Power sector needs urgent overhaul

power line

NIGERIA’S power sector is plagued by many challenges that have hampered viable industrialisation and sustainable economic growth. To clear the decay, a strategic and seamless solution is needed to rescuethe country’s ailing power infrastructure and ecosystem.

Recently, the electricity generation companies lamented that they were owed N3.17 trillion. This included the N2 trillion bill on power generated, channelled to the national grid, and consumed by end users, or 90 per cent of unpaid invoices. The financialdebacle is compounded by the N1.7 trillion funding gap per the Multi-Year Tariff Order.

GenCos are bogged down in liquidity challenges, including unfavourable fiscal and monetary conditions, inflation, and foreign exchange volatility. They fear that their operationsare threatened without funding. The insecurity menacethreatens their fragility.

Apart from battling with access to sufficient forex to purchase spare parts for maintenance, and huge electricity debt, GenCos endure gas shortages.

While the Federal Government recently attributed the current power shortages to the unavailability of gas supply to the GenCos, it has not been able to harness its robust gas reserves to improve the situation.

Gas remains underutilised.Huge volumes are flared during crude oil production while others remain inaccessible to GenCos due to funding challenges.Despite having proven gas reserves of 206.53 trillion cubic feet, per the Department of Petroleum Resources, Nigeria currently generates between 2,944 megawatts and 4,317MW. As of May, the installed capacity, and the national grid demand forecast were 13,014MW and 19,798MW respectively. In contrast, Nigeria’s continental peers – Egypt and South Africa – generate 58,000MW each. Egypt has excess capacity.

The sole national grid managed by the government under the guise of protecting sovereign assets has caused incessant grid failures and inefficiencies. In its current state, it is a recipe for disaster. The grid collapsed 46 times between 2017 and 2023,the International Energy Agency said. In 2024, it has collapsed six times. It should be privatised and redesigned for effective regulatory oversight.

Urgently, President Bola Tinubu and his Minister of Power, Adebayo Adelabu, must revisit the gas-to-power initiative of their predecessors to solve the gas-to-power deficit. They must actively engage Siemens Energy in a deal to revamp the sector. They should do away with bottlenecks without discarding global best practices.

The transmission segment of the power sector is also in a mess. Facilities sufferseriousvandalism. In April, the Transmission Company of Nigeria stated that four of its towers on the Jos-Gombe 330 Kilo Volt transmission line were vandalised. This disrupted the bulk power supply to Gombe, Yola, and Jalingo.

According to the Centre for the Study of Economies of Africa, lack of proper transmission lines, poor management, poor maintenance culture, and problematic grid design encumber the power segment.

The current effort by the government to split the TCN and form the Nigeria Independent System Operator of Nigeria Limited, a government-run company is counterproductive. The TCN should be privatised to entrench transparent management of existing assets and capacity while garnering new and robust investment to boost productivity in the sector.

Unfortunately, the privatisation of the sector by the Goodluck Jonathan government was badly done. The acquisition of distribution licences by local firms with little or no knowledge of the power sector upended the good intentions. They borrowed from local banks to create a façade of financial capability, focused on potential profit from collections, and failed to invest in facilities.

This denied Nigeria the much-needed foreign direct investment andexpertise.

To salvage the DisCos from collapse, the Federal Government is repossessing some of them and re-jigging the system. In April, the Federal Government decided to balkanise the DisCos to cover individual states.

While the Ibadan Electric Distribution Company is fully under the Asset Management Corporation of Nigeria’scontrol, the Abuja Distribution Company has been taken over by the United Bank of Africa, and the Benin, Kaduna, and Kano electricity distribution companies are being managed by Fidelity Bank.

The Federal Government continues to subsidise DisCos to sustain their operations despite privatisation. As of the third quarter of 2023, the government incurred N204.59 billion in subsidy payments due to the absence of non-reflective tariffs, says the National Electricity Regulatory Commission.

Unfortunately, the citizens bear the brunt of the inefficiencies in the sector. Nigerians are saddled with an estimated billing regime which undermines end-user responsiveness to bill payments. The estimated payment system subverts accountability to the consumer yet charges them exorbitantly. Although the government has outlawed it, the unavailability of meters has compounded the situation.

According to the NERC, only 5,990,053 customers out of 13,410,795 registered customers have been metered. This awful outlook accounts for 58.37 per cent of total registered customers.

The government must force DisCos to activate metering across their coverage areas. This can be achieved by gradually deducting metering costs from the consumer bills. Metering complaints accounted for 53.40 per cent of all complaints in April per NERC.

The dilemma deepens as some ministries, departments, and agencies owe DisCos billions in unpaid electricity bills. In February, the AEDC issued a public notice stating that 86 MDAs owed N47 billion while Aso Rock owed N923.8 million. Aso Rock redeemed N342.3 million after the embarrassing announcement.

On June 3, the AEDC gave another notice to disconnect 23 MDAs, including the Office of the Secretary-General of the Federation, military formations, the Federal Capital Development Authority, the Federal Ministry of Works, and the Federal Airport Authority of Nigeria. Kogi and Niger are among the states indebted to the DisCo.

The President should compel the MDAs to respond by negotiating a payment system with the DisCos. They should clear their debt through the budgetary provisions available to them. When regulatory agencies and MDAs refuse to settle their bills, they hinder the energy efficiency process and encourage Nigerians to renege on bill payment agreements. This must change.

Tinubu and Adelabu must create a single, indivisible, and seamless policy that considers the myriad of problems in the sector. They should provide clear solutions and oversight and encourage FDI.

State governments should not fold their hands. They should borrow a leaf from the book of Aba Geometric Power Plant servicing Aba, Abia State’s commercial hub. States should take advantage of the new law to allow them to boost electricity in their domains.

Competent private companies should be encouraged to invest in the industry, while government should incentivise investments in off-grid alternative sources.