria’s power sector saying that the environment is not attractive for investment that would help address various challenges facing the industry.
Nnaji who was the keynote speaker at the Natural Gas Business Forum organised by the Nigerian Gas Association, NGA, in Lagos yesterday (Thursday) in Lagos said that foreign investors are not willing to invest in the Sector because the government has not addressed major issues that would guarantee the return on investment.
The former minister shocked the audience when he revealed comments made by participants at a major power summit in Copenhagen, which attracted key industry operators and investors from across the world.
“I was surprised that the summit featured a special session on Nigeria, and their investors said they are not willing to make an investment in Nigeria’s power sector, citing several challenges”, he said.
Among their fears include lack of cost reflective tariff, gas supply constraints, poor transmission network, non-credit worthiness of Discos, over-leveraged power assets, value chain misalignment and lack of will to enforce agreements.
Analysing the issues, the former minister stated that many projects have been stalled due to financial constraints and tariff issues. According to him, the tariff must reflect currency movement, “so there must be an attachment of tariff to currency movements and adjustments must be done, and tariff review will help Discos to recover costs and pay for Gas”.
He also said that lack of industry deregulation and absence of proper legislation has discouraged investment because it is the only deregulation that will allow investors to consider investment in gas production and transportation.
Speaking on transmission, Nnaji said government does not have the funds to put the transmission network in proper shape. He advised the government to consider concessioning the transmission network which he said should be broken into segments but properly interconnected.
Nnaji noted that the Discos are facing serious challenges because the technical aspect of the system is still bad leading to 50 per cent of inefficiency in the sector. According to him, the investors in the distribution sector borrowed money to buy the assets but did not invest in other supporting infrastructures to make the chain function effectively.
“We can reduce losses by investing in technical areas and also there is lack of commercial knowledge among government functionaries on how to do agreement, and again the country lacks the will to enforce agreements”, Nnaji observed