A Power Sector Recovery Program (PSRP) document seen by Businessamlive has indicated that Nigeria’s power sector requires an estimated $1.5 billion annual investment for the next five years (2017 to 2021), about $7.5 billion, to achieve sector viability.
This annual financial requirement means there is a $7.5 billion investment window that global investors looking for bankable power
projects in Africa can begin to investigate.
The PRSP is a series of carefully thought out policy actions, operational and financial interventions to be implemented by the Federal
Government of Nigeria to attain financial viability of the power sector, and reset the Nigerian Electricity Supply Industry (“NESI”).
The power sector is in transition from government to private-sector owned and operated, according to the document,but “it is facing
liquidity challenges arising from consumers’ orientation to pay only for what they use, transitional learning, regulatory compliance, forex rate changes and vandalism of power assets, which investors could tap in to remediate and bring up to speed for profitability,” the document further stated.
According to a power sector watch group, investors’ opportunities are diverse in the area of metering, renewable solutions, consulting on loss reduction, strategy and governance, as well as business continuity.
The PRSP document specifically noted that the sector viability would be predicated on stakeholders taking requisite steps and activities, which have been approved by the Federal Executive Council (FEC).
They include the elimination of a 2-year accumulated deficit (2015,2016); dimensioning and committing to fund future sector deficit (2017 – 2021); ensuring Disco performance and implementation of credible business continuity plans; establishing data driven processes for decision making across the sector; and putting measures in place guaranteeing a minimum of 4,000 MWH/H of averaged daily energy.
Others are, developing and implementing a communication strategy for the implementation program; developing and implement a robust loss reduction plan e.g. metering; ensuring MDA debts are paid and implement payment mechanism for future bills; restoring sector governance: and putting all boards across the sector in place (NBET, TCN, NELMCO, NDPHC, REA, BPE).
The PRSP equally recognize that stakeholders, including regulators and investors should increase electricity access by implementing off grid renewable solutions; develop and implement an FX policy for the power sector; make electricity market contracts effective; and implement an end-user tariff trajectory ensuring cost reflective tariffs are achieved over 5 years.
The sector’s market shortfall for 2015 and 2016 is estimated at N473 billion while the tariff shortfall is approximately N458 billion.
“The sector shortfall is inevitable at this tariff level, even with zero collection losses – i.e. it is therefore paramount that
government provides a subsidy (or similar mechanism) to offset the expected shortfall, the document stated, adding that the longer it takes to increase tariffs, the larger the market shortfall grows.
The Power Sector Recovery Program was created after the Federal Government discussions with the World Bank Group (WBG) to secure a $2.5 billion financial support for the power sector.