Page 4 - AfrElec Week 19

AfrElec COMMENTARY AfrElec
Debt and losses continue to hold back Nigeria’s power sector
High debt levels and reliance on subsidies are holding back reform and privatisation efforts, writes Richard Lockhart
NIGERIA
WHAT:
The power sector amasses debts of $168mn in April
WHY:
Insufficient gas supply and poor distribution
and transmission infrastructure means bills are left unpaid
WHAT NEXT:
Dealing with the debt crisis is crucial if the government’s reforms efforts are to be successful
NIGERIA’S power sector continues to stack up huge losses and be plagued by non-payment of bills as the inadequate and poorly maintained transmission and distribution systems fail to meet demand.
Government figures reported by Nigerian daily The Vanguard this week highlighted that the gas and power and grids posted losses of NGN65.64bn ($168mn) in April 2020, 33.6% more than in April 2019.
This meant that the country’s grid had a wheeling capacity – or total available capacity – of just 4,441 MW on May 7.
Indeed, on that day the power sector lost an estimated NGN1.9bn ($4.87mn) because of constraints arising from insufficient gas supply, distribution infrastructure and transmission infrastructure, the Office of the Vice President’s Advisory Power Team said.
Negative impact
With just 4,441 MW of grid capacity available in a country of 205mn people, power cuts are common and the use of private generators is common.
“The poor state of the nation’s power sector has impacted very negatively on the economy. Many investors have resorted to the generation of their independent power at higher cost. It is a very serious challenge, because we should not be where we are today,” said Mazi Colman Obasi, president of the Oil and Gas Service Providers
Association of Nigeria (OGSPAN).
Other weakness in the Nigerian power sector
include the widespread use of subsidies. The gov- ernment provided NGN1.63 trillion ($4.18bn) in loans and subsidies between 2015 and 2019, according to consultants PwC.
Government loans in that period include NGN213bn to power distribution companies (Discos) in 2014 as part of the Nigeria Elec- tricity Market Stabilisation Facility (NEMSF). In 2017, the Central Bank of Nigeria approved NGN701bn as a power assurance guarantee for Nigerian Bulk Electricity Trading (NBET), which buys power from generators before selling it on to distributors. Then in 2019, the govern- ment provided a NGN600bn subsidy to make up payment shortfalls across the power sector.
COVID-19
Meanwhile, the coronavirus (COVID-19) pan- demic is affecting the power sector negatively, as industrial demand has fallen, leading to lower revenues for the sector as a whole.
While residential use has grown, although revenues have not grown here because of wide- spread non-payment, consumer electricity theft and illegal connections, said Benin disco CEO Funke Osibodu.
Osibodu stated that COVID-19 has impacted the cost of delivering electricity to Nigerians as well as the revenues of the complete value-chain.
“This is transparently manifested through
The COVID-19 pandemic is affecting the power sector negatively, as industrial demand has fallen, leading to lower revenues for the sector as a whole
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w w w . N E W S B A S E . c o m Week 19 14•May•2020