Pity Nigeria’s energy supply sector! Burdened by mounting debts and inability to secure required component spare parts, the electricity generating companies may be on the verge of shutting down operations except something is done to save the situation. The Muhammadu Buhari administration should therefore pay more attention to the happenings in the sector with a view to finding a lasting solution.
Poor electricity supply has been the bane of Nigeria’s development and the apparent improvement in electricity supply over the past couple of weeks is attributed to high water level at the hydro power stations rather than any conscious re-engineering of or new investment in the sector. However, a huge debt burden is about to make matters worse than ever.
According to the first quarterly Statistical Bulletin of the Central Bank of Nigeria (CBN), credit to electricity and energy firms has been rising exponentially and the independent power plants and power generating companies (Gencos), owed the banks N357 billion as at March 2016.
Also massively indebted are the transmission and distribution companies (Discos), whose debts, as at March 2016, stood at N162 billion.
The exposure of the nation’s banks to the energy firms has now increased to N358 billion. The Oil Producer’s Trade Section (OPTS) of the Lagos Chamber of Commerce and Industry (LCC), revealed that power sector invoice arrears which was N40 billion in 2015 have increased to N100 billion.
Upon that, the electricity companies are not unable to service a whopping N402 billion debts they have incurred, loans they collectively took to purchase the plants when they were privatized in 2013. The astronomical rise in the exchange rate of the naira to the dollar is also weighing heavily on them.
The companies took loans from local and international banks when the naira exchange rate was N157 to $1. They are now finding it difficult to pay back at the current exchange rate of over N400 to $1. To draw attention to their financial predicament, the Gencos are threatening to shut down their operations if the sum of N156 billion owed them by government agencies is not paid. Specifically, the Nigerian Bulk Electricity Trading (NBET) owes Egbin Power Plc N68.71 billion, Transcorp Ughelli Power Limited, N28.29 billion, Shiroro Power Limited, 9.66 billion, Geregu Power Plc, N7.98 billion, Kainji/Jebba power stations, N20.94 billion and Sapele Power Plc, N9.9 billion. This is enough to cripple any national operation!
In an attempt to grant the power operators some reprieve, the CBN reportedly designed a N213 billion bailout package to cover revenue shortfalls and help the companies meet debt-servicing obligations on bank loans. The CBN said it disbursed a total of N120.2 billion to different Discos, Gencos, service providers and gas companies.
But the Gencos rebuffed the gesture, saying that they were not interested in the bailout fund. Rather, they wanted the monies owed them paid. This is, of course, reasonable.
The persistent scarcity of gas, again, presents another critical challenge, which affects not only the electricity firms but also the manufacturing concerns. Already most factories are shutting down while what is left of the entire manufacturing sector is threatened.
The manufacturers allege that a breach of collective agreement contained in the Gas Supply and Purchase Agreement (GSPA) has led to a situation in which franchisees are exploiting operators and innocent citizens.
The Manufacturers’ Association of Nigeria Gas Users Group recently drew the attention of the Federal Government to the persistent increase in the price of natural gas used by manufacturers to power their plants and machinery.
It is, therefore, obvious that the energy problem in the country is multi-faceted. That the energy burden is hampering industrial growth and development is not in doubt.
Nigeria is now at a critical stage where all alternatives must be explored and a well-structured energy mix is imperative as a way out of the mess.
Dealing with the nation’s complex and deep-rooted energy problem requires unrelenting thinking and a mix of many sources is the solution.
Improved electricity can come from hydro power with more dam being built. Coal power stations may have to be revived and solar energy must be tapped. The nation can also explore the nuclear source for power generation.
The truth is that Nigerians are tired of the little or no progress being made in energy supply.