The Federal Government has approved N72 billion investment in the electricity Distribution Companies (Discos) to enable them upgrade their distribution infrastructure and boost power generation. It has also appointed the Transmission Company of Nigeria (TCN) to manage the fund.
According to the Managing Director of TCN, Usman Mohammed, the TCN got the approval to manage the fund because it already had a comprehensive systems study and plan on Nigeria’s electricity network. He also explained that the investment will stabilise the nation’s electricity grid.
We welcome the development and hope that the new investment will make the distribution companies strengthen their operations and meet the needs of electricity consumers. At present, power generation across the country has been limited to an average of 4,000MW or even less per day since this year. However, we are worried that government’s latest investment in the Discos may be hampered by threats from the core investors to pull out if the government refunds the money they spent in acquiring the assets, six years ago.
Some Discos, under the aegis of the Association of Nigerian Electricity Distributors (ANED), recently disclosed to the Minister of Power, Works and Housing, Mr. Babatunde Fashola, that they have not been able to recoup their investment after paying $1.4 billion (about N427 billion) for the distribution assets in 2012. There is need to end the disagreement between the government and the core investors in the distribution value chain because it can undermine the lofty objectives of the power reform roadmap. The endless excuses of the Discos have become unacceptable.
The initial enthusiasm that heralded the emergence of the Discos in the electricity distribution arm of the Nigerian Electricity Supply Industry (NESI) has waned considerably. Therefore, the N72 billion lifeline, which is a step in the right direction, should be judiciously utilised.
We believe that after so much investment in the power sector, it is in Nigeria’s best interest that the problems in the sector are fixed. Unfortunately, the distribution systems still remain in a sorry state as transformers across the country need urgent rehabilitation.
This can explain why the TCN boss described the Discos as the ‘weakest link’ in the electricity supply value chain, which retards power supply growth in the country. Although some of the complaints by the Discos should be considered, it seems that many of the operators of the Discos were not aware of the enormity of the challenge before buying the assets. For instance, the Chairman of the Jos Disco, Mr. Tukur Modibbo, recently revealed that the Federal Government allegedly handed over to the core investors poorly run networks and promised to stabilise them after they took over, but failed in its promise. He also alleged that the investors were deceived by the Nigerian Electricity Regulatory Commission (NERC), which asked them to conduct independent studies on the Aggregate Technical Commercial and Collection (ATC&C) loss levels and renegotiate their operational indicators. However, the NERC is yet to respond to these allegations.
Amid these claims, there is still no hope that the power sector problem will soon be over as power supply remains poor. It will be recalled that before the private investors bought the electricity assets, generation was the weakest link in the electricity value chain. While the distribution and transmission infrastructure could withstand electricity generation of up to 4,500MW, the generating plants could only occasionally attain this level as a result of inadequate gas supply and poor maintenance of the hydro and gas-fired power plants.
Therefore, low power generation has led to frequent grid instability as TCN could hardly guarantee the stability of the transmission network when power generation dropped below 3,000MW. In 2016, the Discos were said to owe banks N356 billion while the power sector lost over N500 billion in revenue. The blame game between the Discos and the government should stop. They should get the power sector template right. It is also time for government to determine the financial capacity of the Discos. The licences of those that could not deliver on their core mandate should be revoked and competent ones engaged.