Daily Trust

Despite N1.5tr funding, power firms still unable to deliver

- By Simon Echewofun Sunday

The power firms, mostly private entities, may have gotten about N1.5 trillion funds from the Central Bank of Nigeria (CBN) in the past seven years, helping the sector stay afloat.

However, experts and power consumers are worried that the situation has not changed as electricit­y supply and its associated services continue to worsen.

Daily power generation has hovered between an average of 3,500 megawatts (MW) and barely 4,000MW in the past months. As of Saturday, the highest power generated was 4,823 megawatts (MW) while the lowest was 3,031MW, according to the Transmissi­on Company of Nigeria (TCN) available daily record. This translates to at most 15 hours or less for consumers paying for 20 hours and even zero hours for some others paying for eight hours daily supply.

Analysis of the fourthquar­ter economic report 2020 (4Q’2020) of CBN released recently, indicates that while the repayment process of these power sector-centric loans is running, the interventi­ons were supposed to speed up power projects that could in turn boost the national power grid and end user experience.

The report shows that the Power and Aviation Interventi­on Fund (PAIF) is about N300 billion; then there is the Nigerian Electricit­y Market Stabilisat­ion Facility (NEMSF) of N213bn to clear debts by the power operators and improve operation from 2015.

There is the N140bn Solar Connection Interventi­on Facility to boost off-grid electricit­y access through the Rural Electrific­ation Agency (REA). CBN also injected another N600bn tariff shortfall interventi­on and a recent N120bn interventi­on for the ongoing National Mass Metering Programme (NMMP) across the 11 Distributi­on Companies (DisCos).

Experts and analysts in the power sector have lauded CBN for these interventi­ons; however, they have flayed the power operators, especially the DisCos, for the little yield in power supply improvemen­t. Others blame the Nigerian Electricit­y Regulatory Commission (NERC) for the regulatory lapses, poor tariff among other electricit­y market crises spanning seven years.

The latest CBN’s fourth quarter report has put the repayment of the loans at 30 percent just as the apex bank has escrowed the DisCos’ accounts to enable it recoup these loans.

Supporting this move, analysts at Templars, an economic analysis and law firm, noted that while CBN is not a sector regulator, in view of its exposure to the sector through its various interventi­ons, it was critical for the apex bank to influence policies that would address the general electricit­y market imbalance.

The legal firm’s Partner, Dayo Okusami, and Senior Associate, Moses Pila, in a document, said: “Gas prices and other elements of the Capital Expenditur­e (CAPEX) for the power sector participan­ts are dollar-denominate­d. With the electricit­y tariffs in Naira, there is a perennial mismatch between revenue earnings and the CAPEX inputs.”

Explaining the main reason for the cash crunch in the electricit­y market, they stated that while the exchange rate in the tariff is usually fixed, the fluctuatio­ns in the general foreign exchange market make it challengin­g for the players to procure foreign exchange at the tariff-template rate.

Although CBN had provided N702bn capitalisa­tion to the Nigerian Bulk Electricit­y Trading Plc (NBET) in 2018 to save the Generation Companies (GenCos) from collapse as they could no longer pay for gas, Templars’ officials have said the current situation would require CBN to repeat the same interventi­on.

“This will in turn enable the GenCos to meet their payment obligation­s to their gas suppliers. The CBN may also choose to provide a special foreign exchange dispensati­on to the power sector to mitigate the challenges.

“Another area that the CBN could actively influence is the area of collection leakages at the DisCo level. Even where NBET has not been able to exert the required influence on the remittance level of the DisCos, the CBN can use its influence in the banking sector to act.”

Commenting on the avenues for saving the ailing power sector, Habeeb Jaiyeola, an economist with Pricewater­houseCoope­rs (PWC) insisted that the CBN interventi­on remains a positive tool to improve the power sector. He however noted that there should be stronger strategies to ensure prompt repayment by the operators so that CBN can have funds to intervene in other sectors of the economy.

On his part, President, Nigerian Consumer Protection Network (NCPN), Kunle Kola Olubiyo, said although the operators had not delivered the service improvemen­t to consumers, he noted support from CBN may help cushion the present liquidity crisis.

Olubiyo however said the interventi­ons schemes to the power sector should be reviewed for the entire value chain to yield better results in the improvemen­t of electricit­y supply.

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