Minister of Power, Adebayo
Adelabu in conjunction with the Ministry of Petroleum Resources (Gas) has set
up a ministerial committee towards resolving the crisis associated with gas
supply to power Generating Companies (GenCoc) in the country to enhance general
improvement across the power sector value chain.
The
committee will be made up of representatives from the two ministries, gas
suppliers, the Nigeria Electricity Regulatory Commission (NERC) and
stakeholders in the electricity value chain.
The Minister also had a separate
meeting with foreign development partners operating in the country on Thursday.
During the meeting, Adelabu lauded the group’s
developmental role in the power sector over time and urged them not to relent
in their continued support.
Adelabu’s Special Adviser on
Strategic Communication and Media Relations, Mr. Bolaji Tunji in a press
statement explained that the minister also briefed the partners on the Federal
Government’s transformation master plan, under the power ministry, to improve
power supply across the nooks and crannies of the country.
He said: "When we resumed
here, we spent the first three months to diagnose and investigate issues that
have affected development in the power sector and why the sector is still at
the level it is today and the factors militating against the turnaround that is
envisaged in the sector.
“We consulted, we engaged all the
stakeholders. At the end of the diagnosis and investigation, we had a full
understanding of the situation. We discovered that most of the problems in the
sector are not all technical or engineering-related, it actually has to do with
liquidity, funding, structural or operational issues which anybody, that has
the commitment, could resolve. Though they are simple issues, they are in multiples,
complicated and permeating all the sectors in the value chain.
“We met as a team to provide
practical solutions and came up with a timing template on those issues that can
be resolved in the short term, mid-term and those that can be resolved on the long
haul and we capped these activities up in December, last year when we had a
ministerial retreat where we had the various stakeholders, cutting across the
value chain, in attendance. We had serious discussions that lasted three days
where we came up with what we have to do. We are focused on providing workable
solutions to the various issues.”
He emphasized that the main
problem of the sector is liquidity and funding, adding that the sector is
supposed to generate funding if allowed to operate on commercial model whereby
all the costs attributed to generation of power, transmission and distribution are
recovered through the tariff while the operators are given a good mark up. All which
leads to a cost reflective tariff which is how the sector is supposed to
operate. With this, there would be sustainability of the sector. There would be
continuity in production, transmission would be seamless while distribution
would be impeccable, he said.
He however noted that the sector
is not allowed to charge cost reflective tariff. “Government promised subsidy
which is not a problem, but that is when government does its own part with
timely release of money. Once the sector
suffers from liquidity challenge, there would be no investment in the sector
and that is why the structures are dilapidated. It's important we resolve the
liquidity issue," he said.
Adelabu also spoke on the role of
the states in the power sector, adding that the DisCos, as presently
constituted, should be unbundled along state lines. “We need to encourage the states
to have their own power generating company, encourage them to establish
structures for transmission and distribution. Each State government must also
start showing interest in those in charge of distribution in their states,
while the federal government can track generation and transmission, the states
should be able to track the distribution companies,” he said.
The Minister also spoke on
strategy that the ministry would adopt to ensure incremental improvement in
power supply in the country. These strategies include ensuring that the Rural
Electrification Agency (REA) live up to expectation by serving the underserved
and the unserved rural communities that may not be commercially attractive to
the Discos; focusing on distributed power by intensifying effort to raise
volume of renewable energy to national capacity, with focus on developing small
hydro power plants along the 26 small dams in the county.
“We can hybridized this with
solar when the water level goes down,” he said.
He added that solar option is
being considered for the northern part of the country including use of
windmills to generate power off shore along the coastal part of the country.
Responding, the development
partners made up of representatives from the European Union (EU), United States
Agency for International Development (USAID), United Nations Industrial
Development Organisation (UNIDO), the World Bank, United Kingdom's Foreign,
Commonwealth and Development Office (FCDO), Japan International Cooperation
Agency (JICA), African Development Bank (AfDB), Agence Francaise de Development
(AFD), Embassy of Norway in Nigeria and Germany’s Deutsche Gesellschaft fur
Internationale Zusammenarbeit (
GIZ) commended the minister for the
comprehensive diagnosis of the challenges in the sector including the
government's transformation plan adding that they would need to further organise themselves in order to avoid overlap
of functions.
They also assured Adelabu of their
continued support since his briefing has given a clear direction on how to
resolve some of the issues in the power sector value chain.
Also at the meeting with Minister
of State, Ministry of Petroleum Resources (Gas), Hon Ekperipe Ekpo, the two top
government officials acknowledged the need for innovative thinking in resolving
the gas supply challenge to the GenCos.
Adelabu said the two ministries should work together to
find a lasting solution to the problem, wondering why the issue of gas supply
to the power sector was not prioritized in view of the importance of the sector
to economic development.
He also suggested that payment of domestic gas
supply should be denominated in naira instead of dollars. “If we are serious
about the economic development of the country, we need to solve the problem of
gas supply today. We should look at the possibility of mandating the gas
suppliers to price in naira. The domestic supply is just a fraction of what the
gas suppliers supply to the international market, so paying in naira should not
be a problem,” he said.
Unlike what operated in the past,
Adelabu added that in order to further resolve the gas supply challenge, the GenCos
must enter a contractual arrangement with the gas suppliers.
“With such contractual
arrangement with gas suppliers, the minimum requirement that should be supplied
to the generating companies would be clearly stated, thus eliminating the
present situation where the generating companies are only operating at about 20
per cent of their installed capacity," he added.
Adelabu stressed the importance of liquidity
in the power sector value chain. “We cannot over emphasized the importance of
liquidity in the sector, the generating company have to cover their overheads,
maintain and service their machineries, most importantly, pay for gas which is
the raw materials needed for production. The only way to sustain production is
payment,” Adelabu said.
Also speaking, Hon Ekpo said the
major challenge with the gas supply is vandalism of the gas pipeline in the Niger
Delta which has affected production from the Nigeria Liquified Natural Gas
(NLNG) company which is producing below capacity. He however assured that the
OB3 line which supplies gas to the northern part of the country would soon be
commissioned to enable supply to the northern part of the country.
“Knowing the importance of gas
supply to GenCos and the industries, we held a stakeholders’ meeting on Tuesday
with gas suppliers in order to know why there has not been adequate supply of
gas to generating companies, we need to
work together to resolve this,” he said.
Ekpo also agreed with the
suggestion that payment for domestic gas supply should be in naira. “However, this should be legislated on. We
can both meet Mr President on this, once we agree on modalities as he is the
only one that can give the directives,” the minister said.
He expressed concern about the
vandalism of the pipeline in the Niger Delta adding that his major concern is
to find a solution to the problem.
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