Will FG finally fix power sector in 2024 to boost economy?
In spite of having the capacity to generate 22,000 megawatts of electricity, Nigeria’s power generation hovers around 4,000-4,594 megawatts. Earlier this year, it dropped to as low as 2,324 megawatts.
This, energy experts say, is too meagre for a country with an estimated population of 200 million people and urgently in need of economic acceleration.
The Federal Government has channeled billions of dollars to the sector yet, its fortunes have not improved significantly.
Experts say poor power supply has negative impacts on virtually every sector including agriculture, industry, mining, small and medium scale businesses.
The implication of this is economic growth that has not matched Nigeria’s human and material resources.
As 2023 ends, expectations are high that the sector will fare better in 2024 if actions and pronouncement from the federal government come to fruition.
The federal government through the Ministry of Power has vowed to reverse the trend and to ensure that power supply in the country is reliable.
To this end, the Minister of Power, Mr Adebayo Adelabu, organised a 3- day Ministerial Retreat on the Integrated National Electricity Policy and Strategic Implementation Plan for stakeholders in the power sector.
The retreat had as its theme: “Navigating and Aligning on the Path to Enhanced Electricity Reliability’’.
Adelabu said that the retreat was a first step towards the establishment of the Integrated National Electricity Policy and Strategic Implementation Plan, as required by the Electricity Act, 2023.
The Electricity Act 2023 was signed into law by President Bola Tinubu in June. It replaces the Electricity and Power Sector Reform Act of 2005.
The Electricity Act 2023 was passed by lawmakers in July 2022 to allow the states to issue licences to private investors who can operate mini-grids and power plants within the state.
The newly enacted law is expected to give the power sector a new lease of life as it will de-monopolise Nigerian electricity generation, transmission, and distribution of electricity at the national level.
It will empower states, companies, and individuals to generate, transmit and distribute electricity in the country.
The minister said the electricity sector and the ministry of power have a unique perspective of the nation’s entire economy.
Adelabu acknowledged the goals of federal government’s power sector reforms have largely remained unmet and urged stakeholders and operators to renew their efforts to ensure that these were achieved.
The minister said that for the country to increase its Gross Domestic Product (GDP) to one trillion dollars by 2030 as projected by Tinubu it must massively increase investments in electricity.
According to him, the federal government should work with state and local governments to increase the coverage and distribution of electricity across the country.
“Certain observable aspects within the power sector require attention. These include the poor track record in contracting, contract management, and adherence to contractual obligations, in some cases, even by design.
“With impartial examination, it is evident that these identified factors erode confidence in the viability of the sector and pose fundamental challenges of inadequate capitalisation and limited access to funds.
“For the diverse players along the energy value chain, from gas supply to electricity distribution, ‘’ he said.
Adelabu said that as one of the ways forward to address the challenge of transmission was to restructure the Transmission Company of TCN) into two entities: the Independent System Operator (ISO) and the Transmission Service Provider (TSP).
“This restructuring must synchronise with the evolving landscape of state electricity markets, addressing calls for the decentralisation of the national grid into regional grids interconnected by a new higher voltage national or super-grid, ‘’ he said.
The minister also said that one major issue in the power sector was the pricing of gas utilised by Generation Companies (GenCos) in dollars describing it as a huge volatile variable that affects the pricing of electricity for end-users.
“A preferable option was to ensure that gas utilised by the GenCos is traded in naira so as to manage the foreign currency-related inflationary trends that challenge the application of the Multi-Year Tariff Order (MYTO) methodology.
“We must find ways and means to pursue domestic gas policies and incentivise stakeholders for the supply of gas for inland use in electricity supply.
“We must be forthright and passionate about our industry while remaining objective in finding the necessary solutions to propel us forward, establishing a credible policy framework for reliable electricity in the country,“ he said.
On his part, Mr Wale Edun, Minister of Finance and Coordinating Minister of Economy, during the retreat said that power was one of Tinubu’s priority areas.
According to him, 40 per cent of the Nigeria’s population does not have access to electricity, a situation he described as unacceptable by Tinubu.
“Ten years ago there was a privatisation exercise, but it has underwhelmed and underperformed, and the results have been disappointing, so it is important that those stakeholders are part of the conversation and solutions.
“In addition to all other options that we have for providing electricity, we now have an array of option with the renewable energy, green energy.
“What we want to see is a solution of providing power and growing the economy rapidly and inclusively“, he said.
Also speaking Rep. Victor Nwokolo Chairman, House Committee on Power, said that the federal government must take a step to improve the power sector.
“How long are we going to have partial privitasation. We are not here to say the assets of the Electricity Distribution Companies (DisCos) should be taken away from them.
“ But urgent steps need to be taken as 80 per cent of the DisCos appear not to have the funds required to move the sector forward.
“Outside three discos others are just there the remaining ones have been taken over by banks,’’ he said
In his presentation, the Chairman, Nigerian Electricity Regulatory Commission, NERC, Mr Sanusi Garba, said without a cost reflective tariff the government would have to pay about 1.6 trillion naira to subsidise electricity tariff shortfall in 2024.
According to him, inflation and the Federal Government decision to unify the official foreign exchange market have pushed cost reflective tariff to N124/ Kilo watts per hour (kWh) from the subsidised N73/kWh charged to Band-A customers.
“ This year alone, subsidy is expected to top the 600-billion-naira mark,’’ he said.
The NERC chairman said that the financial burden due to tariff subsidies between 2015 and 2022 stood at N2.8 trillion.
He said that it was imperative that the government supports the review of end user tariff to minimise fiscal burden in the sector.
He therefore proposed the implementation of an automatic monthly tariff adjustment to manage volatilities in foreign exchange and inflation.
The Permanent Secretary, Ministry of Power, MrTemitope Fashedemi, said the retreat was for stakeholders to sit together to and chat a way forward to achieve the mandate of kps given to the minister.
Fashedemi said that participants at the retreat were drawn across the value chain of the power sector as well as other sectors of the economy that align with the sector.
“It is, therefore, expected that the outcome of the retreat will form the basis of the development of the new integrated national electricity policy and its strategic implementation plan which will guide other reforms the minister has for the sector’’, he said.
An electricity analyst, Lanre Elatuyi, in a media report said power sector players needed to effectively discharge their responsibilities if the challenges facing the power supply would be addressed
“The path to having accessible power is by ensuring there is resource and infrastructure adequacy, such as transmission and distribution networks that are resilient enough to connect all consumers irrespective of their location or economic status.
“Grid operators must ensure system balance with adequate provision for ancillary services and efficient balancing mechanisms. Also, adequate provision must be made for reactive power compensation,” Elatuyi said.
An expert in power system engineering, Mr Adesola Oyedotun, said solving the mirage of challenges facing the sector required massive investment.
“Another key solution in this sector is for the new administration to urgently address the metering gap which will boost Discos’ performances.
“I also believe the current administration will attract investors into the power sector,’’ a recent media report quoted him as saying.
Experts are of the opinion that access to reliable electricity will create employment, increase trade that will the wellbeing of Nigerians and the nation’s economy.
Will the outcome of the retreat help Nigeria finally fix the power sector in 2024? Time shall tell.
