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Do not expect government subsidy on power

by Business News Report

The federal government has ruled out any form of subsidy funding for the power sector, which some operators suggest may provide a way out for the prevailing liquidity crisis.

The Minister of Power, Works and Housing, Mr. Babatunde Fashola, who spoke at the monthly Nextier Power Dialogue in Abuja on Wednesday night, said government considers that the N213 billion Nigeria Electricity Market Stabilisation Fund (NEMSF) which the Central Bank of Nigeria (CBN) is providing is an adequate subsidy for the sector.

He said the facility, which is a low-interest loan with some moratorium, has been accessed by some operators already to upgrade their assets and services.

Fashola said: “Subsidy appears in different forms. When I resumed in this sector, I was made to understand there is an existing CBN fund for the market. The CBN fund comes at a low interest rate. If that does not qualify as subsidy, then I don’t know what else qualifies.”

CBN started the NEMSF in 2014, and by 2016, records show that 24 industry operators including three Distribution Companies (DisCos), 14 GenCos, with the National Independent Power Plants (NIPPs), a service provider, and six Gas Companies (GasCos) have drawn from the fund.

In December 2016, spokesman for the Association of Nigerian Electricity Distributors (ANED), Mr. Sunday Oduntan, said the shortfall in the power sector was N803 billion, adding that government could explore many options to boost liquidity by providing subsidy, giving moratorium on the CBN facility to operators, and domesticating the price of gas to ramp up declining power generation.

As at yesterday, peak power generation had dropped to 1,973 megawatts (mw) from the 3,100mw obtained at the weekend, the Nigeria System Operator (NSO) updates revealed. This year, there has been three system collapses with the recent one occurring on Wednesday when generation fell to 49.2mw.

An industry source told our reporter that the constraint of gas supply to the 23 thermal stations had worsened.

“The huge debts owed for gas, and recent attacks of gas facilities are limiting supply to the power plants. For instance, an oil/gas pipeline facility blew up this week in Ughelli, Delta State and it connects critical Generation Companies (GenCos) like Ughelli, Sapele, Benin GenCos,” the official said.

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