Despite the huge electricity deficit in Nigeria, which provides huge opportunities for investors, the operators in Nigeria’s power and gas sector have revealed that foreign investors said they would not build power stations in Nigeria or invest in the country’s power sector until certain hurdles that impeded investments were removed.
Speaking at a special session of the recent Business Forum organised in Lagos by the Nigerian Gas Association (NGA), the Nigerian operators stated that foreign investors, who gathered in Copenhagen, Denmark for the recent Africa Energy Forum (AEF), a global investment meeting for Africa’s power, energy, infrastructure and industrial sectors, said they would not come to Nigeria to invest in the power sector.
The Nigerian operators listed some of the challenges scaring foreign investors to include absence of cost-reflective tariffs and gas supply constraints.
In his presentation, a former Minister of Power and Chairman of Geometric Power, Prof. Bart Nnaji, who was also at the Denmark power conference told the power and gas stakeholders that the foreign investors said they would not come to Nigeria until the issues of gas, tariffs, transmission constraints and non-credit worthiness of the distribution companies were resolved.
According to him, the investors were miffed over lack of will to enforce agreements and contracts in Nigeria’s power sector.
Nnaji identified absence of cost-reflective tariffs, gas constraints, transmission challenges, and value chain misalignment as the main factors that hinder inflow of foreign investment into Nigeria’s power sector.
“We recognise that government should be sensitive about the business of power. But then, when you look at Africa, Nigeria pays low value in comparison to other parts of Africa, in terms of power. We have to say: do we want power or do we want darkness? I said that the cost of darkness is infinite; the cost of power is finite and we should have the will to do something about cost-reflective tariffs, otherwise, nobody is coming here to invest and is not just a talk. People will come here to invest in the power sector if cost-reflective tariff is there,” Nnaji explained.
Nnaji also argued that gas supply should be liberalised to enable producers sell at market price.
“I do not think that people are unwilling to pay for gas. Of course, this is passed on to the consumers but it is reasonable that reasonable price get charged for gas because actually, in Lagos area, you will find a commercial consumer of gas paying up to $8. This is outrageous for gas but at the low end of it, the price is between $2 and $2.50. So, there must be a solution,” he added.
Also speaking, a director of Eko Electricity Distribution Company and Principal Partner, George Etomi and Partners, Mr. George Etomi said stated that the big investors would not come into Nigeria’s power sector unless all the distortions in the market, including the present non-cost reflective tariffs were removed.
Etomi explained some of the efforts made by Eko Disco to correct anomalies in the tariffs paid by the residents of VGC area of Lagos and how government officials wanted to interrupt the company’s implementation strategies on the grounds that the Acting President, Prof. Yemi Osinbajo is a resident of the VGC.
He wondered how private investor-led sector with such government interference could attract big foreign investments.
“Privately, they (government) will tell you that the issue of tariffs is political and that no government wants to increase tariffs,” Etomi said.
“The big boys (investors) will come but they won’t come because the market is distorted,” he added.
President of NGA, Mr. Dada Thomas said the priority of all the stakeholders was how to ease the natural gas shortage as much as possible in the short term, “in an economically viable, profitable and sustainable manner that would meet the aspirations of the investors and operators on one hand and the government and consumers on the other hand”.
Source: Naija Sniper