Misplaced priorities in government investments in the past and the falling value of the Naira against the US Dollar, in an industry dominated by the greenback, continue to plague the country’s power sector as the investment gap widens.
This investment gap has hit N800bn. The crippling deficit has become a behemoth standing in the way of the country’s hope for improved power generation, transmission and distribution in 2017. Investors have reiterated the need to focus on the power sector if real economic growth is to be achieved in the new year.
Executive Director of Association of Nigeria Electricity Distributors (ANED), Sunday Oduntan, who doubles as the spokesperson for all the 11 distribution companies (Discos) said, “We can never fix the economy without fixing the power sector. The situation is very bad. Is there hope in 2017 for improvement in power? If we get it right, Yes. But if we continue the way we are going, there is no hope,” he declared.
“I will say yes if we do the right thing like meeting up with investment shortfall, which had risen to N809 billion between November 2013 and November 2016 and the answer will be no if we do not do the right thing,” he added.
“All of us – government, operators and customers – must actually do something about it. We should look back and see what we did right and continue to do it. We should also check what we did wrong and learn from it,” he counselled.
In the aspect of distribution, Oduntan described the deficit in the sub-sector as very worrisome and capable or crippling the entire power sector. He pinned the blame on the sharp fall in the value of the Naira against the Dollar after the December, 2015 agreed rate of N197 to $1. This had made things very difficult for both the Generation Companies (GenCos) and the Distribution Companies (DisCos).
He explained that the GenCos who buy gas from the suppliers in US dollars, tender their invoice to the DisCos to pay at the prevailing value of forex and charge their tariffs based on the fixed exchange rate, thus leading to the shortfall.
He blamed the crisis on inconsistency and ineptitude on the part of the Nigeria Electricity Regulatory Commission (NERC) and urged government to intervene and help out by finding a lasting solution to the problem of shortfalls in the sector.
At the budget presentation to the National Assembly, President Muhammadu Buhari had identified this huge challenge in the industry.
He said, “During 2016, we conducted a critical assessment of the power sector value chain, which is experiencing major funding issues. Although Government, through the CBN and other Development Finance Institutions has intervened, it is clear that more capital is needed. We must also resolve the problems of liquidity in the sector. On its part, Government has made provisions in its 2017 Budget to clear its outstanding electricity bills. This we hope, will provide the much needed liquidity injection to support the investors.”
The grid is in need of a total overhaul to avert the impending crisis. The Nigerian National Grid, NNG, experiences an average of 35 system collapses every year in the past 10 years.
The constant collapse of the system increased in the second quarter to over 13 times in three months. In May 2016 alone, the national grid collapsed five times. In June, it collapsed four times. And at the end of the quarter (April-June), the nation had witnessed over 13 grid collapses, a TCN document revealed.
“The grid risks imminent total collapse if nothing is done on its total overhaul” an engineer with the Osogbo Centre of the TCN said.
“For instance, the collapse that occurred on Sunday, June 19, which threw Rivers, Bayelsa, Cross River and Akwa Ibom states into total darkness, will be a child’s play with the looming total grid collapse if nothing is done to avert it”, he expained further.
The source, who acknowledged that the Federal Government’s investment in the power sector has exceeded N4 trillion ($20 billion), maintained that the investment was made on misplaced priority – generation and distribution – while the transmission was left with little or no major investment.
Between 1999 and 2007, the Federal Government invested $16 billion in power generation and distribution through Independent Power Projects (IPP) and the defunct Power Holding Company of Nigeria (PHCN) while between 2007 and 2015, a document of the Nigeria Electricity Regulatory Commission (NERC) showed that over $4 billion was sunk into power generation and distribution, leaving the power transmission with little or no investment.