FG: $10bn Required to Bridge Power Distribution Gap

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Emmanuel Addeh

The federal government has said about $10 billion would be required to bridge the electricity distribution infrastructure deficit gap in the country.

Speaking at the weekend during a television interview, Special Adviser to President Muhammadu Buhari on Infrastructure, Mr. Rufai Zakari, stressed however that the government was looking at several sources for funding the power sector.

He said although the federal government was not against the current players in the industry making money, but it needed to make sure that investors make their money while their services are felt by Nigerians.

Zakari added that having assessed the metering gap through the support of the Central Bank of Nigeria (CBN) in partnership with the ministry of power and NERC, the government was working with the Discos to provide them financing so that they can roll out metres to citizens free.

He said thus far, about N18 billion has been disbursed which has been used to purchase about 350,000 meters, in the phase zero, while about one million meters would be distributed over the next few months.

The president’s aide stated that the government will then move to phase one which will be another 4 million through a similar financing scheme while the balance will be covered through a World Bank facility.

“We need rapid accelerated funding in the distribution sector. The distribution sector is the closest to the consumer and we like to say that if the power sector doesn’t work for the citizens, then it doesn’t have any purpose.

“If you look at what we’re doing, I think the assessed gap is about $10 billion and we’ve come up with multiple schemes to rapidly infuse funding into that segment of the value chain.

“Through the leadership of CBN, there’s an emergency fund that’s being used to upgrade critical feeders in line with the service-based tariff rollout to make sure the Discos can meet their band ABC and the loan commitments,” he maintained.

He added that part of the world bank funding will also be used for infrastructure like transformers in different neighborhoods that are challenged, just so the citizens can feel the impact of improved electricity.

In addition, he said the Siemens presidential power initiative will also bring about funding to ensure improvements as well as to make sure that Nigeria’s distribution capability matches its generation capability as well as transmission.

“But for anybody that says we should only focus on one funding scheme, that is a very wrong way to think because we have a large gap and were are using all of these funds in an accelerated manner to make sure that the citizens feel the impact as quickly as possible,” he added.

He listed the issue of better coordination as one of the problems in the sector, saying that what was available before now was a distributed leadership and many players in the sector, insisting that part of the challenges was ensuring that all the players are moving in the same direction.

Zakari stated that with improved coordination, Nigeria was beginning to see the results, adding that the country needs to make sure the investors can make returns but that the impact on the citizens must be felt.

“So the Discos that have also been working with us, we are taking a carrot-and-stick approach. It was reported that we have broken the record in terms of collections in the sector, partly because we have sequestered the funds for the sector into a lock box, so to say, with the CBN and we are ensuring that generation and gas are getting their money and Discos can earn a return, but there’s much more transparency in the sector.

“On aggregate even with the subsidies and raise in tariff by about 36 per cent on average, but the collection number for Discos over the past few months has jumped by 64 per cent.

“This is ensuring that there’s more money in the system for investments and also if you have a Disco with a balance sheet and is earning revenue, we will allow for them to be able to have enough revenue to invest in the network,” he stated.

Zakari pointed out that although enough balance sheet strength was needed to take on the weight of the loans that is the responsibility of the Discos, the government will not hesitate to withdraw the licenses of those who are unwilling to tap into the government’s vision
“But I will assure you that any Disco that fails to perform with all the measures that have been taken to support them will lose their licence and we’ll find investors that are better equipped to manage it .

“We see the numbers, it’s bearing fruit. The Discos collected N65 billion from the last billing cycle and we’re on a path to get the collection number this year up to N100 billion and that’ll be more jobs, it’ll be more investments and it’ll be better power for our citizens,” Zakari stated.