Stories by Chineme Okafor in Abuja
The Nigerian Society of Engineers (NSE) has advised the federal government to cut down its financial support to private owners of electricity distribution companies (Discos) and generation companies (Gencos) in the country.
The NSE in a communiqué at the end of its 52nd National Engineering Conference, Exhibition and Annual General Meeting (AGM) held in Kano, claimed that electricity Gencos, Discos and the Transmission Company of Nigeria (TCN) have not done enough to improve power supply in Nigeria.
It therefore, advised the government to reduce its financial support to the sector. The government had provided N213.4 billion bailout in 2014 through the Central Bank of Nigeria (CBN)-Nigeria Electricity Market Stabilisation Facility (NEMSF) and N701 billion through the same CBN in 2017 to the power sector. It also intends to provide addition N600 billion already approved to support the sector.
However, the NSE in the communique signed by its Executive Secretary, Dr. Okopi Momoh, a copy of which was obtained by THISDAY stated that, “the power supply crisis in the country is due to inadequate power infrastructure and poor tariff regime in the industry.”
According to the group, “Inadequate commitment among the owners of Gencos, Discos and Transmission Company has contributed to poor power delivery in the country.”
It said that insufficient planning of distribution, transmission and generation infrastructure has led to the power infrastructure failures in Nigeria, adding however that the, “government should reduce intervention funding in favour of private sector investment for Discos to address structural challenges in a sustainable way.”
Furthermore, the NSE suggested that, “the use of single buyer model for (the) electricity industry has contributed to the Nigeria electricity market crisis,” and thus asked the NERC to immediately implement cost-reflective tariff structure by reviewing it multi-year tariff order.
The NSE also called for the prioritisation of power supply for industrial use above domestic consumption and creation of a special purpose vehicle (SPV) that would focus on improving and expanding the country’s electricity infrastructure and revenue collection from consumers, while the Gencos, Discos and TCN only take charge of operation and maintenance of the facilities, as a long-term plan.
To give the sector an efficient lift, the NSE asked that, “All players in the power sector should show more patriotism in discharging their responsibilities to Nigerians.
“NERC should review capital requirements holistically in line with international best practices, and enforce these requirements, outlining penalties for non-compliance with the same.”
A former chairman of the Nigerian Electricity Regulatory Commission (NERC), Dr. Sam Amadi recently criticised the government’s continued provision of financial bailouts to the sector, saying it suggested the sector was failing.
Amadi said in an interview with THISDAY that: “The bailouts are unfortunate but necessary except you want cessation of electricity business in Nigeria. Bailouts are what you get when your reform fails; when there is no commercial viability in the sector. Government must step in.
“But my problem is the manner of the step-in. Government is taking all the risks and leaving benefits to private operators. If you provide the money, then take some responsibility for decision making so you can control market behavior. Otherwise the bailout becomes a moral hazard that induces bad corporate behavior.”