Experts in the Nigerian energy sector have called for a total policy overhaul of the electricity industry to stimulate private sector participation as the current energy crisis may not abate with existing policy regime.
They posit that about $100 billion investment are required to generate 100,000 megawatts of power, a feat that requires public-private participation (PPP) for it to be achieved.
Speaking exclusively to LEADERSHIP Weekend at the sidelines of the LightUp Nigeria Conference organised by BrandZone Innovation Conference, they declared that the current electricity generation of about 5,000 Megawatts was too little for a nation with over 190 million population and widening industrial base.
Former petroleum minister, Odein Ajumogobia, SAN, said the dream of government to fully transform the economy through its industrialisation agenda would continue to suffer setbacks because the power sector is not solid enough to support such initiative.
He stated that Nigeria required an investment of $1billion to generate every 1,000 megawatts of electricity, hence to generate 100,000 megawatts of electricity will cost about $100 billion.
“This fund cannot be supplied by government under the present circumstances; only private sector funding can support investment of this magnitude, but if it must happen, then there must be a complete review of the power sector policy.
“A whole lot of things should be done. In the first place, the present tariff structure must be reviewed, the gas sector should be repositioned to allow for appropriate gas pricing to encourage gas suppliers increase capacity,” Ajumogobia said.
Also speaking on the issue, president Nigerian Gas Association (NGA), Dada Thomas, urged the government to expunge tax on gas and to review the current gas price in order to enable exploration and production companies to profitably execute projects.
Thomas said that the gas-to-power value chain had so much potential but the Distribution Companies (Discos) were not collecting enough money to pay the Generation Companies to enable them pay for gas supplied.
He said it would be difficult to catalyze the sector unless the gas-to-power sector was strengthened, even as the lack of sanctity of contracts was still affecting the industry.
On his part, Ademola Adeyemi-Bero, managing director of First Exploration and Production, warned that the electricity sector would suffer a major setback with growing population.
He noted that with the current population growth, demand for energy will grow astronomically.
According to him, on New Year’s Day, 2018, about 20,000 babies were born in Nigeria, and if the trend continues unabated, the country would require about 190,000 megawatts of electricity in the next few years.
LEADERSHIP Weekend recalls that Nigeria is losing $25 billion (N7.5 trillion at the current exchange rate of N305 per dollar) yearly due to irregular electricity supply. Besides, accumulated power sector cash deficits from January 2015 to December 2016 amounted to N931billion ($2.9 billion).
This is the total amount underpaid by all the Discos to Nigerian Bulk Electricity Trading Plc (NBET) for invoices submitted to each Disco for electricity delivered to their distribution networks. It includes losses incurred by the companies due to lack of a cost-reflective end user tariff.
Moreover, panelists at the conference feared that the revenue shortfall would adversely impact the ability of the Discos to make capital investments in metering, network expansion, equipment rehabilitation and replacement that are critical to service delivery.
Meanwhile, a Power Sector Recovery Programme document released recently said that the World Bank Group had expressed a willingness to assist the power sector with $2.6 billion to settle some of its financial challenges. Also, the International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA) are planning to mobilise up to $2.7 billion to facilitate investment in the private sector in the country.
Irregular electricity supply due to gas constraint has remained one of the biggest challenges confronting the nation’s economy.
It would be recalled that on June 2, 2017, the average power sent out decreased to 3809W/hour due to gas supply challenges which constrained about 1718 megawatts of electricity.
According to recent statistics by the Nigerian Electricity Supply Industry (NESI), the reported line constraint was 147.5MW, while constraints resulting from high frequency were 800MW. NESI added that the power sector lost an estimated N1.279 billion on June 2, 2017 alone due to various constraints.
It was learnt that the total gas supply indebtedness of power plants from January 2015 to December 2016 is N155 billion ($500 million), while supply has been erratic and low, resulting in 1,400MW of constrained generation. The vandalism of oil and gas delivery infrastructure has also shut down gas production, resulting in another 2,900MW of constrained generation.
To rescue the situation, about $1 billion would be expended to NBET to ensure Gencos and gas suppliers are paid 100 per cent notwithstanding any shortfalls from the Discos.
According to the report, there would be an initial deployment of $500 million for metering.
“Initial deployment should be focused on maximum demand customers. The metering scheme will be tied to clearly defined performance targets for the Discos supported by data and information received during an audit exercise,” it said.
The Transmission Company of Nigeria (TCN) is also expected to invest $486 million in its priority projects.
Giving assurance of a better deal for the sector, the minister of state for petroleum resources, Dr. Ibe Kachikwu, at the conference disclosed that government had taken bold steps to restructure the country’s gas industry such that it will play a critical role in the industrialisation initiative of the country.
Kachikwu said the approval by the Federal Executive Council (FEC) of the county’s gas policy was a clear indication of government’s readiness to fully tap the opportunities available in the midstream sector of the industry.
The minister who was represented by his special adviser (Technical), Adiniji Gbite explained that the gas policy had certainly provided the path to tackle all the identified challenges in the sector and its implementation would definitely lead to a long term development plan. He assured that it would stimulate competitive environment that would be attractive to foreign and local investors.
“Identifying that natural gas will be an essential part of the future energy mix as the world moves to a low carbon future, we recognised the need to put in place strategic measures to deliver much needed energy for development and growth, and collaboratively worked with all stakeholders to develop a new National Gas Policy followed by a national oil policy which were approved by the Federal Executive Council and have since been gazetted.
“We are now working hard to improve our business environment leading to increased investor activity and energy supply thus improving prices of goods and services,” the minister said.
Speaking further, Kachikwu stressed that the country’s reform programmes for the gas sector was set out in the National Gas Policy and would additionally be clarified by proposed legislation that would tackle gas commercialization, with very clear rules or gas activities from the upstream, midstream and downstream sectors.
The legislation, he explained, would treat gas as an independent commodity rather than a by-product of oil production and also explains the fiscal regime.
He added that the legislation would also herald a simplified but clearly defined licensing administration which would regulate the licensing of operators throughout the entire value chain.
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