By Chidiebere Ugwu
President Ahmed Bola Tinubu, on Monday declared that there is a need to rebase tariffs in the Nigerian Electricity Supply Industry (NESI) in order to recognize the real costs and loss levels of the entire value chain, and allow for adequate cost recovery for investments.
The President made the disclosure during the opening ceremony of ongoing Nigerian Electricity Supply Industry Market Participants and Stakeholders Roundtable (NMPSR) with the theme: NESI Privatization and its 10-year Milestone: The Journey so far, opportunities and prospects.
Represented at the event by Sodiq Wanka, the Special Adviser to the President on Energy and Power Infrastructure, Office of the Vice President, the President said major challenges the sector will continue to tackle is the lack of cost ‘reflective tariff that will provide sustainable liquidity for the entire value Chain, stressing that the exercise will help in discovering what shortfalls are and how to finance them.
According to the President, said there is need to quickly develop and execute a clear roadmap for serving profitable pools of customers, and strengthen operations, sector governance among others things to create an environment where the worst performers do not continue to drag the sector down.
“We need to have a clear plan to rebase tariffs, so we recognize the real costs and loss levels of the entire value chain, and we allow for adequate cost recovery for investments. We need to be clear on what shortfalls are and how we will finance them. And there must be a clear path to extinguishing historic sector debts to various value chain stakeholders. A reconciliation exercise in this regard is already underway.
“We need to quickly develop and execute a clear roadmap for serving profitable pools of customers. This includes industrial and agricultural clusters and strengthened participation in the West African Power Pool in the immediate term.
“And we must deepen engagement with the Nigerian public on power – including communicating sector strategy and key milestones and curbing energy theft through community engagement and penalties.
“Operationally, there a number of key imperatives that we must pursue:
80% of grid generation today is from gas. We intend to convene all relevant stakeholders to develop a gas policy for the power sector delineating where the power sector will get gas from and how it will pay for it. We cannot build a sector on best endeavour arrangements.
“We need to have a single source of truth in terms of data in the sector, a national electrification plan that highlights the energy gaps, supported by clear investment plans on how to close the gaps.
“We need to institute a Presidential Taskforce that will monitor and unblock the progress of deployment of key projects in the sector. This includes projects that will help un-constrain the grid and deliver the full available generation capacity to our homes and factories.
“We have to accelerate the pace of deployment of renewables and solar in places where it makes sense. There is a real opportunity to accelerate the deployment of inter-connected and isolated mini-grids to deliver power close to the point of use. And will support the rollout out of initiatives aimed at diesel displacement to reduce the carbon intensity of embedded power plants, while supporting innovative financing schemes for solar solutions in the home.
“We have to create an environment where the worst performers do not continue to drag the sector down. All licensees must not only have the technical capacity to deliver on their license, but must also have the financial muscle to invest and grow their operations. Preliminary analysis shows that DISCOS today are under-capitalized to the tune of close to NGN 2 trillion. We must facilitate a reorganization and a recapitalization process that brings in new partners and new capital to jumpstart performance in this critical section of the value chain” he said.
Also speaking, Col, Sani Bello (Rtd} Chairman, The Board of Directors Mainstream Energy Solutions Limited, stated that after a decade of the privatization of the NESI, the industry has evolved and has made positive strides and impact on the Nigerian economic landscape through investments in capacity recovery and capacity expansion thereby increasing the installed Industry Generation capacity
Col. Bello however lamented that despite these achievements in the sector, energy transmission and distribution still poses a severe challenge to a functional NESI due to the state of the infrastructure and requires significant capital to finance its rehabilitation and expansion.
