A possible solution to the problem of liquidity crunch facing eleven power Distribution Companies (DisCos) in Nigeria is to start supplying 50percent of distributable electricity to Nigerian companies, a new report by consulting firm PricewaterhouseCoopers (PwC) has said.
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PwC, an international auditing company suggests that by providing companies who are willing to pay N80 per kilowatts about 50percent of distributable electricity, Nigeria’s Discos can ultimately solve their liquidity challenges.
“To revitalize liquidity in DISCOs, we consider 50percent of energy received by DISCOs is transmitted to industries at a cost-reflective rate of N80/Kwh… At N80/Kwh charged to industries, an estimated N400 billion will be injected into the power sector annually,” PwC said in a recently published report titled Solving the liquidity crunch in the power sector.
PwC Nigeria noted that liquidity crunch is the most worrisome challenge facing the power sector as the tariff framework or the electricity pricing structure in Nigeria is non-cost reflective because “industry participants often complain that electricity charges to customers do not reflect the cost of generation, transmission, and distribution.
PwC Nigeria admitted that inadequate gas supply, limited transmission lines, among others are the biggest problem facing Nigeria’s electricity sector.
PwC’s report explained that operational inefficiencies, poor water management at hydropower plants and inadequate and obsolete distribution infrastructure are other issues facing the sector.
The report noted that, gas-fired power plants account for more than 77 per cent of total electricity generated compared to 71 percent in Q4 2018 while hydro sources accounted for 23 per cent compared to 29 percent in Q2 2018 as insufficient gas supply and variability in rainfall and water level at hydro plants, among other challenges, continue impact power generation in Nigeria.
The report also noted that only 60per cent of Nigeria’s population has access to electricity, meaning that the remaining 40per cent is completely cut off. Interestingly, even the 60per cent do not get quality service because electricity supply is epileptic power, Gencos want Discos’ job as it seeks to sell electricity directly to customers.
“As one can expect, there are many problems facing the Nigerian power sector. A lot of these problems bother on inadequate production. Also, the means via which generated electricity is transmitted also presents another major challenge, the report explained.
