The managers of Nigeria’s embattled power sector are men who can squeeze water out of the rock. Power supply has improved significantly in the last three months despite the devastating effect of sabotage by the gunmen in the Niger Delta. A young man who just finished his master’s degree programme in Britain said the power supply in his community in Lagos was almost as regular as what he saw in Britain.
Nigerians are very easy to please. They hardly complain when things are difficult. They sing the praises of the authorities to the high heavens when they experience little improvement. That is what is happening in the power sector at the moment. Consumers are so impressed by the improvement in power supply that they have suddenly forgotten about Nigeria’s prolonged romance with darkness.
However, the situation on the ground suggests that the recent gains may just be momentary. Nigeria’s installed power generation capacity is just above 5,000 megawatts (mw). A vast stretch of the country’s rural communities remain in perpetual darkness even at the height of the current improvement in power supply. No one can link them to the over-stretched national grid. Nigeria needs to generate a minimum of 15,000mw of electricity daily to ensure regular power to its teeming population.
South Africa, a nation of 50 million people generates 40,000mw of electricity, but Nigeria currently generates less than 4,000mw for 170 million people. The transmission lines, the weakest link in the power supply chain, are creaking under the weight of the paltry 3,740mw being generated at the best of times.
The power sector is encumbered by myriads of problems that the architects of the fraudulent privatization process tried to settle. There is the issue of inadequate gas infrastructure which starves the generation companies of gas supply. The few pipelines in place are being threatened by vandals and economic saboteurs.
The generation companies (GenCos) lack the financial muscle to improve the generation capacity to a level that would lift Africa’s largest economy out of its prolonged romance with darkness. The distribution companies (DisCos) are doing a losing battle with archaic distribution equipment. The distribution lines are ageing. The step-down transformers are inadequate. At times the DisCos cannot even accept power from the national grid because they lack the facility to distribute it to consumers.
But perhaps the most troubling factor is the debt contagion that is infecting the industry like Ebola virus. The Transmission Company of Nigeria (TCN), the only arm of the power supply chain still in the hands of the federal government, is heavily indebted to the GenCos. The GenCos are indebted to gas suppliers. The DisCos owe billions of naira to TCN. Just about every arm of the industry is indebted to the banks.
Conversely, everyone from the federal government to individual consumers is indebted to one or two arms of the power industry.
The federal government’s debt to Egbin Power Plc in Ikorodu, Lagos state stands at N86 billion. The debt is the outstanding bills for the power generated by the country’s largest power plant into the national grid for onward transmission to DisCos which in turn distribute to final consumers.
Government cannot pay the GenCos for power generated into the national grid because the DisCos that buy the power are equally indebted to government.
The GenCos cannot pay gas suppliers because TCN that buys the power they generate does not pay for the supply. With the GenCos heavily indebted to gas suppliers, the suppliers cannot invest in gas processing and transmission facilities that would boost supply to the GenCos.
TCN owes the GenCos because the DisCos are heavily indebted to TCN. Industry sources put the monthly budget deficit of the DisCos at an average of 55 per cent. The DisCos can only generate funds for 45 per cent of their monthly budget. Government is perhaps the biggest culprit in the power value chain debt contagion. Besides its debt to the GenCos, government’s ministries, departments and agencies owe the DisCos well over N60 billion in electricity bills.
The GenCos’ and DisCos’ debts to banks are astounding. Dallas Peavey, the managing director of Egbin Plc said his company raised $325 million at N150 to the dollar to rehabilitate the plant in Ikorodu. Now with the naira trading at N305 to the dollar in the flexible exchange rate window of the Central Bank of Nigeria (CBN), the company’s debt profile has risen from N48.75 billion to N99.125 billion.
The DisCos on the other hand are heavily indebted to local banks. That probably explains why they weigh down unmetered consumers with fraudulent estimated bills.
Two weeks ago, Peavey took the battle cry over the debt contagion to threat proportions. He threatened to shut down the plant if government fails to pay its debt. Some see Peavey’s threat as blackmail bordering on treasonable felony. However, Dallas Peavey and his employers are business men who can only survive if stakeholders pay their bills. Their debtors should pay them rather than wait for them to commit treason by throwing the country into darkness.
