Nigeria’s power sector still has a long way to go - CNBC Africa

Nigeria’s power sector still has a long way to go

Western Africa

by Dara Rhodes 0

Nigeria is currently generating a little over 4,000 megawatts. Photo: Getty images

However, with the electricity supply situation worsening in recent weeks due to an acute shortage of gas to thermal power stations, shutdown of some plants for maintenance purposes and the failure of at least seven plants to generate power at all, the sector has a long way to go in fulfilling its promise.

“Obviously the privatisation is quite a landmark process and now we are moving into the second phase. We’ve had these legacy assets which have been sold on the generation and distribution side, I think the key issue really for those who bought assets from a commercial point of view is, how they can add value to those assets and get returns,” Rolake Akinkugbe, Head of Energy, Oil and Gas Research at Ecobank told CNBC Africa.

According to her, the various regulatory reforms in the markets such as the tariff re-structuring will improve costs covering for a lot of the investors going forward. While many experts worry that the companies that have taken over the assets are not financially viable, she is certain that one can’t generalise.

“There are some companies who are still going to look for additional technical and financial partners who are still looking to raise equity. Certainly, we as a bank have been involved in some of those projects in terms of finding additional sources of funding and actually spreading the risks from a capital perspective across multiple sources of investors,” she explained.

Nonetheless, the government needs to create a steady environment for investors as they would want to ensure gradual investment in an environment that has saved a tariff increase over time.

“The stability of that tariff system is particularly important because it needs to continually reflect the market rate for electricity and of course the cost of gas so gas supplies are going to be particularly critical in this market as well.”

On the other hand, whereas many Nigerians continue to be expectant of the rewards of this process in the country’s power sector, Akinkugbe is certain that the sector still has a long way to go.

“To be honest, we are not going to see the fruits of this privatisation for a while yet because we are coming from a very low base where Nigeria is generating just a little over 4,000 megawatts which is a long way from the peak demanded of around 13, 000 or 14,000 so we still have a long way to go,” she added.

Nevertheless, with the right regulatory framework and with the opening up of the capital market, funding or financing sources as well as involvement of multinational institutions in terms of providing gas, Akinkugbe believes that there is light at the end of the tunnel.