The Federal Executive Council (FEC), presided over by President Muhammadu Buhari, has again approved multi-billion naira contracts aimed at improving the country’s power supply.
The Minister of Power, Abubakar Aliyu, disclosed that the three memos presented by his ministry scaled through, adding that the approvals were for the purchase of major electricity transmission equipment.
According to him, the cost of the projects, which includes procurement of power transformers and construction of 260km transmission line in Kebbi State, will cost N21.7 billion.
The Council had two weeks ago approved N1.4 billion for purchase of additional equipment for the Transmission Company of Nigeria (TCN), as part of efforts to improve power supply in the country.
Further, the much-awaited actual take-off of the Siemens power deal is expected to experience a major leap in September, when electricity equipment like transformers and mobile power substations begin to arrive from Germany.
Notwithstanding the investment in the sector amid incessant collapse of the power grid, stakeholders are currently at loggerheads over poor performance of the 11 distribution companies (DisCos) operating in the country and the defence of the Nigerian Electricity Regulatory Commission (NERC).
With electricity generation wobbling despite the introduction of Service Based Tariff pegged on improved service, NERC had decried that rising insecurity, inflation and harsh operating environment were bedevilling the performance of DisCos.
Described as one of the weakest links in the power sector, which has been struggling eight years after privatisation, the DisCos are on the verge of bankruptcy, while being unable to perform major obligations, especially repayment of loans and replacement of infrastructure, including transformers, poles and wires.
Coming at a time when lenders are already taking over some of the DisCos, the Nigerian Bulk Electricity Trading Company had stated that the DisCos failed to meet up with practically all the market rules, but NERC last week linked the poor performance of the utility companies to the prevailing challenges in the country, adding that the companies are unable to recover revenue due to prevailing challenges in the country.
Chairman of NERC, Sanusi Garba said the inability to fix adequate tariff led to challenges for the DisCos, adding that the development affected the financial viability of the distribution firms.
“A lot of things happened relating to the financial viability of the DisCos, because if tariffs were static and they have inflation and FX issues then distribution companies will have under recovery of revenue.”
The worries for some of the stakeholders is that while consumers are equally facing similar challenges that DisCos are confronted with, they are currently coping with tariff increases as the burden of the sector is being passed on to them, despite barely enjoying electricity supply.
They equally see the defence by NERC as an indictment on the weakness of the regulator, insisting that consumers have had to also invest in meeting the capital expenditures expected of the DisCos.
They expressed worry over the lack of competition in the sector, while questioning the efficiency of the segment as well as whether or not the problems require an overhaul of the regulations in the sector.
While some experts insisted that the franchise areas occupied by the DisCos were too large and needed to be broken into sub-segment, bringing more investors into the market, others believe that the market was not ripe for such move, including the call for government to cancel the licences of the companies and pay them off.
Yet there were indications on Wednesday that the Minister of Power, Aliyu, was forced to travel to German over inability of the $2.3 billion Siemens power deal to move forward three years after.
Aimed at growing Nigeria’s power delivery to 25,000 megawatts and said to be revived in the first quarter of 2021 after delay by COVID-19 pandemic, the visit of Aliyu has led to the expected delivery of 10 Mobile Transformers and 10 Mobile Substations from Germany.
The project under the first phase of the Presidential Power Initiative had led to FEC approval of $1.9 million and €62.9 million in 2021.
The prevailing situation, according to him, has totally defeated privatisation exercise under which arrangement government sold the assets to bring in investors with access to foreign direct investment and technical partners that could overhaul the system.
– Media Report