A Review of the Nigerian Energy Industry

Power distribution firms lack funds – NERC

nerc125 February 2014, Abuja – The poor state of power supply across the country has been linked to the serious financial challenges facing investors who bought into the nation’s electricity distribution companies.

According to the Federal Government, the Discos lack the financial muscle that will ensure efficient distribution of the generated electricity.

The Chairman/Chief Executive Officer, Nigerian Electricity Regulatory Commission, Dr. Sam Amadi, stated that the Discos needed adequate financing to facilitate their operations.

Amadi spoke on Monday at the headquarters of NERC in Abuja while receiving a delegation from the United States Agency for International Development/Power Africa.

The chairman, in a statement from the commission, outlined the immediate and long-term challenges facing the sector, including “financing to facilitate further improvement, especially with regards to the distributions companies.”

He noted that the current low-rate of gas supply caused by the vandalism of gas pipes was another inhibiting factor, which had stifled the capacity of the Discos.

Amadi, however, noted that there had been improved dialogue between the power and gas sectors, which was not always the case before now.

He was quoted as saying that “quick improvement in the industry is necessary to sustain the political will behind the power project.”

The NERC chairman’s statement confirmed Sunday PUNCH’s exclusive report that most power investors were not financially strong.

It was learnt that some of the power firms had not been able to get fresh inflows of funds to boost infrastructure development and this was hampering efficient distribution of electricity to their customers.

The financial challenge, which was described as “stiff” by the managing director of one of the Discos, was the major reason why electricity supply has not significantly improved in many states.

“It is not easy to get funds for this business and you know that a lot of money is needed to bring the power sector to the desired shape; and the truth is that the financial challenge is stiff,” the official, who spoke on conditions of anonymity, said.

Some heads of the Federal Government agencies and ministries had told our correspondent that most of the investors were not financially strong to give the firms the required facelift.

It was gathered that the recent international power summit held at the Banquet Hall of the Presidential Villa, Abuja, was to attract foreign investors to partner with the power sector investors to fund their businesses.

It was also learnt that the inability of some of the power firms to effectively collect revenue from customers was posing a huge challenge to the investors.

This, according to industry officials, has affected the revenue generation by the firms, thus preventing them from expanding the already dilapidated infrastructure of the acquired firms.

Amadi, during an interview with our correspondent, had said, “The new owners came on board faced with the concern of addressing their financial issues. So, it now looks like the new owners are not able to ensure efficiency in distribution and have limited power to serve their clients.
“We have oversold the handing over as a panacea, maybe because we expected people who had enough financial clout to take over, but they are not. At this stage, what the regulator is doing is to manage the scarcity and see if we can get entry points for more power through regeneration.”

– The Punch

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