In Search of Solutions to Nigeria’s Power Sector Liquidity Challenge


Last Wednesday, the Federal Government approved   N701bn as Power Assurance Guarantee for the Nigerian Bulk Electricity Trading (NBET).

The facility, to be provided by the Central Bank of Nigeria (CBN) is to guarantee the payment for the evacuation of power produced by the Generating Companies (Gencos).

This is not the first time investors in the power sector will enjoy intervention by the federal government.

On March 25, 2016, the federal government, through the CBN, provided a bailout to of N213bn, through the Nigeria Electricity Sector Intervention, NESI, to the investors.

But a year after the sector ‘consumed’ the fund, it’s yet to wean itself from illiquidity which stemmed from failure by the operators to collect enough revenue to cover their expenses.

President of Senior Staff Association of Electricity and Allied Companies (SSEAC), Comrade Chris Okonkwo, said in spite of the intervention, the shortfall, instead of being wiped out has escalated to about N15bn.

As at December 31,2015, the total market shortfall was N400bn.

He said since the handover of the Gencos and Discos to the private sector, Nigerians have seen deceptions by failure in promises or commitments of these companies.

“The situation is further aggravated by the absence of a definite roadmap to keep the operators on their toes and ensure financial sustainability for the growth of the sector. Discos that collected revenues failed to remit in full to other market participants without any disciplinary measure by the Nigerian Electricity Commission to block the leakages”, he added.

Today, the shortfall is said to have climbed to N1trn, amidst other challenges besetting the sector in the country.

The latest  intervention was greeted by relative reactions by stakeholders in the power sector. Managing Director of Power Cap Limited, Mr. Abiodun Ogunleye, said channeling the fund through NBET makes the fund opened to fraudulent manipulations.

His view was corroborated by president of Nigerian Gas Association (NGA), Engineer Akin Thomas, who said  power generating and gas suppliers should have been paid directly and not through  NBET .

He said  Gencos are not paying for gas supplied because the Discos are failing to remit money collected from consumers up the gas-to-power value chain.

To solve the liquidity conundrum, he said electricity tariff must be increased to be cost reflective.

According to him, the adjustment of the MYTO must be freed from political and judicial interference and the process allowed to follow its natural and lawfully prescribed course.

Managing Director of PowerCap Limited said aggressive collection and retailing activities with a cost reflective tariff and better supply from the network would help reduce liquidity challenges in the power sector.

President of SSEAC, Comrade Chris Okonkwo, said the intervention fund is a misplaced priority

To him, the privatization of the nation’s power sector is a complete failure and there is utmost need to review same to adequately address the challenges of the sector.

Source: Daily Trust


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