For the necessary private investments in the power sector to happen, the Federal Government must adopt a cost-reflective tariff, as “the cost of darkness is infinite; the cost of power finite,” the former Minister of Power, Prof. Barth Nnaji, has said.
The chairman of Geometric Power and keynote speaker at the Nigerian Gas Association’s (NGA) Natural Gas Forum, with the theme, “Embracing New Realities: Resetting Our Gas to Power Industry,” also listed transmission constraint as part of the problems.
Others include gas constraint, value-chain misalignment, over-leveraged assets, lack of credit facilities, and lack of political will to enforce agreements and contracts.
He stressed that without cost-reflective tariff, no foreigner would invest in the power sector. However, he insisted that the distribution companies also have to deliver on all aspects of the contract – network and metering, among others.
Aligning with him is a director with Eko Distribution Company (EKEDC), Mr. George Etomi, who said the company spent its resources on labour demands as government failed to avail them the assured six-month shadow management.
He regretted that while the power generating companies (Gencos) buy and pass the cost of gas to the distribution companies (Discos) at internationally derived rate, subject to currency fluctuation, the National Electricity Regulatory Commission (NERC) compels the Discos to subsidise the consumers by barring them from selling beyond certain rate.
For the Chief Executive Officer of Gas Invest Limited, Dr. David Oluseyi Ige, the Nigerian power sector is not bankable due to issues that include absence of cost-reflective tariff and regulation, stating that though the market should drive price, needs to be efficient to check the prevailing scenario of willing sellers without willing buyers.
According to him, there are tactical and regulatory sides of the issue, as liquidity challenge arises from the inability to get gas to the critical mass, flowing partly from the fact that Gencos plant stations where there is no gas, while Discos plough where there are no transmission facilities.
Meanwhile, Nnaji linked the poor generation and transmission results to bidders without the necessary capacities having the assets. He stated that the exercise was intended to grow power through private investment, so every company must have financial and technical capacities.
“You don’t have any of those you don’t qualify, but if you have both, you shouldn’t have problem, either if you are a generation company, in being able to continue to improve generation, but if you don’t have the financial and technical capacity, you cannot do it.
“The distribution companies are even worse because it is more technical to do, so you need to have money to invest in distribution, and the technical capacity to operate the distribution. But as you know, I left in the middle of the process, so in some places it did go to correct people, in some others it didn’t.”