Absence of structured policy formulation stifles power sector development

The failure to implement cost-reflective tariffs will continue to constitute a barrier militating against large-scale investment in Nigeria’s power sector industry close watchers have warned.

Energy experts observe that the tariff structure as it stands today is not only non-sustainable, but also not investment friendly saying that what is happening in the Power sector is a reflection of lack of will in policy formulation.

Kenneth Abazie, Chairman of the Petroleum Downstream Group of Lagos Chamber of Commerce and industry observe that most of the DISCOs are only doing business with service providers that are ready for self-financing or extended credit regimes especially in their metering projects.

Abazie disclosed that the overall difficulty of raising finance, which in part, arises from failure to implement cost-reflective tariff, would continue to impede the pace of development at the power generating arm of the sector.

According to him, “Nigerians in their various homes in an effort to generate domestic power are spending three times the cost they are ready to pay the power generating companies, DISCOSs. The resultant effect is colossal loss of revenue on the part of investors, low return in investment, default in service of capital and an impending break down of the whole process”

Analysts reiterated that are several issues that need to be addressed on the distribution side of power, for the whole power/ energy sector to work.

They are concerned that if Nigeria generate the power but can’t sell it or can’t transmit it, then it is redundant “so there are several issues that need to be fixed before we can think of attracting the desired investment in power sector.

According to close industry sources the amount of capital investment required to achieve the needed turn around in the power sector is not available now under the current circumstance unless things improve.

Analysts opine that risks associated with investment to strengthen power supply networks in both the short and medium term is essential for efficient allocation of resources in the industry for a sustainable electricity future in Nigeria and the sub-region.

They are optimistic that a lot of things could change between now and the year 2019 but the most important thing is for government to provide an environment of stability and certainty of exchange rate risk and remove the reliance on crude oil.

Wumi Iledare, Director of Emerald Energy Institute, University of Port Harcourt, Rivers State observes that projected year for achieving the increase in power generation is only three years away.

“2019 is only three years from now, the administrative set up and Industry Governance structure is not in place to make this happen” he said.

Ayodele Oni a specialist in international energy investment law & policy

reiterates that Nigeria’s power sector has had a long history of under-investment in its energy value chain.

According to him, “Factors such as low tariffs, poor regulatory oversight, vandalism of gas infrastructure and weak governance had played different roles in further compounding the Nigerian power sector problems”

He commended government for the step taken in the past few months in the power sector, however, he posit that for the projection to gain traction and materialise there is need for government to be more radical in harnessing the potentials of same; including conducting an overhaul of private sector involvement and taking a proactive approach to dealing with the militating power sector challenges.

KELECHI EWUZIE