Article summary
- The federal government through the Transmission Company of Nigeria, wants to disconnect some electricity companies over payment failures.
- This expert believes that the move could be interpreted as a positive one by potential investors.
- Nigeria’s power sector has been plagued with several challenges over the years, and it is important to tackle them head-on, to activate local and foreign investments.
The Federal Government’s attempt to disconnect distribution companies (DisCos) from the national grid could be seen as a positive signal by potential investors. This is according to Ivan Ambakaderemo, the Strategy and Sustainability Director of Eauxwell Nigeria Limited. He said this during a recent conversation with Nairametrics on the prevailing challenges facing Nigeria’s electricity sector.
He believes the move could be interpreted as going beyond the usual to recover payments that have the capacity to sustain the electricity value chain. According to him, the payment recovery strategy can renew belief in the Nigerian electricity market that the government will no longer tolerate payment losses.
He advised that it is important to look at the negative and positive sides of the move by the federal government through the Transmission Company of Nigeria (TCN). It may seem like the government is willing to drive millions into darkness over payment defaults, however, taking that step to offer punitive measures over payment failures could be interpreted as a positive as opposed to allowing the failure to linger and cause even more damage to the already problematic electricity value chain.
FG vs DisCos and GenCos
On May 4, Nairametrics reported that the Federal Government, through the Transmission Company of Nigeria (TCN), plans to disconnect 13 electricity companies from the national grid. The disconnection plan is because of the failure of the affected companies to make remittances on ancillary services bills.
As a result of the planned disconnection, electricity consumers being served by the affected companies may experience blackouts. Ikeja Electric, Abuja Electricity Distribution Company, and Kano Electricity Distribution Company are some of the 13 companies in the distribution and generation subsectors affected by the planned disconnection.
Nigeria’s power sector challenges
Nigeria has had its fair share of challenges as regards the electricity value chain, even before the emergence of the Muhammadu Buhari administration. These challenges have resulted in low investments in the sector.
The generation, distribution, and transmission subsectors have been riddled with debt, failure of electricity policy enforcement, uncertainty in gas supply, delivery constraints, and failure to increase capacity beyond between 4000 and 5000 megawatts (MW).
By international standards, 1000 MW should be enough for one million people. So, our national power capacity caters to 4 to 5 million people at a time, leaving over 150 million Nigerians in darkness.
What you should know
In March 2023, President Buhari approved a constitutional amendment allowing states to generate, distribute, and transmit electricity. According to power sector experts, the constitutional amendment will enable the decentralization of power and influence the rise of regional electricity systems.
