Mohammed Shosanya,Lagos
The euphoria that greeted the transfer of the assets of Nigeria’s power industry to the power sector on November 1st,2013,was geared towards increased impacts of the sector in the nation’s economy.
The proponents of the change of ownership of the nation’s power structure said a paradigm shift for the esthwhile public utility nature of sector was all Nigeria needed to make same functional,service oriented and responsive to the aspiration of Nigerians.
They also painted a promising scenario of countries that have joined the fray of privatization of its power sector,adding that Nigeria should not be left out of aggressive moves to make private hands run the nation’s power sector better.
Today,analysts said eight years after the private hands took charge of the power sector,the journey to uninterrupted power is farther than nearer,putting the nation in a tight angle in its quest to light up Nigeria
For instance, Agusto & Co, a rating agency says Nigeria’s power sector is still encumbered almost 8years after private sector took over the successive companies of the defunct Power Holding Company of Nigeria(PHCN)
According to the agency,since the privatisation exercise that commenced in 2013, the Nigerian Electric Power Industry has remained fraught with many of the same challenges ranging from unreflective tariffs to high loss levels, obsolete infrastructure, weak policy implementation and gas shortages.
The agency in its latest report said these have culminated in weak and erratic power supply and a dependence on self-generation by many businesses and households. Furthermore, electricity distribution in Nigeria remains plagued by high technical, operational and commercial inefficiencies.
The report said, in 2020,the country’s 11 Distribution companies (DisCos) only billed for 74% of the energy received from the transmission company, below the 81% reported in the prior year.
It said billing efficiency which has historically been impaired by a low metering rate and energy theft, with only 37% of registered electricity customers metered in 2020, was severely impacted by the COVID-19 pandemic.
“Agusto & Co believes the impact of the pandemic was more visible amongst consumer groups with post-paid meters and estimated bills given that the social distancing rules and movement restrictions established to curb the spread of the virus impaired the physical billing process. Collection efficiency also fell marginally to 66% from 68% one year prior. Consequently, the aggregate technical, commercial and collection (ATC&C) losses for the 11 DisCos rose to 51% in 2020 from 45% in 2019.
“This high loss level remains one of the many reasons for the kickback from electricity consumers on tariff increases, especially in the absence of a significant and immediate improvement in power supply
“Agusto & Co notes that these challenges have not only weakened the ability of operators to meet electricity demand but also threaten their financial viability, with significant implications for the fiscal health of the country.”
It said despite the series of amendments to the tariff structure, cash flows from MYTO, the Multi Year Tariff Order, have remained insufficient to fully cover the costs of electricity supplied, adding that the fear of the impact of a ‘rate shock’ on consumers and the accompanying loss of “political capital” has prevented the effective implementation of necessary amendments that will align the MYTO’s assumptions with economic realities.
The report said electricity has thus consistently been sold at a discount, with end-user electricity tariffs much lower than the cost of electricity supplied.
It said: “The shortfall from unreflective tariffs has been borne in large parts by the Federal Government of Nigeria through multiple intervention funds and payment assurance facilities from the Central Bank of Nigeria (CBN) totaling close to N2 trillion (US$4.9 billion) as at the end of 2020, equivalent to 6% of CBN’s balance sheet.
“Despite this level of intervention, the generating companies had estimated receivables of over N400 billion in 2020 alone. Whilst the interventions have been central in ensuring the profitability of operators along the Industry’s value chain, they remain insufficient and unsustainable.
“More recently, there have been notable efforts by the primary regulator – NERC – to minimise the challenges faced by operators in the Industry.
“In particular, tariffs have been raised to near cost reflective levels and adjusted to match consumption via an initiative dubbed Service Reflective Tariffs (SRT). The new tariff model as the name indicates is expected to reflect and match the quality of service received by the ultimate consumers of electricity. Distribution companies will therefore discriminate in the application of tariffs; consumers who enjoy longer daily supply will be expected to pay higher rates and vice versa”.
“The SRT like other MYTO models has key estimates (and projections) for macroeconomic and industry-specific indicators including inflation, exchange rates and electricity generation.
“Other company-dependent factors considered in the determination of tariffs include the amount of electricity received and the aggregate technical, commercial and collection (ATC&C) losses.
“Ultimately, tariff shortfalls (the difference between end-user tariffs and cost reflective tariffs) are expected to taper off by the end of 2022, with tariffs fully reflective and sufficient to cover the cost of production.”
“Whilst a number of the assumptions align with market realities, we note that the inflation and electricity generation estimates in the SRT model are much higher than the actual entries reported for the corresponding periods. In our view, these disparities have the potential to impair the attainment of cost reflectiveness”.
Besides,electricity consumers have declared that after eight years of privatization of the Nigerian power sector the general performances of the sector appear fluid and toxic and there is little or nothing to celebrate.
They said that the distribution companies, otherwise known as DISCOs are fleecing customers by forcing them to pay for purchases of distribution transformers ,
buying recycling cables among others, without refunds to them.
Kunle Kola Olubiyo, President, Nigeria Consumer Protection Network, and Member, National Technical Investigative Panel on Power System Collapses, System Stability And Reliability ( June, 2013 ),said hithertho Nigeria lacks accurate customers data for the electricity demand and supply industry, which he said is conservatively put at between 8 Million – 12 Million end users of electricity in the country.
“Exactly 8 years ago the Power Sector was Privatised and there was a Paradigm shift from Public Sector driven Business model to a supposedly Private sector driven Business model. ..
Taking a glossary look at the general performances of the Power Sector, the picture is fluid and toxic and there is little or nothing to celebrate.
“Since , the year 2013 several DisCoys claims that they don’t have the money to carry out Customers Enumeration ,
Asset Enumeration And Enumeration of
Customers House Holds to House hold ,
Using Properties and Landmarks vide
GPS and Remote Satellite for Real time Customers Data.
“As we speak today, Nigeria don’t have an Accurate Customers Data for the Electricity Demand and Supply Industry
Which is Conservatively put at between
8 Million – 12 Million End Users of Electricity in Nigeria.
“As we speak, Electricity Consumers on daily basis are forced or conscripted to pay for Purchases of Distribution Transformers , Buy the Recycling Cable,
Buy Aluminum Conductors, D I Iron / Line Materials insulators , Buy Armoured Cable, Buy Uprisers Cable, Buy Incomes and Outcomers Cable, Buy Feeder Pillars ,Buy Feeder Pillars Fuses, And other Accessories, Pay Electrical Contractors to carry Installation, Pay through their noise to get the Officials of the Utility Companies and Government Officials to approved the Diagnostic Reports,
Get the Transformer Soaked,Tested,
Energised and then Commission for use.
“At the end of it all, the End -Users don’t get refund for their Investments at the Downstream which runs into several
Billions of Dollars, Pre and Post Privatization era” he said.
He maintained that the Indian Variants of Power Sector Privatisation exercise sold to Nigerians in the year 2013 has intrinsically become worst than a Delta Variant of Novel Corona Virus.
He added that the post -privatization bitter experiences of the end users of electricity in Nigeria has been reduced to a scam of sort, stressing ‘it seems to the End Users that Nigerians have been sold a dummy’.
Adetayo Adegbemle,Executive Director for PowerUp Nigeria,said eight years after privatization lack of(or poor/inadequate) Capital investment, inadequate power generation, poor adoption of technology, poor quality of service, low collection, and now after Power Sector Reform, poor regulatory framework and policy implementation, has all been at the forefront of every industry experts.*
He added:”Of course, one would have expected that promises of privatization of the power sector would have started to manifest, but rather, we see an industry that’s still fighting to find an identity, and solutions to myriad of problems that has bedeviled it for several years”
