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Nigeria’s power tariff deficit hits ₦1.6tn

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By Abiodun Okunloye

Cost-efficient pricing hinders distribution firms from meeting revenue goals.

The Nigerian power sector is currently experiencing a significant financial setback, as stated by Adebayo Adelabu, the country’s minister of power. The sector needs help with a deficit of ₦1.6 trillion in wholesale tariffs, prompting worries about its future sustainability and its capacity to provide consistent electricity to the people of Nigeria. The need for cost-efficient pricing is a significant obstacle for distribution companies (DisCos), preventing them from reaching their revenue goals and making necessary improvements to minimise technical, commercial, and collection losses (ATC&C).

Adelabu stated on his official Twitter account that there is a significant gap in wholesale tariffs. The industry has an average Aggregate Technical, Commercial, and Collections (ATC&C) loss of 48%, meaning that almost half of the electricity generated is not being compensated for due to technical problems, theft, and inefficiencies in billing and collection procedures. He emphasised a significant barrier, noting that the non-cost reflective tariff is hindering the companies from reaching revenue targets and investing in reducing ATC&C.

Power outages are linked to overdue payments from industry players.

Many of the recent power outages in Nigeria have been attributed to a need for payment from key players in the Nigerian Electricity Supply Industry (NESI), leading to a dysfunctional system where Gas Companies (GasCon) are withholding gas supply from Generating Companies (GenCOs). Working together with the Ministry of Finance, Budget and Economic Planning and the office of the Special Adviser on Energy to the President, the minister emphasised their proactive efforts to address the substantial unpaid debts owed to GenCon’s and gas suppliers. This collaborative approach includes a strategic combination of cash injections and guaranteed debt instruments.

Also, the Siemens-supported Presidential Power Initiative (PPI) is currently in progress, focusing on upgrading old infrastructure, increasing capacity, and implementing innovative technologies. In Niger, the 700MW Zungeru Hydro Electricity Power Plant has recently been completed, marking the completion of various power generation initiatives. Finalisation of financing for the 40MW Kashimbila Hydro Power Plant in Taraba state is currently underway, along with the revitalisation of 26 small and medium-sized hydro plants through solar hybridisation. Additionally, progress is being made on the construction of a 20MW Wind/Solar hybrid power plant in Katsina state.

Several initiatives are taken to enhance the sector.

Furthermore, the minister highlighted ongoing efforts to enhance the efficiency of NIPP power plants under the Niger Delta Power Holding Company, with a target of achieving a minimum of 50% operational capacity. He emphasised the importance of expediting essential power projects, like the Siemens Project, to enhance transmission capacity. Also, talks are currently underway with two Chinese companies for crucial EPC+F super grid projects that will provide backup and failover capacity to the National grid.

Upgrades and improvements to the current transmission infrastructure are also underway, focusing on enhancing efficiency and reliability through initiatives like substation upgrades and power line reconductoring projects. Various intervention projects supported by international development partners like the World Bank, AfDB, and JICA are being fast-tracked to tackle important transmission issues. Moreover, strict regulations have led to substantial penalties imposed on non-compliant DisCos and reimbursements for customers who were overcharged, strengthening the reliability and durability of the electricity distribution system.

Related Article: Struggles in power sector despite subsidy

Their dedication to enhancing communication and working through challenges collaboratively ensures the provision of dependable and affordable power to all areas of the country. Consistent electricity is vital for Nigeria’s economic development. It boosts productivity in industries, supports small businesses, and attracts foreign investment. Access to reliable electricity improves the quality of life by ensuring essential services like healthcare and education. It also contributes to poverty reduction by creating employment opportunities and fostering economic growth. Without stable electricity, Nigeria’s economy faces limitations and setbacks, hindering progress and development in various sectors and affecting the overall well-being of its citizens.

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