Analysis: How power failure is killing businesses in Nigeria

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By Ikenna Omeje

He was busy attending to his customers when Nigerian NewsDirect crew visited him in his office – a small room apartment facing Lagos- Abeokuta Expressway.  A cursory look at his generator, seems it has been ON since the early hours of the day, with fumes and smoke from the generator permeating into every corner of the one-storey shopping complex.    Generator fumes, health experts say,  are extremely hazardous as they build up in enclosed areas and can cause sudden illness or death by weakening the blood’s ability to carry oxygen to organs and body tissues. Poisoning occurs after enough inhalation of carbon monoxide (CO). Gbenga , a web designer, wasn’t the only one with their generators ON at the time of the visit.

Discussing the state of power supply at Alagbado, Lagos, where his shop is situated, he described it as “terrible”.  He said that he spends more money on generator than what he spends on the grid-based power. Hear him, ” I spend  between  N25,000 and N26,000  monthly on generator.

Gbenga who looked dejected while explaining how the power situation has been affecting his business continued, “Imagine spending between N500 and N1,000 from Monday to Saturday. It is affecting the net profit. It is affecting my net income because at the end of the day, you are left with nothing after a day’s work. It is terrible.”

According to him, the shop owners in the shopping complex pay about N40,000, which when divided among the occupants, is less than N6,000, monthly to Ikeja Electric, noting that he doesn’t mind to pay N10,000 every month as long as there is constant power supply.

Another business owner, Deji Adeyemi, whose shop is located in Sango Ota, Ogun State, told Nigerian NewsDirect that he spends N1,500 daily to run generator to do his business.  Adeyemi who is an agent of one of the betting companies in the country, bemoaned how his business has been struggling as a result of poor power supply.

“I have lots of customers who patronize my business here, but the issue of power has been affecting my profit. I spend N1,500 everyday to buy petrol to run my generator. It has been very difficult for me, because when you minus expenses, I’m left with little or nothing,” he said.

Nigerian NewsDirect observed the presence of young people, especially boys in the shop choosing betting odds and betting in his shop as at the time of the visit.

Adeyemi admonished the Federal Government to do something about the power sector so as to save thousands of businesses, especially small scale businesses on the verge of collapsing.

The view of Adeyemi is similar to that of James who owns a hair saloon and a barber shop in Abule Egba, Lagos. According to him, even though he has customers who patronize his business, he still finds it difficult to make profit.

James who is a father of one said that if the epileptic situation of power continues, he may be forced to close the shop because of losses he has been incurring due to irregular power supply.

“I don’t think I will continue this business if the power situation does not improve. I have 3 hair stylists who work for me. I pay them every month, pay for my shop, pay levies to the government, spend the bulk of my income on fuel for generator and even pay the power company for energy not supplied. It is becoming more difficult and I may be forced to close shop soon if the power situation continues this way,” he lamented.

In the 58th years of Nigeria’s independence, one of the challenges that have been confronting her economic and social development has been the state of power generation, transmission and distribution. The consequence of this, is the dearth of many promising Small and Medium Scale Enterprises (SMEs) and big industries.

In a bid to stay in business, owners of business now rely on generators for the survival of their businesses. But even at that, thousands of businesses die in the first three years of their establishment because of epileptic power supply across the country, research has shown.

Power generation, transmission and distribution in April and May, 2019

Vice President of Nigeria, Prof. Yemi Osinbajo

In April and May 2019, there was a huge drop of power supply. In April, it dropped from 4,000 megawatts to 2,039 mw. A report obtained by Nigerian NewsDirect from the office of the Vice President Yemi Osinbajo stated: “On April 23rd, 2019, average power sent out was 87,061.8 MWh/day. The reported gas constraint was 2,039.5 MW.”

“The reported line constraint was 0 MW. The reported frequency management constraint due to loss of DISCO feeders was 1,963 MW. The water management constraint was 150 MW. The power sector lost an estimated 2,048, MW due to constraints.”

In the last 6 years, official report of the power Generation Companies (GENCOs) obtained by Nigerian NewsDirect indicated that power generation increased as follows: 4,214.32 (2013);          6,154.05 (2014); 6,616.28 (2015); 7,183.59 (2016);          6,993.14 (2017) and  7,383.04 (2018).

In May, the data that Nigerian NewsDirect obtained from the Federal Ministry of Power, Works and Housing, showed that the country’s power grid fell by 1,507.3 megawatts, dropping from a peak of 4,845.4MW to 3,338.1MW.

The report also revealed system collapse on May 8 and 9 as power generation dropped, from a peak of 5,114.2MW on May 7, to as low as 42MW on May 8.

The Advisory Power Team in the Office of the Vice President while giving reasons for the drop in power generation said, “The dominant constraint on May 30, 2019 was unavailability of gas, constraining a total of 1,320MW from being made available on the grid.”

The APT added, “A total of 1,320MW was not generated due to unavailability of gas; 0MW was not generated due to unavailability of transmission infrastructure, while 1,019.1MW was not generated due to high frequency resulting from unavailability of distribution infrastructure.

“A total of 425MW was recorded as losses due to water management constraint. The power sector lost an estimated N1,327,000,000 on May 30, 2019 due to insufficient gas supply, distribution infrastructure and transmission infrastructure.”

The United States Agency for International Development (USAID) in March 2019 said that Nigeria has installed capacity of 12,52MW. Out of this number, 10,142MW is through thermal while 2,380MW is generated through hydro.

According to the USAID, the current access rate is 45 per cent. Rural areas have 36 per cent access rate while urban areas have 55 per cent. The report also indicated that 20 million households do not have access to electricity.

The Agence Française de Développement (AFD) or French Agency for Development (AFD), which funds, supports and accelerates the transitions to a fairer and more sustainable world in France’s overseas departments, in its latest report on the issues confronting the Nigeria’s power sector, stated, “The industry loss is growing at a rate of at least N474bn per year or N1.3bn per day, but not even including the financial costs of this chaos. Consequently, this liquidity crisis has put the system on the verge of collapsing, which is not able to increase its generation capacity, remove its infrastructure constraints at transmission and distribution networks and aggressively reduce its ATC&C (Average Technical Commercial and Collection) losses.

“In general, the existing power generation assets are inefficient. More than 50 per cent of the generation capacity is not available, either for technical reasons/planned maintenance or due to unavailability of gas or other unplanned outage reasons.”

Federal Government’s 2010 Power Roadmap

2010 Power Roadmap

According to the Federal Government’s 2010 Power Reform Roadmap Report, Nigerians spend over twice as much on self-generated light and power, using candles, diesel, and petrol as they do with grid-based electricity. More so, it is estimated that at a minimum 6000MW is generated using petrol and diesel generators. This mode of self-generation represents a financial albatross on Nigerians equivalent to between $6.7 and $10.47 billion compared to grid-based power. This is not counting the premature deaths and chronic ailments resulting from breathing polluted air.

To address the situation, the Country previously set for itself a target of generating 40,000MW within a 10-year period starting in 2010. This seemingly modest target for generating capacity alone, according to the Government’s Roadmap for Power Sector Reform will require an investment of $3.5 billion per annum over a 10-year period. The entire value chain will require $10 billion per annum over 10-years. Nigeria’s proposed 2016 Federal Budget is $21.3 billion. Therefore, the yearly cost to achieve what is in fact a very modest goal of 40,000MW over a 10-year period equals a one half of the Country’s annual budget. The 2016 federal budget proposed the sum of $1.4 billion for power sector capital expenditure. Additionally, owing to missed milestones and exigencies, the initial target of 40,000 MW by the year 2020 has also been revised down to 20,000MW.

Since 2015 that the All Progressives Congress (APC)- led government at the centre took over the reins of power,  the Federal Government has invested N900 billion in the power sector, in terms of support, according to the Vice President of Nigeria, Prof. Yemi Osinbajo.

How businesses are struggling

At least 800 companies closed shop in the country between 2009 and 2011, due to epileptic power supply. This was the lamentation of the Nigerian Association of Chambers of Commerce, Industry, Mines and Agriculture (NACCIMA)  former President, Herbert Ajayi,  in a paper he presented at a zonal workshop on economic diversification organised by the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) in Asaba in 2012.

Blame game within the value chain

Head, Corporate Communications Unit, Ikeja Electric, Mr. Felix Ofulue

Blaming the Transmission Company and the Distribution Companies (DisCos) for their inability to transmit and distribute the current unstable generated power to consumers, the Executive secretary, Association of Power Generation Companies, Dr. Joy Ogaji said: “Unless the challenges in the power chain are tackled, power output will continue to be poor. The generation companies are ready and willing to generate power that will sustain the country on a daily basis but they are being constrained by factors beyond their control. If power output must improve, the transmission and distribution arm of the power chain must be strictly regulated. The transmission grid must be upgraded to ensure 8,000MW available capacity from GENCOs is put on the grid. The distributors (DisCos) must be strictly monitored to ensure revenues collected for electricity supplied is remitted. This is the link to infrastructure development and future investment along the power chain.”

Defending the DisCos, the General Manager, Corporate Communications, Eko Electricity Distribution Company (EKEDC), Mr. Godwin Idemudia, told Nigerian NewsDirect that it’s what the distribution companies get from the generation companies and the transmission company that they will distribute to their customers.

“If we have enough generation and the transmission is able to wheel the power that has been generated to the distribution companies, definitely, the customers will benefit from it. But if we do not get anything from the grid, there is nothing for us to give to our customers,” he said.

On his own part while reacting to the blame game syndrome which has become the trademark of the Nigerian Electricity Supply Industry (NESI), the Head, Corporate Communications Unit, Ikeja Electric, Mr. Felix Ofulue said, “I think that the blame game has to stop. Where you find-out that one part of the sector is accusing the other of not going its way. Another saying somebody is the weakest team; that’s not the point. The point is that we are in this together to make it a successful venture and that is what the customers are looking up to. Nobody is interested in what value chain you belong to. The most important thing is that there must be light in Nigeria, and that is the reason why all of us are in this.”

Meter Asset Provider (MAP) Scheme

In 2018, the Federal Government introduced the Meter Asset Provider (MAP) scheme to ensure that all electricity consumers in the country are metered , so as to eliminate estimated billing and create room for revenue assurance in the power industry. The goal is not just to eliminate estimated billing, it is also to guarantee revenue assurance for the DisCos.

In April, two DisCos, Ikeja Electric and Benin Electricity Distribution Company (BEDC) were issued permits to commence the scheme. A statement by the Nigerian Electricity Regulatory Commission (NERC) in respect to that effect read in part: “In accordance with Section 4(3) of the MAP Regulations- NERC- R-112 of 2018, to Maps that were successful in the procurements conducted by Ikeja Electricity Distribution Company (IEDC) and Benin Electricity Distribution Company (BEDC).

“Section 4(3) of the MAP Regulation 2018 requires all electricity distribution licensees to engage MAPs that would assist, as investors, in closing the metering gap and thus eliminating the practice of estimated billing in the Nigerian Electricity Supply Industry (NESI).

The statement added, “The Commission has directed that the rollout of meters shall commence no later than the 1st of May 2019.  Customers of these Disco’s should expect from the commencement of rollout date for meters to be installed in their premises within 10 working days of making payment to MAPs in accordance with section 18 (3) of the MAP Regulations 2018.

“MAPs shall charge an upfront amount of N36,991.50 for single phase meters and N67,055.85 for three phase meters respectively.  These costs of meters are inclusive of supply, installation, maintenance and replacement of meters over its technical life.

“The Commission shall monitor closely the rollout plan of distribution licensees and overall compliance with the regulation and various service agreements by the MAP and electricity distribution licensees.”

According to NERC,  the metering gap as of April 2019 is about 5,045,906 compared to the number of customers which stands at 8,840,801, representing 57 per cent deficit in metering across the country.

Metering as the panacea to power failure

Chairman/Chief Executive Officer of Momas Electricity Meters Manufacturing Company Limited (MEMMCOL),  a subsidiary of Momas Systems Nigeria Limited, Engr. Kola Balogun,

Some experts in the electricity industry believe that if electricity consumers are well-metered, it will go a long way in solving the problem of  poor revenue generation and power failure confronting the industry.

Speaking to Nigerian NewsDirect,   the Chairman/Chief Executive Officer of Momas Electricity Meters Manufacturing Company Limited (MEMMCOL),  a subsidiary of Momas Systems Nigeria Limited, Engr. Kola Balogun, said that metering will guarantee cost recovery.

“100 per cent metering at the distribution end, will give cost recovery guarantee  for the DisCos. It means the DisCos will be able to have sufficient fund to pay market operator. Secondly, it will be able to give a relief to the consumers from their own end that they are not being estimated. So, it’s win- win situation. The consumer will be happy that he is not being cheated in anyway and the DisCos will be happy collecting revenue from the energy disbursed  for the operator,” Balogun told Nigerian NewsDirect.

Similarly, Idemudia of EKEDC also believes that the MAP scheme is the way to go. “That’s the way to go, because the Federal Government introduced MAPs in order to bridge the metering gap. Because they felt that the DisCos (Distribution Companies) one way or the other could not meet  the metering needs of the customers nationwide, that was why they introduced MAP,” he told Nigerian NewsDirect.

Lending his voice to the permission given to MAPs by NERC, the Executive Secretary,  Association of Nigerian Electricity Distributors (ANED), Chief Sunday Oduntan, said that the move by NERC was a welcome development, stressing that it was long overdue.

“It’s a good move. It’s a welcome development. We support anything that can bring meters to Nigerians to use. We support any initiative that will help us roll out more meters.  We will support the MAPs.  And we will continue to cooperate with the Federal Government to ensure massive rollout of meters in the country,” Oduntan stated.

So far, permits have been given to 10 DisCos to commence the roll out of meters, but just few of them have started the roll out scheme.  Responding to a question on why the delay, the Principal Manager, Public Affairs Unit, NERC, Mr. Samuel Ekeh, told Nigerian NewsDirect that there was no delay per  se.

Hear him: “There is no delay so to speak. The issue is that DISCO’s list of unmetered  customers have to be identified by the MAP and also ascertain the type of meter required either single phase or three phase etc before deploying the meters. It is work in progress.”

It’s been more than two months since the commencement of the roll out scheme and not much ground has been covered, leaving the hope of electricity consumers for a stable power supply, especially business owners, hanging in the balance. What becomes of their fate is left for the future to determine

2 COMMENTS

  1. This county needs power upgrade because some people would rather ise only generators than pay electricity bills

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