How To Resolve Nigeria’s Power Sector Challenges- Experts

Experts in the nation’s economy at the weekend in Lagos called for compromise to resolve the seeming bottlenecks that have kept Nigerians in darkness despite the privatization of the power sector by the Federal Government some years ago.
Speaking at a panel discussion on financing the economy during the unveiling of a special report on “Financing the Economy” by management of The Guardian newspapers, the experts however disagreed on the bankability of the power sector. This, they linked to the several grey areas and domestic risk factors, particularly the weak institutional arrangement.
Amidst all of these, former Chairman of the Nigerian Electricity Regulation Commission (NERC), Dr. Sam Amadi, one of the panelists proposed three models for financing the nation’s electricity value-chain. He listed these to include private sector financing, lowering regulatory risk, just as debt recovery should be at the heart of the business.
For him, power sector financing has grown beyond government funding, just as the private sector cannot do it alone, following which there is need for a hybrid.
“Government’s involvement is critical… Some components of the power system can be crowd funded, provided that there is trust,” he stressed.
He agreed on the need for stable power supply to ensure adequate funding of the sector, for which reason the National Independent Power Projects (NIPP) was envisioned.
Lamenting that the nation has become trapped in the mix, he called for creation of a win-win situation for consumers, comprising a combination of funding sources such as government, smart investors and effective financing.
Another member of the panel, Chinedu Ugbo, chief executive of Niger Delta Power Holding Company (NDPHC), lamented a situation where his company generates power and does not get paid for by the power distribution companies (DISCOs).
“The DISCOs talk about tariffs, but they have not told us how many customers they have… We generate… we don’t get paid more than 30% of the money… The bankability of the sector is a key issue, the banks are not willing to come in, because the N1.1tr (debt burden),” which he recalled was meant for acquisition and not project financing.
“The banks were supposed to look up to their balance sheet, they were not supposed to look at profit (from the power generation and distribution companies) for the first three years,” he added, stressing that the sector requires investment in critical infrastructure in the area of distribution.
Ugbo urged the banks to bring in more financing, while government should focus on helping the DISCOs to develop infrastructure and ensure dispersal of stranded power.
That, he believes, is the surest way of attracting more investment into the sector.
For Bismarck Rewane, chief executive of Financial Derivatives Company, adequate power supply is at the heart of economic growth and development of any kind.
The N1tr bank debt owed by the various operators, he said have gone bad, swelling the banking industry’s pool of non-performing loans (NPLs), which is also making the financial services industry unprofitable. Banks are required under Prudential Guidelines to make 100% provision from banks’ profit for loans that remain non-performing after a particular period.
He argued that only compromise by all stakeholders is needed at this time to resolve the problem for both the power and banking sectors.
The problem, he continued, would require some forbearance on the part of the banks such as resetting the foreign exchange rate for the loans back to $165/$ which was the ruling rate at the time most of the facilities were granted.
This, he continued, could mean the banks foregoing roughly $3bn of those loans in national interest, a situation that would enable the economy grow by about $8bn through job creation, increased domestic output and de-risking of the financial system, and in the process enhancing the capacity of banks to lend more.
Rewane argued that the Nigerian power sector is bankable. What is needed, he said, are ‘mitigants’, while the stakeholders return to reset, agree on the forbearance and some form of governance structure.
Drawing the panel discussion to a close, the chairman, Johnson Chukwu, chief executive of Cowry Assets Ltd said stakeholders must work on making the power sector bankable, granting some forbearance, including restructuring of the funds and getting fresh financing.
Commenting on the funding issue, Godwin Emefiele, Governor of the Central Bank of Nigeria (CBN) who was unveiled as The Guardian Economic Personality of the Year 2017, at the event, agreed that “the share size of our economy makes it impossible for the private or public sectors to independently finance the economy, hence the need for collaboration” by both sides.

Photo Caption: CBN Governor, Godwin Emefiele; CBN Deputy Governor, Financial Sector Stability (FSS), Mrs. Aishah Ahmad; Prof. Adeola Festus Adenikinju; a member of the Monetary Policy Committee (MPC); and Alhaji Aliko Dangote, President, Dangote Group.

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