The challenges of the Nigerian power sector are enormous, but the situation is not a hopeless one. Nigerians have grappled with inadequate power supply for many decades, and it seems there is no end in sight to the darkness being experienced from the South to the North and from the West to the East.
According to the Association of Nigerian Electricity Distributors (ANED), the country needs about 33GW for self-sufficiency. As a result of this perennial darkness, many children grow up to understand that a generator is an essential item to have in a household as they are ubiquitous in our society from the “I better pass my neighbour” to the mighty diesel generators.
The value chain of electricity power extends from the energy source (gas, hydro, liquid fuel, etc.) to the last point of usage in residential or industrial facilities. The key players in this value chain are the Generation Companies (GenCos), the Transmission Company of Nigeria (TCN), and the Distribution Companies (DisCos), the government (regulator), and not to forget the consumers.
The national grid serves as the conduit through which the electricity generated at different generating power plants is aggregated and transported across the nation. The DisCos, strategically located across the nation, take the power from the national grid, step it down and distribute it to end users. To complete the loop, the DisCos collect money from the end users in the form of bills. These collections by all the 11 DisCos in Nigeria are aggregated by the Nigerian Bulk Electricity Trading Company (NBET) – a government entity with the responsibility to ensure equitable distribution of the cash collected. NBET pays the GenCos and gas suppliers their share according to the invoices submitted by each of them.
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This distribution of value is another challenge as there are many unsolved issues around full settlement of the invoices of the GenCos especially.
There is no consensus among these key stakeholders in the value chain on who is responsible for the inadequate electricity supply, and the attendant darkness experienced across the country.
To the surprise of many and I believe this would generate some counter opinions, I dare say that not one but all the stakeholders in the value chain are to blame for this unfortunate situation that has earned Nigeria the name “The Generator Republic”. All the stakeholders have been sleeping on their responsibilities and find it easier to point fingers towards another. They have refused to accept their share of blame.
One of the major challenges of the sector is liquidity. There is a huge imbalance between the value that flows downstream and the value that flows upstream. This illiquidity is in the form of lack of injection of funds into the sector and the lack of accountability in the revenue or funds generated in the value chain.
As stated earlier, value flows downstream in form of electricity from the GenCos through the transmission and DisCos to the consumers while it flows upstream from the consumers through the DisCos, then to NBET, which should be eliminated in my opinion, to the GenCos and the gas suppliers.
There is a huge lacuna between the values downstream and upstream thereby affecting the ability of many of the stakeholders to fulfil their obligations. The main cause of this gap is a twin monster of energy theft and low tariff. It has become a cliché to say that electricity tariff in Nigeria is not cost reflective, meaning the price paid for the electricity is not commensurate with the cost of generating and getting the electricity to the consumers. This stifles the sector and does not make it generate adequate revenue for all the stakeholders.
A consequence of this is that most of the stakeholders are not incentivised to inject more funds into the sector. Electricity supply is not cheap in any part of the world, and what makes it a success is the willingness of stakeholders to invest in the assets.
On its part, the regulators have not been courageous enough to enact policies that would help to drive efficiency of the sector and punish all those that steal electricity. There must also be a strong resolve to enact policies that protect all stakeholders. The regulators must develop regulations and policies that guarantee the optimisation of value upstream and downstream the chain. This will eliminate any excuses and improve accountability of all stakeholders to generate value and manage the resource effectively.
I will dwell on managing the resources through effective energy management in my subsequent publications, look out.
Consumers must be willing to pay fully for the electricity used and be open to accept a cost-reflective electricity tariff. The owners of the DisCos and GenCos must be willing to inject funds into the system to upgrade old and ineffective electric power infrastructure. The regulators must be courageous to listen to the yearnings of the stakeholders and establish laws and policies that help to maximise value for everyone in the sector.
In all, everyone in this electricity value chain must do their part to ensure improved electricity generation, transmission, distribution and consumption.
Ajilore resides at Garki 2, Abuja
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