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Market Digest Nigeria

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Osinbajo says FG will open power market to new investors

Osinbajo

The Federal Government is creating policies that will open up the nation’s electricity market to new investors in generation, transmission and distribution infrastructure, the Vice President, Prof. Yemi Osinbajo has said.

Osinbajo said on Thursday that resolving the power supply problem had been a top priority of the Federal Government in the past few years. He, however, said the current structure of the market could not deliver on the government’s promises for power for domestic and industrial use, adding, “A substantial change of strategy is being pursued.” Total power generation in the country stood at 3,586.5 megawatts as of 6am on Thursday, data obtained from the Nigeria Electricity System Operator showed. This confirmed The PUNCH’s report on Thursday that the Federal Government was considering repossession of 10 electricity distribution firms as one of the options to rescue the nation’s beleaguered electricity industry. This is coming ahead of the scheduled final performance review of the private firms that bought into the distribution companies carved out from the defunct Power Holding Company of Nigeria. However, document available to one of our correspondents shows that the Federal Government would require up to $2.4bn (N736bn) to repossess the privatised distribution assets from the core investors if it finally takes the decision.

Giving clue that it could recover the assets from the core investors, the Ministry of Power, Works and Housing in a document sighted by one of our correspondents has described the co-owners of the distribution companies as ‘failed investors.’ Osinbajo, while speaking at the inauguration of a 2x60MVA, 132/33kV substation built by Niger Delta Power Holding Company Limited at Abeokuta, Ogun State, on Thursday, lamented the inability of the distribution companies to distribute available grid power to consumers. He said, “Today we have 13,427MW of installed capacity, and an available capacity of 8,342MW. The national grid has the capacity to transmit about 7,000M, an increase from less than about 5,000MW in 2015. “But distribution capacity in the 11 Discos are significantly low, hovering at around 4,000MW on average with a peak of about 5,400MW. So despite the availability of about 8,000MW of generation and about 7,000MW of transmission capacity, lack of Disco infrastructure to absorb and deliver grid power to end users has largely restricted generation to an average of about 4,000MW.” According to the Vice-President, at the heart of that strategy is the Nigeria Electrification Road map aimed at deploying financing and technology on commercial terms agreed with transmission and distribution companies in partnership with the German government and Siemens.

On July 22, 2019, the Federal Government and Siemens signed a Letter of Agreement on the Nigeria Electrification Road map, a three-phase project designed to achieve 25,000MW of electricity in the country by 2025. “Second is the opening up of the market to new investors in generation, transmission and distribution infrastructure, transacting directly with each other to serve willing customers including deploying off-grid power and using micro-grids, especially for deployment of solar power,” Osinbajo said. According to him, the policies and regulations meant to empower customers to get the services they want at prices they agree to include the Independent Electricity Distribution Networks 2012; the Mini-Grid Regulation, 2016; and the Eligible Customer Regulation, issued on November 1, 2017.

He said, “The Electricity Distribution Franchising Regulation, which is still in public consultation preparatory to its issuance within a short period of time, sets out the rules for a distribution company to appoint or be compelled to cede consumers connected to a 33kV or 11kV feeder or a designated area to an agent or third party willing to make investments in lines, metering, transformers, other equipment and operations to serve the customers better at a mutually agreed tariff.” The Vice-President said these polices, when fully implemented, would enable the opening up of the market to new investors.

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