Discos, Gencos, others’ Shortfall In Power Sector Rises To N1.6tn
The Executive Director, Research and Advocacy, Association of Nigerian Electricity Distributors (ANED), Sunday Oduntan, revealed that the total shortfall in the Nigerian power sector has reached N1.6trn in eight years and that findings have shown that the shortfall was recorded in the fourth quarter of last year.
According to a report by The Punch, Oduntan says “As at the last quarter of 2021, the total shortfall in the power sector is about N1.6 trillion,”.
A shortfall arises whenever electricity distribution companies and generation companies, otherwise called DisCos and GenCos, are not able to recoup an investment made from projects. For instance, the tariff shortfall occurs when DisCos are unable to collect total tariff revenue from electricity provided to consumers. Shortfalls result in debts, which inhibit further investments and development in the sector.
Nigeria’s power sector has been faced with tough liquidity concerns since the distribution and generation arms of the industry were privatised in November 2013.
As a result, the Federal Executive Council approved the Power Sector Recovery Programme in March 2017 and made further amendments in 2019 with strategies to phase-out Federal Government support to the electricity market.
Outlining the key drivers of the PSRP, the government said revenue deficits in the sector were inevitable, thus creating unsustainable fiscal burden, necessitating various interventions in the form of loans to the sector by both the World Bank (WB) and the Central Bank of Nigeria (CBN).
A report indicates that CBN is currently touring the utility firms to provide them with loans in order to meet their metering plans as a means of addressing the shortfall.
The last CBN loan to the DisCos was on tariffs shortfalls, which, as of late 2021, had dropped from N1.891trn to N247bn due to the Federal Government’s intervention.
It was learnt that the government began talks with the DisCos on metering intervention in 2020, leading to introduction of the National Mass Metering Programme (NMMP).
The Federal Government’s NMMP was set up to augment that of the Nigerian Electricity Regulatory Commission ’s Metering Assets Providers (MAP), which as of the time of the intervention had barely reached 300, 000 households.
The CBN has, so far, disbursed the sum of N47.66bn for the acquisition of 858,026 meters for the first phase of the NMMP.
The NMMP, currently in its second phase, will begin in the second quarter of this year, and that the CBN tour was geared towards providing loans for each Discos for the programme.
Although the ANED spokesperson declined revealing how much CBN would give each DisCo as loan for the second phase of the metering, a top industry source said that the Federal Government would also provide some sort of subsidy on each meter.
Oduntan denied being aware of any form of subsidy to the DisCos.
The spokesperson for Ikeja Electric Distribution Company, IKEDC, Felix Ofulue, confirmed CBN’s visit to his firm’s office last week.
“It was in the past that we used to shout about liquidity, but now, the Federal Government is beginning to step in with various interventions to the power sector. No more liquidity, what we have now are shortfalls. The CBN visited IKEDC last week after its visit to EKEDC,” he told The PUNCH in a telephone conversation.
According to him, the new service-based tariffs were also introduced to cater to the tariff collection shortfall being experienced by the DisCos.
Communication strategist, marketer and scholar with the School of Media, Pan Atlantic University, Lagos, Dr Chido Nwakamma, said the challenges in the power sector were beyond the shortfall, describing the crisis as “foundational”.
“It’s not just a matter of shortfall, it is a foundational issue. The privatisation was wrong-headed ab initio, unlike what we saw in the communications sector. The DisCos thought that it was a money-spinning sector. Rather than do it the way the NCC did the telecom’s privatisation by looking for the best players wherever they could be found, the PDP in power then handed it over to friends and families.
Source: The Punch