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Am I to Expect Improved Power Supply in 2017?

Proshare

Monday, January 09, 2017/ 4:02 PM /FDC

The power grid currently has an installed generation capacity of about 12, 500MW of which 10, 500 is generated from gas and 2,000MW from hydro plants. Yet, the power grid currently produces about 2,000MW – 4,000MW and only peaked at 5, 074.7MW before the valentine day massacre in the creeks of the Niger Delta.

Barring the constraints on the generating capacity of the grid, the transmission networks are even worse in terms of transmission capacity. The existing transmission system can only deliver 5,300MW of the installed generating capacity (12,500MW) to the Discos.



The Discos on the other end of the spectrum are faced with financial constraints. The debt burden of dollar denominated loans used to pay for the acquisition of the distribution companies continues to grow as revenue generated (based on the MYTO) is denominated in naira.

Furthermore, the revenue collection has proven difficult as unpaid electricity bills from the MDAs, commercial and residential users continue to mount up (approximately N1trn).

The trilemma in the power sector requires more than 365 days to be resolved. Investing in infrastructure needed to eliminate constraints and improve generating and transmitting capacity is a starting point. The ownership structure of some of the assets will have to be transferred to investors that are in a better position to manage operations more efficiently.

A comprehensive bailout package will be required to stabilize the finances of the distribution companies. Other forms of generating power that are less susceptible to gas pipeline vandalism (such as hydro & solar) should also be explored.

Power supply could improve in 2017. A lion share of the 2017 budget (N529bn) has been allocated the Power, Work & Housing.

While the amount is only sufficient enough to cover one of the three units, the Minister is more likely to focus on power, a sector which has a multiplier effect on the productivity (particularly labour productivity) of an economy.

Hence, power supply may improve marginally in 2017 but not significantly. The constraints within the sector are too grand to resolve within a fiscal year.

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