Connect with us
Advertise With Us


In Search Of Beneficiaries Of Power Sector Reform



Although the partial privatisation of the Nigeria electricity industry may not have brought the much-expected dividend, it has opened up the sector for scrutiny. FESTUS OKOROMADU writes.

Any keen observer of the Nigerian Electricity Supply Industry (NESI) will agree that the sector has always been bombarded with blame trading, accusations and counter accusations. All stakeholders appear to be at war with one another, with everyone emphasising his or her losses, creating the impression that they are losers.

There is no doubt that the ongoing heated debate as to who is making the kill in the sector is due to the prominent role the power sector plays in the development of any economy. The need to block the leakages in the system cannot be overemphasised, as it is the only way it can attract the much-needed genuine investors.

For now, the industry remains the only one that gulps huge funds in terms of acclaimed investment yet, no one is talking of making gains from it. From the government’s agencies to operators down to the consumers, everyone is complaining of being shortchanged. Everywhere you look, you see losses being posted and you wonder if the sector will ever recuperate.

While consumers say they are paying for darkness energised by the refusal of the electricity distribution company (DisCos) to provide them with metres, the DisCos blame the consumers whom they prefer to give what is now known as crazy bills for not settling their bills.

Other stakeholders like the electricity generation companies (GenCos), the industry regulators, the Nigerian Electricity Regulatory Commission (NERC) and the government itself are not left out of the under performing saga. Everyone appears to be a loser in the industry.

Counting The Losses

According to the managing director of Seplat Petroleum Development Company, Mr Austin Avuru, the Nigerian economy loses over N534 billion yearly to inefficiency of the power sector.

His point is further buttressed by the recent report of Financial Quest, a financial advisory of First Bank of Nigeria, which quoted a draft document of the Power Sector Recovery Programme (PSRP), that says Nigeria’s economy is currently losing $29.3 billion yearly due to inadequate power supply.

Similarly, the Manufacturers Association of Nigeria (MAN), had raised the alarm that about 272 manufacturing firms shut operations in 2016. They blamed the situation on their inability to continue to operate on generator-powered energy.
The fate of young entrepreneur, Nnodim Emeka, who established a sachet water-producing factory, in Dutse area of the Federal Capital Territory (FCT) is not different.

Emeka, who managed to buy a Dyna truck for distribution of his product and employed 10 young people for a start, told LEADERSHIP Sunday that five years after, his plans for expansion and more employment appear to be a mirage due to deplorable power supply in the area.

Narrating his experience, Emeka said he uses a 10KVA generating set, which he powers with 25 litres of diesel, three times a week, while he produces about 1,300 bags of sachet water. At the cost of N200 per litre, he spends about N15, 000 weekly on diesel alone.

Emeka is even more infuriated by the fact that the Abuja Electricity Distribution Company (AEDC) has continued to refuse to provide his premises with metre but continue to give him crazy bills at an industrial rate even though the electricity is never available for production.


The market regulator says its books are in the red. NERC, in its financial report for the third quarter of 2018, said its total revenue was N1.052billion, while total expenditure for the period stood at N1.353billion.

A comparison of the revenue and expenditure of the Commission, within the third quarter, showed a negative net cash flow of  301.76million. Taking unpaid liabilities into account as at the end of the third quarter of 2018, the Commission posted a total deficit balance of  962.80million.

The report further acknowledged that financial viability is a threat to the industry’s sustainability. It, however, attributed the liquidity challenge partly to the non-implementation of cost-reflective tariffs, high technical and commercial losses exacerbated by energy theft, and consumers’ apathy to payments under the widely prevailing practice of estimated billing.

According to the report, the total billing to electricity consumers by the 11 DisCos was N172.9billion in the third quarter of 2018 but only N106.7billion was collected representing 65.5 per cent collection efficiency.

The severity of the liquidity challenge in the NESI was further reflected in the settlement rate of Nigeria Bulk Electricity Trader Plc (NBET) and market operators (MO) energy invoices issued to DisCos.

During the third quarter of 2018, the 11 DisCos were issued a total invoice of  162.5billion for energy received from NBET and for service charge by the MO, but only a sum of  54.1billion (33.3 per cent) was settled by DisCos, creating a significant deficit of 108.4billion in the Market. Energy Loss In the face of these acclaimed multiple liquidity challenges, the sector is equally bedeviled by energy loss, which cost operators further stress.
For instance on Saturday, February 23, 2019 when Nigerians went out to vote in the presidential and National Assembly elections, the power sector was said to have lost N2.17 billion and 73 megawatts of electricity.

Data from the Advisory Power, which operates from the Office of the Vice President, Prof Yemi Osinbajo, made the disclosure. It also revealed that on Friday, the eve of the presidential and parliamentary elections, the country generated 4,286MW and lost N1.635 billion to operational constraints.

And as usual with the industry, the data linked the losses to issues related to gas; transmission; distribution and water management limitations.

For instance, it said: “On February 23, 2019 (Election Day), average energy sent out was 4,213 MWH/Hour, down by 73.44 MWH/Hour from the previous day. The report further showed that 2,408.21MW was not generated due to unavailability of gas.”

According to the report, “440MW was not generated due to unavailability of transmission infrastructure, while 1,521.60MW was not generated due to high frequency resulting from unavailability of distribution infrastructure.”

Industry experts have estimated that the amount the sector has lost so far in 2019 to insufficient gas supply; distribution; transmission and water reserves constraints is N76.076 billion.Government LossesAlthough Nigeria is well endowed with natural gas, which should have facilitated efficient power supply, the country is also losing in this area due wastage and absence of infrastructure.
Available reports show oil companies in Nigeria waste enough gas to generate about 3,000 megawatts of electricity. Operators are said to be flaring sufficient gas that can power two or three liquefied natural gas trains if harnessed.
Recently, a senior official of the Federal Ministry of Petroleum Resources (FMPR), the programme manager, Nigerian Gas Flare Commercialisation Programme (NGFCP), Justice Derefaka, stated that about 22 million tonnes of Carbon IV Oxide was flared by oil firms in Nigeria, adding that the worth of the wasted gas was about $500m (N153bn at the official exchange rate of N306.8/dollar).

He said, “For the 22 million tonnes CO2 we emit, we lose approximately $500m emission credit value. If harnessed, we could power two to three LNG trains and if used for power, we could generate about 3,000MW of electricity.

“Additionally, the gas could be put to good use and potentially displace other fuels like coal and diesel that generate higher emissions per energy unit.”
Derefaka lamented that the country had been burning money that would have been used to generate wealth, create employment and also generate electricity for the people.

DisCos Versus Government

Worried by the agitation in the industry, especially as it concerns claims of an unutilised 2000 megawatts (MW) electricity capacity by the 11 DisCos in the country, the minister of Power, Works and Housing, Babatunde Fashola, has always argued that the GenCos generate 7,000MWs while DisCos can accommodate only 5,000 MWs, leaving the balance of 2,000 MWs as stranded.
To curb this trend, the Eligible Customer policy was put in place in 2017 to reduce this wastage but again, rather than solving the problem, it is bringing more contentions.
Speaking recently at a workshop organised in Abuja by NERC on the eligible customers’ regulation, the deputy managing director of Ibadan DisCo, Mr John Ayodele, said the claims of stranded power is not true. He argued that daily records of power generated and transmitted to the DisCos are doubtful.
“I read the national broadcast and I am still asking myself: is there any stranded 2000 megawatts hiding behind the stories? I haven’t discovered any but this issue keeps coming up, he said.

“When I look at all plants that are available, when you talk about installed capacity, it is different from capacity that can go on bar. I looked at the broadcast today on maximum generation available, capacity unbarred is 4666 megawatts, while we are generating about 4200 megawatts.

“Available generation that can be made available based on gas turbines that are down or undergoing repairs will never take us to having extra 2000 megawatts,” Ayodele said.

Summarily, the NESI industry may remain a blame game playground where nobody appears to be making any gain; everyone argues that he or she is not making any gain. If this is true, even when the sector is overwhelmed with liquidity, only magic can restore the sector.

Stakeholders in the sector must be honest enough to tell electricity consumers what happens to the money they pay for power, which is most times, never available. That way, they may be encouraged to do more.



%d bloggers like this: