ODUNTAN: We Need To Invest More In Energy

By DAVID OGAH   |   07 November 2015   |   11:39 pm  
Oduntan

Oduntan

Sunday Oduntan is the executive director, Association of Nigerian Electricity Distributors. In this interview with DAVID OGAH, he gives the reason why Nigeria is in darkness after a period of a steady power supply.

At the advent of this administration, there was renewed hope of improvement in power supply, but a few months after, darkness has returned to homes. What has gone wrong?
PEOPLE need to understand the operations of the power sector. We have had a culture of rot and inefficiency for over 50 years. There is no way you can correct that within two years. The Muhammadu Buhari administration came on board May 29, 2015, and everybody expected that magic would start from June 1. But the truth is, when they came in, there was an improvement in power supply, and I will tell you the reason for that. Before the government came in, we were generating about 2,000 plus megawatts (MW). It went up to as far as 4,600MW, but under 5,000 MW. The impediment to power generation in Nigeria is the vandalisation of gas pipelines.

When Buhari was coming, those who vandalised pipelines in the Niger Delta disappeared, and there was an increase in generation. The value chain in electricity supply involves three major components: generation, transmission and distribution. There are 11 distribution companies.
Distribution companies can only distribute what has been generated and transmitted. In the case of that increase in generation, what that meant was an increase in transmission as well as distribution. That has what increased the power supply, following Buhari’s coming. However, power sector does not work like magic.

The level of generation in Nigeria is still very low, compared with the population, industrial and domestic requirement. When we are talking about the uninterrupted power supply, Nigeria should have about 30,000MW. The day we generate 15,000MW, we would be talking about 20 hours of power supply all over the country, at the same time. But when you are generating less than 5,000MW what do you expect? You can’t have it. And we have to understand the reason why we don’t have as much generation as we should have. The first is the investment in it, the finance. The financial gap in the industry is very wide, coupled with a lot of constraint and challenges. Another major challenge is the issue of indebtedness to the sector. The distribution companies are the collection agent; they are the ones that collect money from the customers, and then pass it on.

Out of every N100 that is collected, only N25 belongs to the DISCOs, 11 percent of it is for the transmission company of Nigeria, which is still publicly owned, but privately managed by Manitoba. Sixty percent goes to the generation companies; they also have to pay the gas suppliers. Four percent goes to the regulator and other stakeholders. That is how the money is shared. Commercial losses represent an incident of theft and stolen electricity. There are people that are not even known, but are using the network; all those things come together to create the problem of a huge financial gap in the sector. Coupled with that, is, what we call the non-cost reflective tariff. What we have in this country is a non-cost reflective tariff.

That is the reason for the ongoing tariff review. Some people call it tariff increase, but I disagree. Tariff review is different from tariff increase. Tariff increase is, when you want to increase tariff across the board while tariff review means, this is what we currently charge, let us look at it together, does it make sense to you as a producer, manufacturer or service provider? This is the situation with the power sector. I would say that this government is very much interested in power; in fact, it has done very well in terms of seeking to know the problem in the sector, showing understanding, giving good leadership to people in the sector, and we appreciate that. They have brought all of the generation, transmission, the distribution companies, and us together. They own the transmission company, and they know that it is the weakest of the three. That is the weakest link. Ikeja DISCO has 15 percent of whatever is generated in Nigeria, because of its industrial base, and that is the highest percentage. So, we have that pocket of percentage. Imagine a Northern DISCO that has seven percent, but can only receive four per cent, because of transmission grid constraint.

These are the kind of things that this government is looking into, but they cannot do it overnight. It involves a lot of money, and what that means is that we need to invest more in the business. To do that, we need to be able to have access to funding. No bank is willing to lend us money because we are running the business at a huge loss. A bank will be ready to lend you money if it is convinced that they will recoup their investment. But when you don’t have a cost reflective tariff, no bank is willing to lend you money. That is the situation with the banking sector today, and that is the truth. And for us, we are private sector players, we are ready to open our books, and there is nothing to hide.

You said before Buhari came in, the country was generating 2,000MW, which went up to as much as 4,000MW because pipeline vandals vanished as a result of the president’s body language. Are you saying the vandals are back at work?
No. In the last five or four weeks, we lost Egbin Thermal Station. We lost 1,100MW. Egbin gives Nigeria about 20 percent of its total power generation. The station is very important to Nigeria’s electricity generation. There was a crisis there; a sabotage, so to say, such that someone threw an object into the machine. That was the report I read in the papers like anybody else, I don’t have the full facts, but I know that we lost Egbin. And when you lose Egbin, the whole country will feel it. All industries will feel it. I think they are back to about 700MW. But it is still very much lower than the 1,100. So, that has what has affected the country in the last couple of weeks. And they are working day and night to restore that capacity that we normally take from them.

I keep saying that there is a difference between the telecommunication and power sector. In our own case, we have a value chain that depends on one another. You cannot be a distribution company if you don’t have enough generation and transmission. You cannot be a generation company, if there is nobody to transmit it to the distributor and you cannot be a transmission company, if there is nothing to transmit, in other words, you cannot be a generation or transmission company, if there is no company to receive it into their distribution network, because you cannot store power. Once you produce power, you must ship it out and those are the kind of things I want Nigerians to understand. It is in our interest to generate, transmit and distribute power. The more power I give you in your area, the more money I will collect from you. It is not in my interest for you to be in the dark.

Nigerians have not seen any form of investment since you came into the business, transformers are still old, the wiring system has not changed, some communities don’t even have a transformer.
Well, just because you don’t have a new transformer in your area, does not mean there are no new transformers in other places. There is some level of investment. But I am not saying the investments are enough. That is why I am saying that access to the financial market will help us to put more into the network. A bad transformer in your area is not just bad for you; it is also bad for the business because we won’t be able to collect. If it is weak, we won’t have a good supply, and when that happens, you won’t be able to use it and charge if you are using prepaid meter for instance.



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