Poor financing, gas shortage dogs Nigeria power sector – NERC boss

Sam-Amadi, NERC

Sam-Amadi, NERC

*Power firms to access N213bn bailout funds

Oscarline Onwuemenyi,
with agency reports

09 March 2015, Sweetcrude, Lagos –
The Nigerian Electricity Regulatory Commission (NERC) has admitted that Nigeria’s electricity industry is being hindered by producers’ inability to raise finance and natural-gas shortages, which has curbed companies’ ability to boost investment in output as the country suffers from daily blackouts.

Despite billions of dollars worth of investments which has culminated in the privatisation exercise over the years, peak electricity output of Africa’s biggest economy is about 3,800 megawatts, with another 1,500 megawatts unavailable because of gas shortages.

The Chairman of NERC, Dr. Sam Amadi, who spoke in an interview with Bloomberg in Abuja, noted that there are still issues of creditworthiness for many of the electricity companies.

According to him, “Power generation is not coming on board because the distribution companies are weak, they’re not credit-worthy and can’t get financing.”

He added that distribution companies are struggling to get consumers to pay their bills and this means that their revenue is so poor they are unable to pay producers for power.

Nigeria, beset by frequent blackouts, dismantled the state monopoly and sold hydro- and gas-powered plants to try bring in investment needed to expand electricity supply. The industry requires $18 billion to $20 billion to boost supplies to 10,000 megawatts within six years, according to the nation’s privatization agency.

Amadi pointed out that South Africa, with a third of Nigeria’s population, has eight times more installed capacity. One megawatt is enough to provide energy to 2,000 average European homes, or about 333 in Japan.

He, however, observed that a possible lifeline was on the way for the ailing electricity sector with the N213 billion intervention fund provided by the government.

He said, “Power generation and distribution companies can now access a 213 billion-naira ($1 billion) bailout announced by authorities in September to shore up struggling operators.

The fund is supposed to help them pay off gas-supply debts and meet debt-service obligations to lenders on loans of almost 500 billion naira, on which some were falling behind.

While Nigeria was the world’s fourth-biggest exporter of liquefied natural gas in 2012, it’s struggling to meet local demand for the fuel used by plants that generate at least 70 percent of the country’s electricity needs. The nation, which holds Africa’s biggest gas reserves of more than 180 trillion cubic feet, is expanding pipeline networks so that they can service power plants and industries and not just exports.

For now, the country has “one of the lowest rates of net electricity generation per capita in the world,” the U.S. Energy Information Administration said in a statement posted on its website on Wednesday.

“There is hope that gas is coming,” Amadi said. “We have promised that by the end of this year we should be able to have enough gas to fire about probably 5,500 megawatts.”

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