Nigeria’s power sector and the way forward- Kamoru Yusuf

By Dr.Kamoru Yusuf The decades of appalling performance of the Nigerian Electricity Supply Industry (NESI) have left many Nigerians wondering if NESI could ever be remedied seeing that the role of NESI in the state of Nigeria’s economy and power sector cannot be overemphasized.

From the several households scattered across Nigeria, through the Small and Medium Enterprises to the large electricity consumer in the manufacturing sector, a turnaround of NESI will in no small measure positively impact the very fabric of Nigeria. This is because virtually all business needs electricity to thrive.

It is worthy of note that despite the plethora of interventions from several quarters – National and even international, there has yet to yield much benefits as the sector is clearly enmeshed in avoidable chaos.

One would have expected that the advent of the Electric Power Sector Reform Act 2005 (ESPR) and the laudable innovations thereunder would usher in respite to Nigerians, but their hope has been dashed as the desired changes and impact have yet to materialize of the last 16 years.

It is however clear that beyond the mysticism that has characterized the possibility for an effective NESI, a cursory look at the Power Sector in other nations of the world reveals that there are huge learnings to glean from them and more importantly, that a vibrant and efficient NESI is possible if only ALL hands are on deck to achieve same.

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It is pertinent to state at this juncture that whilst the value chain NESI comprises of Generation Companies (GenCos), Nigerian Bulk Trader (NBET), Transmission Company of Nigeria (TCN), and the Distribution Companies (DisCos), the DisCos are central to the effectiveness of the NESI being the bridge between the customers and the value chain.

Some of the initiatives that could change the forlorn trajectory about the NESI include:

1. Need for urgent revaluation of the capital base of the electricity Distribution Company (DisCos) Investors, and a possible increase in the capital base:

Over the years, DisCos have continuously lamented over the paucity of funds. This is however at variance with the commitment of the DisCos to invest in the DisCos infrastructures most of which were weak and obsolete, overdue for an overhaul and upgrade.

Despite the intervention by Government and International Organizations, the state of DisCos infrastructure remains a far cry from the expected. There is therefore urgent need to revalue the capital base of DisCos and increase the same to achieve meaningful investment in their network. This will largely address the sector liquidity issues.

2. Further unbundling of the current distribution sub-sector to 1 Investor per state:

It has been canvased severally that the coverage areas for the DisCos are too large and would not make for the effectiveness of the DisCos hence, the need to further unbundle the distribution sub-sector of the value chain comprised of 11 DisCos into 36 DisCos.

This will ensure the effectiveness of DisCos as well as monitoring. It is clear, that, most of the 11 DisCos are biting more than they could chew.

3. Development and Monitoring of Implementation of Performance Improvement Plan (PIP):

Seeing that DisCos are critical to the achievement of the desired improved electricity supply to Nigerians, they should be mandated to carry out infrastructural improvement by constructing a minimum of 5 kilometers of new lines (every month) complete with both TCN interface projects. TCN should also be required to periodically upgrade the equipment and infrastructure.

DisCos should be mandated to set up and operate electric pole manufacturing companies within their franchise area to meet their pole requirement and support the PIP. This is practiced in China and other countries of the world, and this has enhanced DisCo’s performance in such climes.

Interestingly, it costs only $2,000,000.00 to set up a standard concrete pole company with the capacity to produce a minimum of 2km worth of poles daily. This will bridge the deficit in their pole needs and eliminate cases of substandard poles provided International Standards for pole manufacturing are complied with.

4. Operationalization of the Eligible Customer Regulation (ECR) to take care of the stranded 2,000MW:

Whilst DisCos reject energy under the guise of contracted capacity, there is about 2000MW stranded energy wasted as result. This trend has continued and there seems to be no end in insight because the operationalization of the ECR under which customers whose power requirement is over 2 Megawatts could purchase this stranded energy from willing GenCo suppliers have been frustrated by some stakeholders in the value chain as well as the Regulators.

It is almost four (4) years after the ECR came into effect yet, none of the several applications has been approved by NERC due to bottlenecks. There is a need for the Regulators and more particularly NERC to urgently simplify the ECR and its processes to make it operational. One of the benefits of doing so is a robust and effective power sector.

5. Need For Regulatory and Policy Consistency and Clarity:

Regulatory and Policy inconsistency creates uncertainties in NESI which negatively impacts investors’ willingness to invest in NESI hence, the need for consistency. No Investor will invest where there are uncertainties. For instance, the Regulatory inconsistencies on the Eligible Customer Regulation 2017 and its regime, has had a devasting impact on an investment opportunity in Nigeria’s Power Sector.

6. Effective Regulatory Monitoring of Stakeholders:

The need for effective Regulatory Monitoring of Stakeholders cannot be over-emphasized. Regulators should consistently review existing policies and concepts and improve on them periodically to eliminate policies that are not practicable and inefficient. The Regulators must ensure the prompt enforcement of these policies to achieve the desired change in NESI.

7. Speedy Enactment of effective Anti-Energy Theft and Vandalism Legislation:

The need for anti-energy theft legislation and vandalism legislation cannot be over-emphasized as this constitutes one of the huge loss elements for the NESI. Putting in place effective legislation and structures will ensure that offenders are dealt with and will help sanitize NESI as it would be a deterrent to others. This will free up more energy to be utilized within NESI.

Kamoru, Chairman of Basic Metal Fabricated Iron and Steel Products Manufacturers, a sectoral arm of the Manufacturers Association of Nigeria,  (MAN) writes via sardauna2@gmail.com