PRESIDENT Muhammadu Buhari tried to undertake some major reforms in the power sector, but his intervention is marred by inconsistencies, overwhelming subsidy payments and recurring grid collapse.
Nigeria’s power sector was unbundled and privatised in 2013 to establish a competitive market to improve management and efficiency, attract private investment, increase generation, and provide a reliable and cost-efficient power supply.
However, the dream to deliver a cost-efficient power supply to Nigerians remains a pipe dream, due to poor leadership and weak regulatory intervention.
For instance, many public institutions default to pay for power, with debts surging in billions even as government pays subsidies for liquidity shortfall. Also, the pricing for power has been the bane of the sector.
Another key problem is operation deficiencies and non-alignment of various power sector value chains consisting of generation, transmission and distribution, with each constantly trading blames.
The sector, despite privatisation, is weak due largely to underpayment of power costs by consumers which makes subsidy in the power sector thrive despite privatisation.
“Many Nigerians bypass power lines to access power without payment. This is hugely affecting cost recovery. There is also low electricity pricing because people are yet to pay the appropriate price for power. Most often we get directive from the Nigerian Electricity Regulatory Commission, NERC not to effect the appropriate price, which contradicts the Electricity Power Sector Reform Act of 2005 on multi-year tariff Order. It also affects cost recovery efficiency.” President of the Association of Nigerian Electricity Distributors,(ANED) Sunday Oduntan told The ICIR.
President Buhari’s interventions to bridge various shortfalls:
Despite being privatised, the Buhari administration has continued closing various gaps in the power sector value chains, including paying over N50bn for subsidy for the sector.
Ahmed Zakari, the Presidential Adviser on Power and Infrastructure revealed that the President is keen and focused on using numerous avenues to close infrastructural gaps in the power sector. He said $3 to $5billion have been committed to upscale various power infrastructure in the country.
” Through support from the World Bank, we now have $1.6 billion has been devoted for the Transmission expansion programme. We signed another 500 million dollars for the development of the distribution sector. The Central Bank of Nigeria has also put out. Emergency funds for the distribution sector as well as transmission sector in various phases to the tune of 500 million dollars.”
” We also have the SIEMENS presidential power initiative that we’ve signed the engineering agreement. We are also looking at the performance improvement plans of the Discos to enable us to hold them accountable as they receive these support funds. This performance agreement will enable them to align their projects with funds that are available.
“We also have the national mass metering programme which is helping us to improve the revenue and sustainability of the sector while addressing the liquidity concerns in the sector.”
“With this enhanced metering on the service-based tariff, we can see the Nigerian Electricity supply industry generating over N100 billion in the near to mid-term. This is very impressive. The hypothesis that we have is that if you enhance payment discipline through the metering population, revenue will go up. We have proven that, “the presidential adviser said.
Interventions in off-grid power by President Buhari
The federal government through the Rural Electrification Agency, REA has unveiled plans to provide access to power to about 85 million Nigerians not connected to the grid through various off-grid electricity solutions. The plans also extended to connecting targeted markets across the country, and several industrial clusters in other to expand access to power. It also targeted several higher institutions in the country for constant power through solar-powered electricity solutions. The REA drove these initiatives through its energising education, market and industry programmes via solar-powered off-grid connections.
To support the economic recovery in response to the COVID-19 pandemic, the Federal Government of Nigeria (FGN) has launched an initiative as part of the Economic Sustainability Plan (ESP) to achieve the rollout of 5 million new solar-based connections in communities that are not grid-connected. According to the federal government, this program is expected to generate an additional N7 billion increase in tax revenues per annum and $10 million in annual import substitution
The Solar Connection Intervention Facility is expected to complement the Federal government’s effort of providing affordable electricity to underserved rural communities through the provision of long term low-interest credit facilities to the Nigeria Electrification Project (NEP) pre-qualified home solar value chain players that include manufacturers and assemblers of solar components and off-grid energy retailers in the country.
The 5Million Solar Power Naija connection scheme is a Federal government initiative whose objectives are to: Expand energy access to 25 million individuals (5 million new connections) through the provision of solar home systems (SHS) or connection to a mini-grid; Increase local content in the off-grid solar value chain and facilitating the growth of the local manufacturing industry.
It would also incentivize the creation of 250,000 new jobs in the energy sector.
FG intervenes in mass metering to plug liquidity shortfalls
Zakari said the National Mass metering Programme replaced the Meter Asset provider programme to ensure a metering gap of over 6 million is closed.
“Arbitrary billing is one of the key challenges of the sector and we mandated that we transition to national mass metering programme ‘that is full! Funded, and the estimated six million meter gap would be eliminated by the end of the life of this administration. We’re currently in the zero phases now which the Central Bank has provided over N35 billion for.
“The phase zero targeted 1 million meters. We’ve mopped up all the available meters produced locally which is about 600 000 meters indigenously manufactured. The next phase brings in about 4 million meters.400 000 meters have been installed and we track the geolocation, names of every citizens and household that has been metered. Before the end of the life of this administration, we would eliminate the metering gap.” Zakari explained.
He pointed out that arbitrary billing and energy theft are issues that we’re also addressing currently, that is why we are tracking metering and ensuring regulations stop certain untoward practices, he stressed.
Unbundling of TCN updates by the Buhari’s administration
Ahmed Zakari noted that the Electricity Power Sector Reform Act allows that at the maturing stage of the privatised market, there is a need for the separation of the management of the grid which will be a new independent systems operator from the transmissions services which builds the infrastructure.
He said: “The Act requires for you to unbundle first before privatisation or commercialise. We’re currently doing both and determining how best to unbundle into the new parts. The National Council of privatisation and the Ministry of Power are currently evaluating that. The second step is to go back to the National council of privatisation, with approaches to unbundling and privatisation.
Zakari noted that the Central Bank of Nigeria has sustained interventions to the Transmission Company of Nigeria, TCN through the Transmission Expansion Programme to plug the gap in transmission infrastructure in the country and provide, Supervisory control and data acquisition, (SCADA) that helps to control grid collapse by enforcing efficient communication in the various power value chain.
“The issue of unbundling of the TCN is NERC’S responsibility as prescribed by the Act. We are currently losing a lot without unbundling the TCN. The day you open up the TCN for proper unbundling, you would solve the problem of dilapidated infrastructure as people would build their own independent transmission. Investors would come in and build their own transmission.” Said Power sector Governance Expert Chuks Nwani.
“This is not good for the system, as you could see the distribution companies trade blames with the TCN once there’s grid collapse issue. We must deliver the unbundling as quickly as possible for the advancement of the power sector.”Nwani stated.
Nigeria’s expectations still unmet
Nigerians waited to harvest the fruit of power sector privatisation embarked upon in 2013, however, the privatisation hasn’t delivered efficiency in Nigeria’s power sector, as calls for review of the privatisation heightened post-privatisation.
For instance, the Multi-Year Tarrif Order, as prescribed by the Electricity Power Sector Reform Act of 2005, stated that the tarrif ought to be reviewed every six months to factor in various variables such as exchange rate and inflation concerns.
These have not been adhered to as adjustment in tarrif clauses has met stiff opposition both from various labour unions in the country, and most recently the legislators who have opposed the adjustments leaving the government with huge payment gaps to bridge the shortfalls through ‘subsidy’ to the power sector.
Against this backdrop on non-adherence to the Electricity Power Sector Reform Act of 2005, and lack of implementation of the multi-year tarrif Order, the federal government has seen its financial support and interventions to the power sector hovering around N1.8 trillion in the past few years.
Despite these subsidy interventions, the current administration still struggles to keep the lights on.
Sale Mamman, the Minister of Power expressing concern on this development disclosed that about N50bn is being paid monthly by the government to assuage the plight of the sector. The monthly subsidy would push the interventions in the sector to N2.6 trillion in a year.
Privatised about seven years ago, the power sector has not been able to stand on its owner’s given historical challenges and deficit of critical infrastructure.
World Bank low ranking of Nigeria’s power sector.
Nigeria has been enjoying lots of support from the World Bank and the African Development Bank to support efforts to improve power supply.
The World Bank in February approved $500 million to support the government of Nigeria in improving its electricity distribution sector. The project will help to boost electricity access by improving the performance of the Electricity Distribution Companies, Discos through a large-scale metering programme desired by Nigerians for a long time.
The Central Bank, the disbursement agent for the fund had confirmed disbursement of N35.9 billion on mass metering so far.
According to the World Bank,85 million Nigerians don’t have access to grid electricity. This represents 43 per cent of the country’s population makes Nigeria the country with the largest energy access deficit in the World. The lack of reliable power is a significant constraint for citizens and businesses, resulting in annual economic losses estimated at 26.2 billion(N10.1 trillion) which is equivalent to about 2 per cent of GDP.
According to the 2020 World Bank Doing Business report, Nigeria ranks 171 out of 190 countries in getting electricity and getting electricity access is seen as one of the major constraints of the private sector.
“Improving access and reliability of power is key to reduce poverty and unlocking economic growth in the aftermath of the global COVID-19 pandemic,” says Shubham Chaudhuri, World Bank Country Director in a recent press conference.
“The operation will help improve the financial viability of the DISCOS and increase revenues for the whole Nigeria power sector.
In its latest online meeting with the media people, the bank indicated that over 78 per cent of electricity consumers in Nigeria received less than 12 hours of electricity supply daily.
According to the global financial institutions, while 93 per cent of metered power users pains their bills regularly,78 per cent of the electricity consumers in Nigeria received less than 12 hours of supply daily. The bank confirmed that the results it harvested the results after a thorough survey.
PricewaterCooper’s Associate Director, Energy, Utilities, and Resources, Habeeb Jaiyeola noted that fund injection into the sector and mass metering arrangement remained the right way to go. He argued that the sector would have collapsed without the timely intervention of the government.
“It is necessary for the government to continue to keep the industry balanced. Because as of now, even though we have privatised the sector, the government will have to intervene. So that the industry does not collapse.
“We expect more sensitisation for Nigerians to understand the issues. Nigerians are still not seeing power as a service that needs to be fully paid for. We have issues with cash collection, we have to keep improving on the collection by the Discos, who are constrained by security and other issues. Part of what is causing the poor collection is the absence of full metering, he stressed further.”