Energy experts have faulted the privatization of Nigeria’s power sector, blaming the federal government and the companies that purchased the 11 Distributing Companies, DisCos of not improving the epileptic power supply.
The energy experts spoke in Abuja at The Electricity Hub (TEH) a subsidiary of The Nextier Group, at its 73rd Power Dialogue, to discuss the implications of the recent restructuring of DisCos on service deluvery to electricity consumers.
It is a monthly public discourse series that aims to share information and pragmatic ideas, advocate policy positions and highlight investment opportunities in the Nigerian power sector.
The experts explained that electricity consumers would not face dramatic changes from banks taking over the shares because the process did not cheer in new investments.
They contended that the partial privatisation of the Nigeria power sector in 2013 was aimed at tackling the energy deficit and create an efficient and competitive electricity market, but noting with regret that almost a decade later, Distribution Companies are being restructured for unpaid loans.
The privatisation, according to them, established six Generation Companies (GenCos), the Transmission Company of Nigeria (TCN) and 11 Distribution Companies (DisCos), expected to bring succour to the country’s meagre state of power supply,; but the assets are yet to attain optimal levels of service delivery as the economy and the populace still suffer from the inadequate electricity supply.
The CEO, Newhampshire Capital Ltd, Odion Omonfoman, noted that whereas the government has been working to tackle its fault in the privatisation, “the timing is wrong.”
According to him, both parties have difficulties servicing their loans because, notwithstanding the commercial losses brought back into the tariff structure, the inaccuracy had already accrued liabilities for DisCos.
Mr. Omonfoman highlighted that projects such as the PSRP and other targeted interventions create sustainable finance to stabilise the sector.
He opined that these interventions, in addition to distribution companies’ managerial investments, will be the basis for service improvement to consumers.
He explained that the partial privatisation of the Nigerian power sector in 2013 aimed to tackle the energy deficit and create an efficient and competitive electricity market, however, almost a decade later, Distribution Companies are being restructured for unpaid loans.
The panel discussants included: Chiamaka Asoegwu, Energy Consultant, Nextier Power; Odion Omonfoman, CEO, Newhampshire Capital Ltd; and Olushola A. Ajala, CFA, FCA, ACCA, Finance Specialist, PSRO Secretariat.
Analysing the challenge that resulted in the takeover of certain DisCos, Mr Omonfoman mentioned that the “Aggregate Technical, Commercial and Collection (ATC&C) losses incepted by investors while acquiring distribution assets were significantly less than the actual value loss”. He noted that these fundamental flaws in the privatisation process have begun affecting the entire value chain.
According to him, “the core investors were only able to raise the acquisition financing, they have been unable to improve power supply; hence the poor performance of some distribution companies.”
Mr Omonfoman noted that the federal government in responding to the challenges in the distribution sector began several interventions.
These interventions by the Central Bank of Nigeria (CBN) and the Power Sector Recovery Programme (PSRP) have injected over three trillion nairas to stabilise the energy sector.
Further elaborating on the challenges that led to the takeover, Mr Ajala noted that the government and DisCos investors contributed fairly to the challenges that led to the restructuring.
Mr Ajala stressed that service delivery to consumers relies not only on distribution capacity alone but also on the transmission network, gas supply, and the maintenance of plants by generation companies.
He noted that the partial activation of contracts and service-based tariffs had increased the level of electricity supply to consumers.
Indeed, the takeover of some distribution companies was foretold; it was inevitable, given the nature and manner of the privatisation transactions.
The panellists unanimously agreed that restructuring and other significant interventions in the sector, such as the contract agreements, were a step in the right direction.
Although to ensure a steady supply of power, the regulator must ensure that signed pacts are followed thoroughly and new investments are made in the distribution sector to deliver operational efficiency.