…DISCOs need over N3.07trn investments to boost services
…As FEC Okays CBN intervention fund extension for GenCos
Motolani Oseni
There is a great concern that epileptic power supply currently experiencing by most parts of the country may not be addressed in the coming years,
as the 11 power distribution companies (DISCOs) in Nigeria on Monday said they need a minimum of N3.07trillion ($10billion) investments to boost their services over the next five years.
The operators stated this at a one-day conference held to appraise challenges in the country’s power sector, stressing that the estimates followed an industry study on how to boost electricity supply.
The French Agency for Development (AFD), which organised the conference, however, noted that it conducted the study with the support of the European Union (EU) on the Nigerian Electricity Supply Industry’s challenges, to help resolve the problems of the sector.
The study conducted by a consultancy firm, AFMercados, under the Technical Assistance Programme, said the best way out of the challenge was to evolve innovative financing solutions, possibly involving new players to invest in the sector.
A key finding from the study was that the sector needed more investment than interventions by the Central Bank of Nigeria (CBN) to turn the electricity market around.
Also, it disclosed N600 billion has been earmarked as the second tranche of CBN of Nigeria Electricity Market Stabilisation Facility (NEMSF) starting this year or by 2020.
The team leader of the Capacity Building and Technical Assistance Programme (CaBTAP), AF Mercados, Jose Guerra, said the study was also designed to empower decision makers with reliable information on the country’s power sector.
AFD said the study was conducted in conjunction with other development institutions involved in the power sector and witnessed how investments in the sector have been stalled since it was privatised.
“This has led to the buildup of a major bottleneck, constraining ever more access to electricity for the public and the economy, driving up the costs for users who can only resort to diesel-powered generation”, AFD said.
“The failed attempts at financing DISCOs by the Federal Government and its development partners to think out ways of breaking the vicious cycle starting from an initial infrastructure gap led to today’s severe liquidity crisis, with a revenue shortfall that is over $3billion,” the agency added.
The report blamed the revenue shortfall on the lack of a cost reflective tariff, customer dissatisfaction and a lack of performance in the power sector, in general, resulting in a shutdown of access to finance.
AFD said Mercados worked closely with stakeholders in the sector and the DISCOs since mid-2017, following the guidelines of the Performance Improvement Plans (PIP) released by the Nigerian Electricity Regulatory Commission (NERC).
The study shed light on key actions needed to solve the liquidity crisis in the sector, such as in the areas of segmenting the electricity market into manageable urban areas, rural areas, and potential Eligible Customers.
The other segmentations are informal settlements in urban areas and peri-urban areas, and the difficult to manage rural areas.
Other highlights of the report included an analysis of the cost and revenue structure of the DISCos on these various segments; appropriate data to help in valuing the needed investment-linked to key performance indicators targets to help in forming the PIP of each DISCO as required by NERC.
Meanwhile, the Federal Executive Council (FEC) has approved an extension to the CBN intervention fund for power Generating Companies (GenCos) in the country.
Minister of Finance, Zainab Ahmed, on Monday, disclosed this while briefing State House correspondents on the outcome of the council meeting presided over by Vice President Yemi Osinbajo.
She said that the aim was to continue to support the power sector, adding that the council also approved an extension of a CBN intervention that will be used to continue to support the power sector specifically the generation arm of the sector.
“This is based on a commitment that we signed into as a country, where we have several guarantees to the Generation Companies (GenCos) to bridge any gap that they have after the Nigerian Bulk Electricity Trading Plc (NBET) has settled them”, she explained.
