2017- A Year Of Power Sector Highs & Lows

By Idowu Oyebanjo, MNSE CEng MIET UK

This year has had its “ups and downs” and the power sector is no exception. The year started with a generally low mood in terms of the quantum of power generation available for distribution from none to a peak of 5,222MW on 18^th of December, 2017. Early on in the year, the Nigerian Bulk Electricity Trading Company (NBET) decried the generally low level of remittances from the distribution companies (DisCos) which has led to the rising spate of on-going debt and general illiquidity in the Nigerian Electricity Supply Industry (NESI).

 The average monthly remittance from the DisCos was as low as 30 percent with all the operators trading blames on who is responsible for the situation. This has led to the inability of the generating companies (GenCos) and the transmission company of Nigeria (TCN) to pay for services procured in generating and transmitting power to the DisCos. The illiquidity in the NESI has resulted in a generally low mood for all stakeholders including Banks, financial institutions, relevant ministries, departments, agencies, potential investors (local & international).Throughout the year, consumers were at a loss as to why the much needed electricity generated by the GenCos was rejected month after month by the DisCos and TCN. The blame game between the operators made nonsense of privatisation. Yet, accompanying the low levels of electricity supply were outrageously high levels of estimated and fraudulently extorted electricity bills leaving consumers at their regular and continuous state of “low”.

In its lowest ebb of financial distress, the NESI experienced a financial debt profile of over a trillion naira until the Federal Government (FG), through the Central Bank, arranged a 701 billion Payment Assurance Guarantee (PAG) to the NBET to enable them make payment to GenCos who were unable to make prompt payment for gas and other incurred expenses. GenCos however remained in low spirit for months thereafter as actual payment by instalment did not commence until much later. Even then, DisCos remained in a low spirit especially with the declaration of eligible customers (EC) by the Minister of Power during this year of highs & lows. In their low ebb, DisCos have given a notice of Force Majeure to NBET, stating that the declaration of EC is a threat to their continued survival within the NESI.

On a more positive note, the NESI was on a “general high” when FG, working with the World Bank and other affiliate financial institutions, sets out a power sector recovery program (PSRP) which if implemented will put the power sector reform back on track. However, conditions precedent to the release of over 5 billion USD of loan have not been met by the FG whilst industry watchers remained on a “general low”. To access the loan, FG must overcome technical, governance, commercial and operational barriers.

At the end of the year, the annual Future Energy Nigeria conference puts the NESI on high hopes shifting discussion points from the known issues to the proffering and implementation of solutions. To this end, the NESI will therefore witness, in the coming years, a radical shift in focus to sustainable electricity systems with increased penetration of renewable energy generation, mini grids, solar homes, and hybrid solutions involving solar and gas technology in combating the power problems facing Nigeria.

*Engineer Oyebanjo, the MD/CEO of Ipec, writes from the UK