Years have gone by since the privatisation of the Nigeria power sector, which had a core objective of increasing the power supply efficiency to consumers. However, the goal is yet to be fulfilled despite several interventions. The first half of 2022 has recorded a significant drop in power generation capacities resulting in poor power supply to consumers. In what many call a wild dream, the Nigeria Electricity Regulatory Commission (NERC) has moved to enforce a new power purchase agreement (PPA). This move has stirred conversations among stakeholders on the feasibility of NERC achieving its proposed target.
The commission released a statement of its intent to develop a purchase agreement between the Nigeria Bulk Electricity Trader (NBET) and power generation companies (GenCos). The deal will have GenCos produce a minimum of 5000MW (5GW) to enhance the country’s electricity availability. However, stakeholders have begun questioning the possibility of GenCos achieving this target, given that the present generation capacity fluctuates around 3500MW. In an interview with the Guardian, GenCos emphasised that the sector constraints would pose a huge challenge for this target to be realised.
Access to a steady gas supply has always constrained a stable generation of electricity. Gas supply to GenCos has staggered around 13 per cent since the post-privatisation of the sector. This low supply has been attributed to the inability of GenCos to provide “securitisation” to gas suppliers ahead of supply. In an interview with journalists from This Day Newspaper, the Executive Secretary of the Association of Power Generation Companies (APGC), Mrs Joy Ogaji, explained that NBET was expected to provide the securitisation in the form of a bankable commercial letter of credit from a commercial bank. However, NBET had not given them such since privatisation in 2013.
Another constraint faced by GenCos is the rising debt. GenCos assert that they are still owed about ₦1.64 trillion from the previous agreement. Although the federal government has paid ₦701 billion to the gas suppliers, a significant amount is still owed.
These challenges highlighted contribute to the low generation capacity. Should GenCos meet their new targets, efforts must be made by the NBET to allow for a steady gas supply. Also, the government has to devise other means to clear up the debts to power generation companies.