Bab a lola: Power Sector Requires Interim Improvements, Structural Changes

A former power minister during the administration of late President Musa Yar’Adua, Dr. Lanre Babalola, has said that irrespective of the plans of the federal government in its recently approved Power Sector Recovery Programme (PSRP), Nigeria’s power sector requires urgent short-term improvements and reinforcements of its structural changes to drive up efficiency. Babalola, who spoke at the October edition of the monthly power dialogue of the Nextier Advisory in Abuja, also posited that repeated emphasis on tariff increase in the sector was not the way out of the sector’s challenges. He noted that the sector needs more of efficiency in its operations to drive up competition and cut down on its losses.

“While building additional generation, transmission and distribution infrastructure, as outlined in PSRP is important to supplying electricity to almost 200 million Nigerians in the medium to long term, emphasis needs to be placed on short-term improvements and reinforcing the structural changes that will promote efficiency, competition, choice and sector viability, which will ultimately lead to better service delivery,” said Babalola.

He further stated: “The body of empirical evidence suggests that the sufficiency condition is met and power supply improvement will happen, sustainably, when regulation is clear and effective, when operations are efficient, when losses are brought within reasonable thresholds, when electricity pricing is underpinned by cost minimisation and not revenue maximisation, when risks are identified and mitigation strategies are appropriate, when system expansion is planned and coordinated across the electricity value chain, when economic activity is the focal point of operations.”

The former minister said decisions pertaining to market design needed to be analysed and implemented for Nigeria to develop its wholesale or retail electricity markets.

Providing his thoughts on how the government could reposition the power sector almost four years after its privatisation, Babalola said: “Reducing technical and non-technical losses should be national and firm priority. Too much emphasis on tariff increases, focus should shift to cost reduction, allowing prices to rise uncontrolled has dire consequences.”

“Cost components should be revisited. Enhance energy accounting and trading arrangement must be emphasised. Commercial framework and risk mitigation are critical to sector viability and sustainability. Better oversight and monitoring must be instituted at the firm level where the federal government still has representation and revitalise implementation and decision-making arrangement to enrich analyses and debate,” he added.

On the transmission network, he stated: “In transmission, so much is in the air as to what to do with TCN: Should it remain unified or restructured into its constituent units? Privatise or concession? Peculiarities of transmission means thorough analyses required so that we do not make mistakes and compound the challenges.”