…Pitfalls with dwindling mega capacity; 13 grid collapse; discos unremitted invoice
By Olabode Jegede
The power sector is at the heart of the economy in Nigeria and there has been promises by the President Muhammadu Buhari led administration upon inception to expand electricity generation, transmission and distribution from 5,000 – 6,000 megawatts to at least 20,000 megawatts of electricity within four years and subsequently increase the capacity to 50,000 megawatts with a view to achieving 24/7 uninterrupted power supply within 10 years.
The administration also said it would expand power capacity through renewable energy sources, such as solar, hydro, wind and biomass, for domestic and industrial use.
While it has been reported that there have been some improvement of power supply in some areas, it is however important to state that it is only when development is even cutting across the country at large, that development can be said to be taking place as the country still grapples with epileptic power supply despite the sector being privatized.
In the heat of the recession in 2016, Nigeria’s GDP growth dipped by 1.62 per cent. The economy recovered in 2017 with a growth of 0.82 per cent and this was sustained to 1.93 per cent in 2018, due to oil price recovery and stability in domestic oil production.
Growth, albeit remained fragile, as it was expected to reach 2.1 per cent by the end of 2019 according to PwC estimates, but output growth still remains significantly lower than population growth which hovers around 2.7 per cent.
Power generation capacity falls short of pre-privatization target. Nigeria has more than 190 million people (the largest in Africa) including large industrial and commercial ventures scattered unevenly across the country. About 40 per cent of the population has no access to electricity and supply is usually epileptic for those that have access.
However, the country’s current operational capacity stands at less than 4,000 megawatts. In the 2018 Multi-Year Tariff Order (MYTO), the operational capacity projection stood at less than 8,400 megawatts.
The installed capacity of 7,000 megawatts is also less than the pre-privatization target of 11,879 megawatts by 2012 and post-privatization target of 14,218 megawatts and 40,000 megawatts by 2013 and 2020 respectively.
The bulk of electricity generated comes from thermal sources (gas-fired power plants). As a result, the inadequate gas supply often affects power generation.
The problems in the power sector are too complex even as Power sector has been de-coupled from works and housing and regained its status as a ministry which is now heads a new minister, Mr. Saleh Mamman.
Signs that the profile of Nigerian power architecture is not appreciably improving reflected earlier in November with a system collapse of the national grid making it the 11th power grid collapse occurring in 2019.
The national grid which was said to have collapsed twice within a space of five hours was another national embarrassment that threw the Country into the dark, spurring many Nigerians to re-echo the songs of lamentation.
Another power outage occurred recently over the industrial action by the National Union of Electricity Employees (NUEE) went on a nationwide blackout.
This year alone, the national grid collapsed 13 times and it is like the current administration appears clueless in the face of a persistent grid collapse, poor co-ordination and threats of industrial actions by electricity workers.
Furthermore, Liquidity crunch is the biggest challenge of the Nigerian electricity sector today. The 11 distribution companies (DISCOs) have been struggling to meet their obligations to the Nigerian Bulk Electricity Trading Plc (NBET) and Market Operators (MO) as evidenced in their low remittances to NBET and MO.
According to PricewaterhouseCoopers (PwC), in Q1 2019, only about 28 per cent of the N190 billion invoice (comprising invoice of 161.4 billion for energy purchased from NBET and an invoice of N28.8 billion for administrative services from MO) of DISCOs were remitted.
In one year (Q1’2018 – Q1’2019), DISCOs’ outstanding remittance to NBET and MO stood at about N523.8 billion and N80.3 billion respectively.
Consequently, NBET have in turn been unable to meet their obligation to the generation companies (GENCOs), thus creating a liquidity challenge that has plagued the electricity industry since the privatization exercise in 2013.
The proportion of remittances relative to market invoice is low across all the DISCOs as none could attain 50 per cent of the total bill owed. This situation creates liquidity challenges to the generation and transmission segment of the industry.
It is also believed that metering customers will reduce the liquidity challenges currently grappling the power sector but meter delivery progress has been slow so far.
Abuja, Benin and Port- Harcourt are the DISCOs that currently have more than half of their customers metered.
Yola Disco had the slowest metering progress (21 per cent) of all Discos as at Q1’ 2019. Progress in metering customers will help to reduce ATC&C losses and billing collection inefficiencies in the sector.
As a result of the challenges bedeviling the power sector ranging from low collection, non-cost reflective tariffs, distribution losses amongst others, DISCOs are unable to meet their obligations to NBET and this in turn spirals to other players in the power value chain (GENCOs, TCN, gas companies, banks etc.).
There is a need for the current government to build synergy with all stakeholders in the power sector and beyond, to craft out an outstanding system that looks beyond the current state of affairs. The system should be such capable enough to housing prudent structures that will address future needs and demands as they arise.
It is therefore essential if the President Buhari’s led government would not want to end up failing as other past administration failed in Power architecture, to make pragmatic moves towards instituting structures that are proactively prudent to meeting future power demands in the Country, from the generation to the distribution spheres of power architecture far and wide Nigeria.