Nigeria’s power sector shortfall to reach N1trn in December

The Nigerian electricity supply market will record an estimated N1 trillion shortfall by December 2016 that could lead to systemic bankruptcy and a risk of nationwide blackout if left unresolved.

This is according to Nigeria Electricity Hub, an initiative of Nextier Power, which convenes monthly power sector dialogues to discuss pragmatic ideas for developing Nigeria’s electricity market.

The aim of the monthly dialogue is to share knowledge, explore investment opportunities, generate ideas for policy formulation, and network with stakeholders from the power sector and other related sectors.

Chiedu Ugbo, who is the CEO of Niger Delta Power Holding (NDPHC), in his opening speech, stated that since the establishment of the company’s first power plant in 2011, estimated energy invoiced by the 8 power plant currently amounts to N235.4 billion.

Of this estimate, about 55.3 percent, he explained, has been paid while the remaining 44.7 percent is still outstanding and owed by the Discos, and as at August 2016,  debts owed the company by the market stood at N105 billion.

“The implication is far reaching: capacity utilization, low productivity, inability to meet obligations, asset replacement issues and finally it challenges them as a going concern,” the NDPHC boss lamented.

Azu Obiaya, CEO of the Association of Nigerian Electricity Distributors (ANED) assessed the liquidity challenge from the perspective of the Discos.

He explained that Discos are experiencing a revenue shortfall of N38 billion monthly and that the government alone, through its ministries, departments and agencies (MDAs), currently owes the Discos about N58 billion.

This, the ANED CEO, said could amount to N309 billion by the end of the year, and that the Discos books no longer reflect cash flows that are necessary for lenders to accept funding their ongoing projects.

He also noted that as at December 2015, the Discos were experiencing a revenue shortfall of N298 billion due to the non-cost reflectivity of MYTO.0, a tariff plan then in force for the power sector in Nigeria.

As a result of this, the Nigerian Electricity Regulatory Commission (NERC) approved electricity tariff increases to increase liquidity for the sector in MYTO 2.1, but its implementation was suspended for about six months, resulting in losses of about N13 billion for the Discos.

Apart from these, other losses are coming through inflation of the naira and its weakness against major international currencies, as well as from pipeline vandalism and energy theft or evasion of bills payment for energy consumed.