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PwC proposes possible solutions to the biggest problem facing Nigeria’s electricity sector

Anyone living in Nigeria can testify that insufficient electricity production/distribution is the biggest infrastructural challenge facing the country.

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Anyone living in Nigeria can testify that insufficient electricity production/distribution is the biggest infrastructural challenge facing the country. This problem has lingered for many years, adversely affecting the country’s economy. In the meantime, countless attempts have been made to resolve the problem. These attempts have, however, failed to yield any result. Now, PwC Nigeria is joining the effort with a recently published white paper titled, ‘Solving the liquidity crunch in the Nigeria Power Sector’.

The key observations  

The report by PwC Nigeria noted that the situation in Nigeria’s power sector is rather abysmal. The country’s operational capacity of less than 4,000MW is far less than the set target prior to the privatisation of the power sector in the early 2000s. The report also noted that only 60% of Nigeria’s population has access to electricity, meaning that the remaining 40% are completely cut off. Interestingly, even the 60% do not get quality service because electricity supply is epileptic.

[READ MORE: Federal Government spends N2.3 trillion on Subsidies in 3 years – PwC]

power, Gencos want Discos’ job as it seeks to sell electricity directly to customers 

The main challenges 

As one can expect, there are many problems facing the Nigerian power sector. A lot of these problems bother on inadequate production. Also, the means via which generated electricity is transmitted also presents another major challenge. See the problems highlighted below:

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  • Inadequate gas supply
  • Limited transmission lines
  • Operational inefficiencies
  • Poor water management at hydropower plants
  • Inadequate and obsolete distribution infrastructure

“Gas-fired power plants account for more than 77% of total electricity generated (Q4’2018: 71%) while hydro sources accounted for 23% (Q2’2018: 29%). Insufficient gas supply and variability in rainfall and water level at hydro plants, among other challenges, continue impact power generation in Nigeria.”

Besides these problems, PwC Nigeria noted that liquidity crunch is the most worrisome challenge facing the power sector. According to the company, the tariff framework (I.e., the electricity pricing structure in Nigeria) is non-cost reflective. This is because “industry participants often complain that electricity charges to customers do not reflect the cost of generation, transmission, and distribution…” As such, this predisposes the operators to liquidity constraints.

“Liquidity crunch is the biggest challenge of the Nigerian electricity sector today. The 11 DISCOs have been struggling to meet their obligations to the Nigerian Bulk Electricity Trading Plc (NBET) and Market Operators (MO) as evidenced in their low remittances to NBET and MO. 

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“In Q1’2019, only about 28% of the N190 billion invoice (comprising invoice of 161.4 billion for energy purchased from NBET and an invoice of N28.8 billion for administrative services from MO) of DISCOs were remitted.”

The ripple effect of these challenges 

Electricity is a vital component of the industrialisation process. Any country that wishes to industrialise without first sorting out its electricity challenges will keep on going around the same circle without accomplishing its set agenda. This is the situation Nigeria has found itself in – a situation whereby companies are struggling to remain in operation because the cost of production is unusually high, execrated by the high costs they incur from powering their generators because electricity supply from national grids is epileptic. Unfortunately, the DisCos cannot perform optimally because they too are grappling with the challenges highlighted above.

[READ ALSO: PwC’s Taiwo Oyedele critiques CBN’s newly-implemented cashless policy]

PwC proposes possible solutions to the biggest problem facing Nigeria’s electricity sector

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What’s the forward? 

According to PwC Nigeria, a possible solution to the problem of liquidity crunch facing the DisCos is to start supplying 50% of distributable electricity to Nigerian companies. This, the white paper suggests, should be done provided these companies are willing to pay N80 per kilowatt. The remaining 50% can then be shared among residential consumers.

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The paper went further to explain that doing this will help solve the liquidity problem facing the sector. This suggestion is based on the assumption that Nigerian companies would be willing to pay for stable electricity supplied by DisCos instead of expending more to generate electricity for themselves. And if these companies pay N80 per kilowatt for a collective 50% of Nigeria’s generated electricity, they would eventually be paying an estimated N400 billion to the DisCos. This would go a long way towards solving the main problem highlighted above.

“To revitalize liquidity in DISCOs, we consider 50% of energy received by DISCOs is transmitted to industries at a cost-reflective rate of N80/Kwh… At N80/Kwh charged to industries, an estimated N400 billion will be injected into the power sector annually.”

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To read the full report, click here

Emmanuel is a professional writer and business journalist, with interests covering Banking & Finance, Mergers and Acquisitions, Corporate Profiles, Brand Communication, Fintech, and MSMEs.He initially joined Nairametrics as an all-round Business Analyst, but later began focusing on and covering the financial services sector. He has also held various leadership roles, including Senior Editor, QAQC Lead, and Deputy Managing Editor.Emmanuel holds an M.Sc in International Relations from the University of Ibadan, graduating with Distinction. He also graduated with a Second Class Honours (Upper Division) from the Department of Philosophy & Logic, University of Ibadan.If you have a scoop for him, you may contact him via his email- [email protected] You may also contact him through various social media platforms, preferably LinkedIn and Twitter.

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Tech News

Facebook Oversight Board to review decision to suspend Trump’s account

The decision to suspend Donald Trump’s Facebook and Instagram accounts will be examined by an oversight board.

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Facebook’s Oversight Board has received a proposal to revisit the decision to indefinitely suspend former US President, Donald Trump’s access to Facebook and Instagram.

On January 7, Facebook suspended Trump’s account indefinitely, a decision reached when he incited a violent mob that stormed the U.S. Capitol, leaving the country shaken.

Nick Clegg, Facebook VP of Global Affairs and Communications said that the circumstances around Trump’s suspension was an unprecedented set of events that called for unprecedented action and also explained why the Oversight Board would review the case.

Our decision to suspend then-President Trump’s access was taken in extraordinary circumstances: A U.S. president actively fomenting a violent insurrection designed to thwart the peaceful transition of power; five people killed; legislators fleeing the seat of democracy,” Clegg said. “This has never happened before — and we hope it will never happen again.”

The oversight board was established last year to make the final call on some of the most difficult content decisions Facebook makes. It is an independent body and its decisions are binding — they can’t be overruled by CEO Mark Zuckerberg or anyone else at Facebook. The board itself is made up of experts and civic leaders from around the world with a wide range of backgrounds and perspectives.

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According to the Oversight Board, a five-member panel will evaluate the case soon with a decision planned within 90 days. Members will decide whether the content involved in this case violated Facebook’s Community Standards and values. They will also consider whether Facebook’s removal of the content respected international human rights standards, including freedom of expression.

Trump’s case is a big moment for how impactful the board’s decisions will really wind up being. If the board overturns Facebook’s decision, that decision would likely kick up a new firestorm of interest around Trump’s Facebook account, even as the former president recedes from the public eye.

What you should know

  • Following the violent attack of the US Capitol building by Trump supporters, Facebook announced the suspension of Trump’s account indefinitely, on allegations of inciting his supporters.
  • YouTube also suspended Trump’s channel and removed new content uploaded by Trump’s campaign, citing potential threats of violence.
  • Twitter announced it has permanently suspended Trump, citing the risk of further incitement of violence.
  • Jack Dorsey, the CEO and founder of Twitter, in his statement, said that the decision to ban Trump from the social network was the right decision, but one that sets a dangerous precedent.

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Coronavirus

Covid-19: Buhari approves N6.45 billion to set up 38 oxygen production plants

President Buhari has approved the sum of N6.45 billion for the set-up of 38 oxygen production plants across the country.

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Buhari sacks DG National Directorate of Employment, Nasiru Argungu

President Muhammadu Buhari has announced his approval of N6.45 billion for the set-up of 38 oxygen production plants across the country, in a bid to contain the second wave of Covid-19.

The President disclosed this in a statement on Thursday evening after the first National Economic Council meeting of the year presided over by Vice President Yemi Osinbajo, SAN, with State Governors, Federal Capital Territory Minister, Central Bank Governor, and other senior government officials in attendance.

READ: Covid-19: FG directs universities to suspend academic activities till further notice

“As part of efforts to contain the second wave of Covid-19, we’re setting up new oxygen production plants in 38 locations across Nigeria—to enhance the management of patients in need of oxygen.

“I have equally approved funding for the rehabilitation of oxygen plants in 5 hospitals,” Buhari said.

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The Minister of Finance, Budget and National Planning, Zainab Ahmed said the President said the fund’s release was necessitated by the rising cases of Covid-19 in the country with patients needing oxygen.

READ: Toyota suspends operations in China over Coronavirus outbreak 

What you should know 

  • Recall Nairametrics reported that the Lagos State Governor, Babajide Sanwo-Olu, warned that the rising second wave of the pandemic in Lagos had seen the demand for oxygen rise 5 times from 70 six-liter cylinders per day to 350 six-liter cylinders at Yaba Mainland Hospital alone.
  • He added that the state government had the decentralized provision of oxygen and other services needed for Covid-19 patients, citing the provision of oxygen kiosks.

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Economy & Politics

FG says Excess Crude Account balance now stands at $72.4 million

The Federal Ministry of Finance has told the NEC that the Excess Crude Account (ECA) now stands at $72.4 million as at January 20, 2021.

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The Federal Government has announced that Nigeria’s Excess Crude Account (ECA) balance as at 20th January 2021 is $72,411,197.80.

This was disclosed by the Minister of Finance, Budget and National Planning, Zainab Ahmed at the first National Economic Council meeting of the year presided over by Vice President Yemi Osinbajo, SAN, with State Governors, Federal Capital Territory Minister, Central Bank Governor and other senior government officials in attendance.

READ: Nigeria’s growing current account deficit fans devaluation flames 

The FG said, “the ECA balance as at 20th January, 2021, $72,411,197.80; Stabilization Account, balance as at 19th January, 2021, N28, 800, 711,295.37; Natural Resources Development Fund Account, balance as at 19th January 2021, N95, 830,729,470.82.”

READ: Nigerians spend $9.01 billion on foreign travels in 2019 

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What you should know

  • In August 2015, during the early days of the Buhari administration, the ECA stood at $2.2 billion. It was $3.6 billion in February 2014, one of the highest balances on record.
  • According to the Central Bank of Nigeria’s annual report for 2018, Nigeria’s excess crude account fell from $2.45 billion in 2017 to $480 million as of December 2018.
  • In 2019, Nairametrics reported Nigeria’s Excess Crude Account had dropped to $480 million. This is as controversy continued to trail the $1 billion military spendings which was withdrawn from Nigeria’s Excess Crude Account.
  • Nairametrics reported in July 2020 that the  ECA had fallen by about 98% within the last 5 years to $72 million.
  • Nigeria has two Sovereign Wealth Funds: the Excess Crude Account and the Nigeria Sovereign Investment Authority (NSIA). Note that these two are funded by the savings earned when oil prices are at their peak.

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