Gas shortages continue to pressure Nigeria’s power sector

  • Losses hit N488bn in 11 months
  • Weak investment threatens outlook

DESPITE its 202 trillion standard cubic feet, scf, gas reserves, Nigeria has not been able to harness enough of its gas for power generation, as a result of many challenges, including low investment, inadequate funding of projects and huge indebtedness to gas suppliers.

A compilation of industry figures obtained by Vanguard from the office of Vice President Yemi Osinbajo, indicated that the power sector has, in the past 12 months (January – December 2018), suffered several setbacks, resulting to N519 billion losses due to insufficient gas supply, amidst dilapidated distribution and transmission infrastructure.

[Gas flaring and pipeline vandalism in the Niger Delta]

A breakdown showed that a total of N40 billion, N36 billion, N36 billion, N33 billion, N48 billion and N43 billion was lost in January, February, March, April, May and June, 2018, respectively.

It also showed that N50 billion, N57 billion, N51 billion, N52 billion N38 billion and N31 billion were lost in July, August, September, October November and December 2018, respectively.

The report further stated: “On December 29 2018, average energy sent out was 3,510 MWH/Hour (down by 728.04 MWH/Hour from the previous day). 1,960 MW was not generated due to unavailability of gas. 0 MW was not generated due to unavailability of transmission infrastructure, while 558.1 MW was not generated due to high frequency resulting from unavailability of distribution infrastructure.

“Nil was recorded as losses due to water management. The power sector lost an estimated N1, 209,000,000 (One Billion Two Hundred and Nine Million Naira) on December 29 2018 due to insufficient gas supply, distribution infrastructure and transmission infrastructure.

“The dominant constraint on December 29 2018 was due to unavailability of gas – constraining a total of 1,960 MW from being available on the grid. Peak Generation attained on December 29 2018 – 4,506MW. Peak Average Energy sent out ever – 4,557MWH/H (02 February 2016). Peak Generation attained ever – 5,222MW (18 December 2017). Estimated Amount Lost to Insufficient Gas Supply, Distribution, Transmission & Water Reserves to date in 2018 – N517,133,000,000 (Five Hundred and Seventeen Billion One Hundred and Thirty Three Million Naira only).”

Commenting on the situation, the Executive Director, Association of Nigerian Electricity Distributors (ANED), Barr. Sunday Oduntan, stated: “there are some challenges that need to be tackled by many stakeholders, especially the Federal Government, the DISCOs and gas suppliers. These include: lack of liquidity that hampers operations. Another challenge is energy theft which culminates in leakages and losses.

“The vandalism of facilities that occur too often is also a serious problem that leads to huge deficit. No bank would lend you money unless your business is bankable.
“Let me re-state for emphasis that this liquidity crisis is a major threat to the power sector. The revenue shortfalls adversely affect the ability of the DISCOs to make capital investments in metering, network expansion, equipment rehabilitation and replacement that are critical for service delivery.”

Corruption

In addition, the sector is also haunted by corruption. In one of its recent reports sent to Vanguard, the Socio-Economic Rights and Accountability Project (SERAP), stated: “Allegations of corruption in the electricity sector in Nigeria have had catastrophic effects on the lives of millions of Nigerians, akin to crimes against humanity as contemplated under the Rome Statue and within the jurisdiction of the court.

“Therefore, the staggering amounts of public funds alleged to have been stolen over the years in the electricity sector create just these consequences. Crimes against humanity are not only physical violence; allegations of corruption in the electricity sector hold a comparable gravity, which the Prosecutor should examine and thoroughly investigate.

“Corrupt officials and corrupt contractors in the electricity sector know well that their conduct is criminal and injurious, and the denial of human dignity coupled with a radical breach of solemn trust, aggravate their alleged crime.”

Impact

From construction, to education and from finance to manufacturing, the poor power supply has crippled activities in many sectors of the nation’s economy.

Immediate past President of the Manufacturers Association of Nigeria (MAN), Mr. Frank Jacobs, stated: “It is possible to gauge the loss suffered by manufacturers arising from paucity of electricity supply and high cost of alternative energy source. Capacity utilisation in the sector has barely been above 50 percent.

“This implies that the production has been sub-optimal; production value in the sector was estimated at N8.38 trillion in 2016. Another way of measuring the loss to manufacturers as a result of the challenges of electricity supply is by looking at the huge cost of alternative energy which was estimated at N129.95 billion in 2016.

“Even though the sector, especially the distribution aspect has been privatised, it is important that government should find ways and means of supporting the Discos until a stable, quality and reasonably priced electricity is available to the manufacturing sector.

“There is need for government to continue to offer integrated support to all stakeholders on the NESI value-chain i.e. manufacturers, GENCOs, TCN, and DISCOS in terms of finance and expertise.”

Expectation

From all indications, this situation will continue in 2019 and beyond, especially as the deep-seated problems may not be successfully tackled in a short or medium term.
Executive Secretary, the Association of Power Generation Companies (APGC), Joy Ogayi, said: “To bridge the gap between demand and supply of power, there is need for all parties of the power chain to be fully effective to bring about the installed capacity of 13,200MW to hungry consumers. However, this is not the case in the power sector in Nigeria.”

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