Nigeria’s power shortfall to hit N3trn by December 2016

Acting Chairman /Chief Executive Officer, Nigerian Electricity Regulatory Commission (NERC), Anthony Akah, has said that if care is not taken, the shortfall in the power sector will hit N3 trillion by the end of this year.

Akah revealed this in a statement over the weekend.

“This is like a doom’s day scenario because if care is not taken, shortfall in power sector will hit N3 trillion by end of 2016. The reason is lack of revenue attributed to the services provided but don’t get paid for”, he said.

In October, Nigeria Electricity Hub, an initiative of Nextier Power, said that the Nigerian electricity supply market will record an estimated N1 trillion shortfall by December 2016, which could lead to systemic bankruptcy and a risk of nationwide blackout if left unresolved.

The CEO of Niger Delta Power Holding (NDPHC), Chiedu Ugbo, also stated that since the establishment of the company’s first power plant in 2011, estimated energy invoiced by the eight power plants currently amounted to N235.4 billion.

Of this estimate, about 55.3 percent, he explained, has been paid while the remaining 44.7 percent is still outstanding and owed by the Discos, and as of August 2016, debts owed the company by the market stood at N105 billion.

“The implication is far reaching: capacity utilisation, low productivity, inability to meet obligations, asset replacement issues and finally it challenges them as a going concern,” the NDPHC boss said.

While speaking, Akah described the huge shortfall as a “doom’s day scenario”, saying it came about as a result of services rendered by the different strata of the sector yet-to-be paid for by consumers.

He mentioned power theft, metre by-pass, unpaid bills as some of the causes for the shortfall.

He then explained that power loses are usually estimated and added to the bills/tarrifs of those customers with metres.

The Chief Executive Officer, Association of Nigerian Electricity Distributors (ANED), Azu Obiaya, had earlier assessed the liquidity challenge from the perspective of the Discos.

Discos are experiencing a revenue shortfall of N38 billion monthly and that the government alone, through its ministries, departments and agencies (MDAs), currently owes the Discos about N58 billion, he said.

This, the ANED CEO said, could amount to N309 billion by the end of the year, and that the Discos’ books no longer reflect cash flows that were necessary for lenders to accept funding their ongoing projects.

He also noted that as of December 2015, the Discos were experiencing a revenue shortfall of N298 billion due to the non-cost reflectivity of MYTO.0, a tariff plan then in force in the power sector in Nigeria.

As a result of this, the NERC approved electricity tariff increases to raise liquidity for the sector but its implementation was suspended for about six months, resulting in losses of about N13 billion for the Discos.

Apart from these, other losses are coming through inflation of the naira and its weakness against major international currencies as well as from pipeline vandalism.