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Nigeria needs $100b in 10 years to fix electricity, says minister

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Adebayo Adelabu

Federal Government of Nigeria requires $100 billion at N10 billion per year for next 10 years to fix the ailing power sector, Minister of Power Adebayo Adelabu, said yesterday.

He said the sector was beset by liquidity challenge, adding that it could only be attractive to investors if there is commercial pricing.

Adelabu spoke in Abuja at a one-day public hearing on the electricity tarrif increase by the Nigerian Electricity Regulatory Commission (NERC), which is expected to be implemented by the Distribution Companies (DisCos).

The hearing was organised by the Senate Committee on Power.

But, senators urged the NERC to reverse the hike of tariff to N225 per Kilowatt per hour for Band A customers.

Justifying the increase, Adelabu said: “For this sector to be revived, government needs to spend nothing less than $10billion annually in the next 10 years.

“This is because of the infrastructure requirement for the stability of the sector. But, government can not afford that and so we must make this sector attractive to investors and to lenders.”

He added: “So for us to attract investors and investment, we must make the sector attractive, and the only way it can be made attractive is that there must be commercial pricing.

“If the value is still at N66 and government is not paying subsidy, the investors will not come. But now that we have increased tarrif for B and A, there are interests been shown by investors.”

The minister, who identified the absence of liquidity as the major challenge confronting the sector, said it has been operating on a subsidised tariff regime due to the absence of a cost- reflective tariff.

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An economist, Dr. Muda Yusuf suggested the involvement of private sector in raising the required funding to boost the sector because of its importance to the economy.

Adelabu, however, said the subsidy has not be funded over the years as huge liabilities was being owed the Generating Companies (GenCos) and the Gas Companies.

He said the inability of the government to pay outstanding N2.9 trillion subsidy was due to limited resources, stressing that there is need to evolve measures to sustain the sector.

He appealed to the lawmakers to support the process of paying the debt owed operators across the value chain of generation, transmission and distribution.

The minister said the increase was based on supply, adding that any customer that do not received 20 hours power supply will not be made to pay the new tariff.

He said government was committed to ensuring sustainable reform in the sector, insisting that the outstanding debt owed GenCos and Gas companies must be settled.

To improve power supply, Adelabu said government was investing in hydro-electric power.

He said the construction of 700 mega watt power station in Zungeru had commenced while Kashimbila Hydroelectric power plant of 40 mega watt was awaiting evacuation to improve generation.

The minister said there was also an on going investment of 26 small hydro power dams to boost electricity production across the country.

However, members of the committee decried the constant power failure despite the unbundling of the sector.

Senator Lola Ashiru said Nigerians were paying for inefficiency of power sector operators.

Ashiru, who is Vice Chairman of the committee attributed the failure to inefficiency across the value chain of generation, transmission and distribution.

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Urging the Federal Government to reverse the increment in tarrif, he said Nigerians must be protected.

Senator Simon Lalong said there was no consultation before the increase, adding that palliative should have been discussed and provided before the tariff increase.

Chairman of the Committee Senator Enyinnaya Abaribe, said what Nigerians wanted was a solution to the issues and ways to ensure liquidity in the sector.

He also decried the non-appearance of a company, “ZIGLAKS,” to explain its failure to provide prepaid meters for Nigerians according to agreed terms.

He alleged that the company had received N32 billion in 20 years to distribute meters to electricity consumers.

Senator Adamu Alero said there was no consultation before the tariff increase.

He said the public was upset because of the over 200 per cent, urging government to reverse it.

Other stakeholders that made presentation at the hearing included the Nigerian Electricity Regulatory Commission (NERC), Manufacturers Association of Nigeria (MAN), Association of Power Generation Companies (GenCos), Electricity Distribution Companies (DisCos), among others.

How government can raise power revival cash, by Muda Yusuf

The Chief Executive Officer (CEO) of the Center for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, suggested to the government how the $10 billion per annum lifeline can be sourced.

Yusuf told reporters that the government should collaborate with the organized private sector in raising the morning.

He said: “The $10 billion is a resource that has to be mobilised by both government and the private sector.

“When the government talks like this, the government is not saying all the money will come from her purse.

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“The government will be part of the funding, the private sector will be part of it, but an enabling environment will also be created to incentivize the private sector capital.

“It’s a blend of the two. Government cannot walk away completely from power because power is not just a business, it is a development issue; no country can develop without power.

“There is a development content; if you leave everything in the hands of the private sector, then there may be some issues because private sector is chasing profit; they are purely concerned about their commercial objectives; that is why we are seeing what we are seeing now, that those who cannot pay are left in perpetual darkness.

“But if you consider the development content of power, yes, government has to be part of it one way, or the other, either by giving tax incentives, import duty incentives, concessional facilities; partial risk guarantees, and so on because we are talking about major infrastructure needed for development needed for the welfare of the people. So, government cannot walk away completely from it.

“There are some heavy lifting that the government must do and then the private sector can now come in…that is how to build an economy”.


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