Utilities still unable to deliver despite naira 1.5 billion in funding – Economic Confidential
Electricity companies still unable to deliver despite funding of 1.5 billion naira
Power companies, mostly private entities, may have secured around 1.5 trillion naira from the Central Bank of Nigeria (CBN) over the past seven years, helping the sector stay afloat.
However, experts and electricity consumers fear the situation has not changed as the electricity supply and its associated services continue to deteriorate.
Daily electricity production has fluctuated between an average of 3,500 megawatts (MW) and barely 4,000 MW in recent months. The highest power generated on Saturday was 4,823 megawatts (MW) while the lowest was 3,031 MW, according to the daily record available from the Transmission Company of Nigeria (TCN). This translates to a maximum of 15 hours or less for consumers paying 20 hours and even zero hours for some others paying eight hours of daily supply.
Analysis of CBN’s recently released Fourth Quarter 2020 (4Q’2020) economic report indicates that while the process of repaying these power sector-centric loans is underway, interventions were supposed to accelerate projects. which in turn could boost the national electricity grid and end-user experience.
The report shows that the Electricity and Aviation Intervention Fund (PAIF) is around 300 billion naira; then there is the Nigerian Electricity Market Stabilization Facility (NEMSF) of 213 billion naira to discharge the debts of electricity operators and improve operations from 2015.
There is a N 140 billion solar connection intervention facility to boost access to off-grid electricity through the Rural Electrification Agency (REA). CBN also injected another 600 billion naira tariff deficit intervention and a recent 120 billion naira intervention for the National Mass Metering Program (NMMP) underway in the 11 distribution companies (DisCos).
Power sector experts and analysts congratulated the CBN for these interventions; however, they flayed the electrical operators, in particular the DisCos, for the poor performance in improving the electrical supply. Others blame the Nigerian Electricity Regulatory Commission (NERC) for regulatory failures, mediocre tariffs among other electricity market crises spanning seven years.
CBN’s latest fourth quarter report put loan repayments at 30 percent just as the umbrella bank blocked DisCos accounts to allow it to collect those loans.
Supporting this decision, analysts from Templars, an economic analysis and law firm, noted that although the CBN is not a sector regulator, given its exposure to the sector through its various interventions, it was essential for the umbrella bank to influence policies that remedy the general imbalance in the electricity market.
Law firm partner Dayo Okusami and senior partner Moses Pila said in a document: âGas prices and other elements of capital expenditure (CAPEX) for industry participants electricity are denominated in dollars. With electricity tariffs in Naira, there is a permanent mismatch between income and CAPEX inputs. “
Explaining the main reason for the shortage of liquidity in the electricity market, they said that although the tariff exchange rate is usually fixed, fluctuations in the general foreign exchange market make it difficult for players to source currencies to the tariff model. rate.
Although CBN provided a capitalization of 702 billion naira to Nigerian Bulk Electricity Trading Plc (NBET) in 2018 to save production companies (GenCos) from collapse as they could no longer pay for gas, officials of the Templars said the current situation would force CBN to repeat the same intervention.
âThis in turn will allow the GenCos to meet their payment obligations to their gas suppliers. The CBN may also choose to grant a special foreign exchange exemption to the electricity sector to alleviate the challenges.
âAnother area that CBN could actively influence is the area of ââcollection leaks at the DisCo level. Even where the NBET has not been able to exert the requisite influence over the level of DisCos remittances, the CBN can use its influence in the banking sector to act.
Commenting on avenues to save the struggling electricity sector, Habeeb Jaiyeola, economist at PricewaterhouseCoopers (PWC) insisted that CBN intervention remains a positive tool to improve the electricity sector. He noted, however, that there should be stronger strategies to ensure rapid reimbursement by operators so that the CBN can have funds to intervene in other sectors of the economy.
For his part, the chairman of the Nigerian Consumer Protection Network (NCPN), Kunle Kola Olubiyo, said that although operators did not provide improved service to consumers, he noted that CBN’s support could help cushion the current liquidity crisis.
Olubiyo, however, said that intervention programs in the electricity sector should be reviewed for the entire value chain in order to achieve better results in improving electricity supply.