Stakeholders at Sahara Group’s roundtable mulls solution to Nigeria power sector challenges

Stakeholders in the nation’s power sector have suggested solutions to the perennial crisis in the country. According to them, power is very important in the life of any nation and plays a significant role in its economic activities.

They made this known at the maiden Sahara Power Group stakeholders roundtable held in Lagos, Thursday.

Kola Adesina, group managing director of Sahara Power Group Limited and chairman of Egbin Power Plc said there should be an alignment between policymakers and operators urging for a cost reflective tariff.

He said, “The discourse around electricity is usually emotional and emotive. There is a misalignment of visions and policies in the sector. I wonder why the cost of a commodity should be higher than the price of the commodity.

“There is no economic magic to guarantee efficiency in such a state of affairs. There is need to be paid to the sector a cost reflective tariffs. There is the need for systemic evaluation of every policy churned out.”

Nigeria has been experiencing epileptic power supply for years due to low generation and inadequate money to buy new equipment to replace the old ones which are not functioning properly.

Although the country’s capacity to produce power appears to have grown with investments reportedly made by investors in generation companies (Gencos), extant constraints from gas supplies and water management have continued to cut into the final production levels of the Gencos.

Huge debts owed gas producers for supplies made but not paid as expected from the revenues remitted by the distribution companies (Discos) is also a challenge in the sector.

Olawale Oluwo, Lagos state commissioner for energy and mineral resources said there ought to be a paradigm shift from what obtained in the past
In his words, “The problem in the power sector is structural which cannot be solved by the administration. Evacuation of power is a problem in the country to the extent TCN and DISCOs say AT&T losses run into 40 percent.
“Why build up generation when it is not getting to the end users. There is the need for more investment in the distribution companies for them to function effectively. As more power gets to the people, less power will be rejected,” he said.
On his part, Pedro Omontuemhen, partner and lead, power & utilities, PwC Nigeria, said the illiquidity in the sector has made it unattractive for banks to lend operators funds to grow the sector.

He said, “There is no bank today that you will take a power sector project to and the bank will grant you audience. If they ever approach a bank, no bank will lend them because all of them have reached their obligor limit according to CBN.

“I make bold to say that to create the right instrument that will support the sector and remain viable in order to attract investments that will drive this industry forward.

“Most of them are operating at a loss. Go to the Securities and Exchange Commission, you will realize this.
“I was recently with the chairman of a Disco who told me if he knew, he would not have invested in the sector. The GENCOs may be making money but the Discos are not.

Speaking, Aigbe Olotu, chief financial officer of Sahara Power Group Limited said power companies are having challenges with their financials.

In his words, “On paper, gencos are making money but there is a difference between selling and being profitable on paper and being illiquid.
“Cash in the system is like blood in the human system. If there is no blood, you are dead. They may have paper profit but they are not cash. And because they are completely illiquid, they can’t approach the bank for any kind of borrowing.

“More importantly, the only cost in naira is probably salaries and wages. Every other cost is dollar dominated. If you do a critical analysis into the balance sheet of most Gencos, and check their unrealized exchange losses in their book, they are also technically bankrupt.

On her part, Sola Salako, president/founder Consumer Advocacy Foundation of Nigeria , a non-governmental organisation that is into consumer advocacy said it is high time operators took consumers serious adding that there is a gap in education.

“We don’t think the power sector sees us as important. The greatest challenge to the power sector is that consumers feel disconnected. It is not very true that the Nigerian consumer does not want to pay for services.

“Once he sees that he’s getting full delivery of service being paid for, he will readily pay his bills. We need to bridge the deficit of trust between the consumers and the operators,” she added.