Power supply now above 4000MW as liquidity gaps eases

by | March 21, 2017 12:35 am

Nigeria’s troubled power sector ramped up generation to 4,155.5 MW on March 17 following two critical financial interventions by the Federal government.

On March 1, the Federal executive council approved N701bn guarantee for the Nigerian Bulk Electricity Trading (NBET) for any energy produced by any GenCo so that they can pay their gas suppliers when they get paid so that the hydros can continue to operate.

The Federal Government last week indicated its readiness to commence payment of all verified bills owed Electricity Distribution Companies in the country for electricity supplied to its Ministries, Departments and Agencies (MDAs) based on the on-going audit of the bills submitted by the DisCos.

At the 13th Monthly Meeting with Power Sector Operators, Stakeholders in Ughelli, Delta State, debts of government MDAs were reviewed and it was agreed that claims currently estimated at N59.3 billion will be reviewed further.

While a new lease of life has been given the troubled sector, some operators insist expectations may be exaggerated

“However, as commendable as this intervention is, we believe that it is a partial solution to the liquidity challenges of the sector,” says Sunday Oduntan, executive director, research for Association of Nigerian Electricity Distributors (ANED).

He further said, “More so, as it holds the potential for exacerbating the revenue shortfalls that the market is currently suffering from.  While an increase in electricity supply is the desired objective of everyone, such an increase without the requisite full recovery of cost via the appropriate pricing of power, means a resultant worsening of the market revenue gap,” Oduntan explained.

However, the DisCos often fail account for their own short comings. In their operations, they fail to adhere to corporate governance ethics by providing audited accounts, inefficiency in collections and inability to attract new investments due to poor technical competence.

Increased commitment towards resolving liquidity issues in the power sector by the federal government without demanding they fulfil their obligations whether as Gencos or DisCos or Transmission Company will not bode well for the sector.

This is not the first time the government through the CBN is coming to the aid of the power sector through intervention funding.

Last year, the CBN gave the power sector N213 in intervention funds known as the Nigeria Electricity Market Stabilisation Facility but it only resulted in huge megawatts of darkness.

Analysts say the sector requires a fundamental retooling including revising the assumptions on which tariffs were based, keen commitment to diversifying energy sources and carrying out functional regulation.

“The solution to the power sector problem is really not access to funds but a combination of bad policies and poor regulations,” Taiwo Oyedele, head of tax at PwC told BusinessDay when the idea was first mooted.