Mr. Olabode Sowunmi, CEO of Cabtree Limited and Chairman of the Hydrogen and New Energy Committee of the Nigerian Gas Association, has announced the need for Nigerians to set aside political considerations and confront the reality: the Nigerian power sector is operating at a significant loss.
He made this revelation during the Nairametrics energy industry outlook on harnessing Nigeria’s energy sector to supercharge our economic growth.
Sowunmi contends that despite new policies implemented by the current administration, the energy sector is hemorrhaging financially, with no quick fixes to attract investors.
What he said
In his remarks addressing the prevalent discourse among Nigerians regarding the energy sector, Sowunmi highlighted the recent tariff hike for B and A customers, emphasising that the previous tariff cost falls short of covering the production expenses.
- “When I ask people what the tariff prices for Band A consumers should be, they don’t have an answer.”
- “Nobody has an idea of the cost of production. The cost we sell electricity is less than the costs of production.”
- “The industry is running at a loss, and someone is bearing that loss. We must put politics aside technical issues.”
- “The loss is what we call government subsidy. It is when there are losses that the government intervenes.”
Sowunmi disclosed that to mitigate these losses, Nigerians would now purchase electricity at the production cost plus a marginal profit.
He emphasised the underlying economic principles within the power sector, asserting that despite policy adjustments, the industry’s financial downturn renders it unappealing to potential investors.
What you should know
Sowunmi emphasised the necessity for Nigerians to prioritise technical considerations over political agendas.
He clarified that the industry operates under a privatized framework, with distribution companies (DisCos) being predominantly privately driven, albeit with some government ownership, while transmission companies remain under government control.
This distinction underscores the importance of understanding the sector’s structure to address its challenges effectively.
- “The essence of the government is to provide guidelines and intervene. This is a free market.”
According to Sowunmi’s analogy, the government serves as the coach, while industry stakeholders act as the primary players on the field.
