The Minister of Power, Adebayo Adelabu, last week in Abuja, while giving the 2023-2025 Performance Report on the Nigerian Electric Institute (NESI), addressed the press on the state of power generation which has slowed down economic activities. The minister, who gave the breakdown of achievements and the challenges the sector is presently undergoing, said only performing DisCos will have their licences renewed when they expire in 2028. TAOFEEK LAWAL brings details:
NE would like to congratulate you on your achievements so far and the challenges that you have listed too. You said the power situation will improve soon. Can you be more specific on when you expect things to improve from where we are because things are very bad?
You asked me to be specific. Now I will be specific and when to expect improvement because it is not a situation that we also desire. Everybody feels it you know specially when we had a good 2025 and we are not starting 2026 on the same pedestal. So, I can tell you, with the committee that we have set up and some comments that we have from gas suppliers and the timeline for repair of the gas pipelines, I can tell you, two weeks from now, we should start seeing improvements in supply. Two weeks. And why I said two weeks the reason is, we already have a view of when the repair will be completed, especially the one from Seplat. And we already have a committee that is working on this to also track the compliance with the domestic supply obligations of these gas companies to our power plants. And we also feel that once part of the payment starts coming in, it will also encourage the gas suppliers.
How much is owed gas suppliers?
I can tell you that the amount we owed GenCos which is estimated and is being reconciled when we said N4 trillion at the end of 2024, it was audited and it was agreed that N2.8 trillion was owed because of the interest elements and the FX throw up element of it. The number of generating companies have agreed while some are still discussing back and forth. But now that we are talking about N6 trillion for the generating companies, by the time they are done with the reconciliation, probably it will be about N4 trillion total. So, what I can tell you is that a proportion of this, which is no less than 60 percent, is being owed to the gas suppliers. I hope that is clear.
You said there are about $3 billion in private sector investments so far. Can you give us a little bit of a direct aspect of these investments? Is it in the GenCos aspect? Is it in transmission? Or is it in distribution?
When you said private sector investment, yes, we have about $2 billion investment to-date. And this is across all the segments involved from generation to transmission to distribution. We have new power plants that have been established by private sector investors. We have a number of investments in the distribution end too by private sector but, more importantly is in renewable energy investments. We have a lot of private sector vendors that are even taking advantage of some programs from the development partners. You know, we have the DARES, the Distributed Access through Renewable Energy Scale-up, we have the NEP, the Nigeria Electrification Project, whereby the private sector investors are bringing funds which is being subsidised by these development partners by the government. So, we have about $2 billion in two years and we believe this can only go up.
In reviewing the performance contract of DisCos, what can you say?
Now, to have more healthy DisCos, let me tell you something. The performance standards expected of the DisCos at the time of acquisition in 2013 were not met at all. But at the time they were to be taken up on this, it became litigious. Because the DisCos said government also failed to perform what was expected of them. so it became messy. But since we came in, we have set new performance standards, which we are holding the DisCos to. We are not only setting the standards, we are also taking steps to ensure that they meet up with these standards especially for those that are newly acquired by new investors.
I will also try to give them support. Part of the support is the DISREP, the Distribution Sector Recovery Programme. It’s not focusing on meter acquisition alone, it is also focusing on infrastructure revamping, a major infrastructure of this DisCos that will enhance their service delivery. Also in it, we have the PPI, the Presidential Power Initiative that is extending some very good credits. I mean credits at good rates to the DisCos to enable them revamp the infrastructure, improve the service delivery and enhance their revenue connection out of which these loans will be paid back.
But the DisCos are holding a 15-year licence that is elapsing in 2028, that’s 2013 to 2025. In fact, when we came we thought it was a 10-year licence until we discovered that it was extended by another five years. But this is 2026, so we are looking at another one or two years for the licences to expire by which time new set of performance standards can be set and it’s only those that we believe can meet these standards whose licences will be renewed. That is the only time you can wield the big stick on the DisCos, you understand. It will be a fresh deal entirely; it is those that can convince us that they will meet up with the standards that will get renewal of their licences. Let them enjoy the music while it lasts between now and 2028 even though we are still not leaving them alone.
Why are gas companies exporting when we don’t have enough in Nigeria. Are they not supposed to respect the Domestic Supply Obligation?
The Domestic Supply Obligations (DSO), thank you for asking that question. It’s our local resources and everywhere in the world, we are mining our local resources, exporting it, you must satisfy local appetite first, which is what leads to Domestic Supply Obligations (DSO), which says a percentage of your production must be sold locally to industries, to power, before you start exporting it overseas for profit. But DSO did not say they should not be paid. The only condition where you may not even meet that DSO or when you don’t meet it you cannot be tried for it, is when you supply and you are not paid. You get that, if you supply and you are not paid.
But DSO is also at concessional pricing which is lower than your export pricing. So, you cannot suffer from two ends. You are selling locally at a lower price, and when you sell, they are also not being paid. It’s a reason for you not to supply. So we are saying that we are owing trillions of naira to gas companies. You cannot blame them. But, we are only going to appeal to them.
Let them know the importance of their activities to the entire nation. And I believe our committee will work on it. We would also continue to engage the Federal Ministry of Petroleum (gas) to ensure that we sit down with these gas suppliers so that we’re able to come up with workable and practical solutions to this problem. Why they should not be owed, why the power plants must have firm supply contracts, because power is key to our economic development and industrial growth.