Electricity: Why Poor Funding Will Rob Nigerians of Recovery Gains

Power-Supergrid

As Nigerians expect the Federal Government to hit the ground running with the 2017 budget signed into law by the execu- tive after nearly six months of presentation, there is widespread apprehension that poor allocation to the critical sectors of the economy may hinder its implementation.

This comes as development and budget experts have expressed concern that power and transport sectors where much government’s attention should have been directed, only got poor allocation.

For power, expected to serve as tonic for revitalising the economy, Mr. Ayodele Oni, Partner, Bloomfield Law Practice, said the N69.96 billion allocation to the sector in the 2017 budget remained grossly inadequate considering the fact that it requires more funding to meet the target of an all-out electrification of the country. Given a further breakdown of the 2017 budget, Oni said that the Transmission Company of Nigeria (TCN), got the lion share of N40.2 billion, followed by the National Rural Electricity Agency with N16.137 billion. NERC was allocated N2 billion; NEMSA, N2.837 billion; NAPTIN, N2.465 billion; NELM- CO, N2. 718 billion and NBET, N3.595 billion.

Oni worried that as at Decem- ber 31, 2016, the revenue short- fall in the Nigerian power sector was N1 trillion, while the sector’s indebtedness to commercial banks was $12.52 billion. ‘‘In addition to the indebted- ness of the sector, it is also impor- tant to note the inability of the Nigerian Bulk Electricity Trading Plc (“NBET”) to pay the power generation companies, which shall also lead to the generation companies being unable to pay for the gas they bought to gener- ate power.

Other fundamental issues such as the rate of tariff set by the industry regulator (NERC), gas supply to power plants and the generating capacity of existing plants, quality of the transmis- sion network occasioning losses, electricity theft, and vandalism should have been carefully con- sidered by the Federal Govern- ment when passing the budget. On the other hand, he ex- plained that the capital expendi- ture provision for TCN under the Multi-Year Tariff Order (MYTO) – 2015 Financial Model (which indicates amounts that needed to be spent) is N418.504 billion but only N40.2 billion has been earmarked for transmission proj- ects under the 2017 budget.

‘‘It is understandable that as the FG has other pressing needs contending for resources and it would need to attract private in- vestors into that segment of the market. However, one doubts the willingness of commercially- minded investors to provide investments into the Nigerian power sector, especially when they have to contemplate regula- tory restrictions on securing cer- tain licenses as well as having to charge cost-reflective tariffs.

Oni argued that from the above figures and also taking into consideration the recent intervention funds paid by the Federal Government, stakehold- ers are of the view that a larger figure should have been appor- tioned to power project given the determination by the Federal Government to ensure that there is regular supply of power.

Source: IWIN

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