The Honorary Adviser to the President of Dangote Group, Joseph Makoju has warned that if the existing structure in the power sector is not fundamentally changed, the nation risks disaster.
Speaking at a two-day Power Sector Stakeholders Interactive Dialogue convened by the National Assembly in Abuja, Makoju, who was Special Adviser to three presidents on Power, canvassed for a fundamental structural change, as against the current path of tariff increases and government’s bailouts.
He said: “I want to stress that, I do not wish to be alarmist; but if we continue on the current path of tariff increases and government bailouts without fundamental structural changes, we will soon be dealing with a disaster. What assets are on ground will depreciate, financial positions will deepen, and eventually we will all come back to these same conclusions but after much more harm has been done.”
Makoju pushed for adequate funding and restructuring of the power sector so as to achieve relative stability in electricity generation and distribution
He said the power sector is bankrupt to the point of even threatening the health of financial institutions and the wider national economy.
To restructure the sector for effective services, Makoju advised a reduction in the distribution zones.
He said the failure of the power sector under government management was not technical and commercial management of the business but the absence of sustained and adequate funding of the sector. According to him, despite the privatisation exercise six years ago, the problem of the sector remained the same.
“Most of the private sector investors in the power privatisation had no specialist knowledge or understanding of the power sector, which has eroded the technical and managerial competence in the industry. And the funding problems have persisted and even become exacerbated as they now even threaten the stability and health of the nation’s banking system as well as the entire electricity sector,“ Makoju lamented.
While noting that the distribution end of the value chain is the most inefficient and has suffered the greatest neglect, he described it as one which underpins the financial viability and sustainability of the entire sector. “To get the sector moving forward we need to improve its liquidity position, and this can only be accomplished through satisfied, paying customers,” he said.
Still on adequate funding for the sector, Makoju said the Association of Nigerian Electricity Distributors (ANED) reports that as at last December, the funding gap in the power sector is over N1 trillion and as such, advised that funding must be looked at from the perspective of new equity and debt financing arrangements and structures, and internally generated revenue maximisation.
As a lasting solution, he also canvassed new capable players working in a reconfigured power sector while also considering residual government shares for bringing in long term funding.
While urging the government to declare a state of emergency in the sector, he sought for the engagement of industry experts and policymakers to draw up a comprehensive power sector master plan building on past provisions and arrangements to deliver an electricity industry fit for current and future needs.