Turning the curve to solve the never-ending hiccups trailing power sector

The economic impact of constant unstable power supply to businesses amid the strangulating effect of shortfall in gas and high cost of diesel has left Nigerians on their knees.

Over the years, challenges in the power sector have largely featured poor infrastructure, lack of sufficient funding, failure by the executive arm of government to pay for power, security issues and the uncertainty surrounding the present foreign exchange regime.

With operations of the power sector indicating that grid capacity to wheel power has hovered around the 4500MW-5000MW range such that any additional power generated outside that range could not be wheeled.

Generation levels which were expected to be between 5,000MW and 7,500MW had been between 2,000MW and 4,750MW. The national grid is still very weak, old and collapses incessantly.

Industry close watchers observed that despite the concerted efforts by successive government to tackle the power sector challenges, the problem appears to be more man-made than engineering or technical.

Babatunde Fashola, minister of Power, Works and Housing on July 14, 2017 while delivering a lecture at the University of Lagos said that man-made problems like communities’ disagreement over right of way, court issues bordering on resettlement claims among others have for long frustrated government efforts in developing a lot of power projects.

Analysts said that the entire electricity sector is faced with huge revenue shortfalls. The implementation of cost reflective tariffs, access to long-term debt capital and equity injection, will still not address the revenue shortfall to the system in the short term.

They opine that as a first step towards resolving the financing challenges facing DISCO operations, Core Investors, in line with their performance agreements, need to urgently capitalise DISCO operations by the injection of “patient” capital by way of long-term debt or equity.

According to them, “It is imperative that Core Investors inject significant patient capital to address the challenges mentioned above. Short-term debt or borrowings will not suffice and only serve to exacerbate the financing and operational challenges.

Analysts insist that underpinning any debt or equity capital raise is a sustainable and cost reflective electricity tariff and a long-term tariff path. Without cost reflective electricity tariffs, the electricity sector is not likely to attract and sustain the much needed investments.

Industry analysts are worried that government has failed to honour any of its commitments to investors as the issues of improvement in gas supply have not materialised.

They are of the view that government promised to ensure a substantial increase in the capacity of the grid such that enough electricity would be wheeled along the transmission network to ensure that the generation companies could send sufficient power whilst the DISCOs would receive enough power for distribution in order to generate sufficient electric power.

‘‘It was only recently that the grid expanded by about 40 percent, effect of which had been that the DISCOs could not receive sufficient power and consequently generate sufficient income to service the remaining parts of the electric power supply value chain”, they said.

KELECHI EWUZIE