20 June 2012

Nigeria: Unrealistic Tariff Impedes Investment in Power

The Nigeria Electricity Regulatory Commission, NERC, has linked the absence of cost-reflective tariff in the power sector as impeding on investors' confidence.

"The absence of a cost-reflective tariff is a key reason why the power sector has failed to serve Nigerians in the past three decades. Without a cost-reflective tariff, no utility provider will enter the market," the NERC Commissioner for Marketing, Competition and Rates, Mr. Eyo Ekpo has said.

He gave the hint at the Nigerian Economic Summit Group, NESG's forum in Lagos, noting that that the government alone can no longer sustain power supply in the country.

In a presentation titled, "Appropriate pricing and the future of Nigeria's Electricity Supply Industry," Ekpo said that the investment gap in the sector had increased immensely in the last three decades, adding that the wide gap is responsible for Nigeria's inability to equal countries like Brazil, South Africa, and Egypt, in power achievements.

Epko stressed that Nigeria required about $500 billion investments to guarantee constant electricity supply.

He, however, noted that apart from this volume of investment, Nigeria also needed additional $300 billion to achieve 10,000 megawatts generation capacity.

With the present population of the country, he said that there is the need to attract private investors to the sector in order to remove key challenges such as corruption and poor management.

He argued that with the intervention of the private sector comes in, the issue of low penetration of meters; the incidence estimated billings, and poor power supply will be abolished.

"By 2017, more investment will be recorded in the power sector. The Nigeria Electricity Supply Industry will need an average of $20billion per annum, to achieve 7,500 megawatts, excluding domestic gas investments," he said.

Ekpo said that within the next decade, state governments will develop the capacity to regulate market operations within their boundaries.

The NERC commissioner added that despite the power sector reform, the sector is bedeviled with lots of challenges such as the domestic gas market, and the inability of domestic banks to finance the power sector.

The Chairman of NESG, Mr. Phillips Foluso, said that the forum was aimed at creating an avenue for the power sector regulators to explain the rationale behind the recent increase in tariff.

Foluso argued that the private sector must be a key player in the power sector in order to achieve sustainable power supply in the country, while government provides the needed framework for measuring effectiveness and drive in the economy.

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