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BUSINESS & ECONOMY

Power Sector Fails To Reflect 114.3% GDP Growth, Generates 3,221MW

Despite massive interventions which have resulted in a 114.3 per cent growth in GDP growth, the performance of the Nigerian power sector has remained abysmal, recording less than 4,000 megawatts of electricity, which experts say does not reflect the growth.

Data from the National Bureau of Statistics (NBS) showed that the electricity, gas, steam and air conditioning supply sector recorded a year-on-year growth of 114.30 per cent in the second quarter of 2021.

This was 105.66 per cent points higher than the 8.64 per cent growth rate recorded in the corresponding quarter of 2020, and 83.60 per cent points higher than the growth rate of 30.70 per cent recorded in the quarter before. Quarter-on-quarter, the sector recorded a growth rate of 281.45 per cent in Q2, 2021.

The report also showed that in real terms, the electricity, gas, steam and air conditioning supply sector increased by 78.16 per cent in Q2 from 8.66 per cent in the first quarter of 2021 and  -3.00 per cent in the second quarter of 2020.

However, power generation data from Nigeria’s System Operation (SO) showed that the country’s electricity generation stood at 3221 megawatts as at September 14, 2021, a far cry from its 13,000 megawatts capacity.

Analysts say recent reforms to improve cash returns, such as higher tariffs, higher meter supplies and federal government’s financial interventions in the sector have had some impact.

According to the managing director, Credent Investment Managers, Mr. Ibrahim Shelleng, the increase in this sector is attributable to an increase in electricity tariffs which have gone up by almost 100 per cent.

Shelleng noted that the price increase will have a positive impact on output as demand tends to be inelastic. Therefore the whole power sector value chain from generation, distribution to consumption will see growth.

“The 114.03 per cent year-on-year growth of the electricity, gas, steam and air conditioning supply sector’s GDP value was largely attributed to the increase in electricity tariff in the country based on the directive of Nigerian Electricity Regulatory Commission (NERC) in January 2021,” a business management consultant & energy policy advisor, Mr. Michael Faniran, told LEADERSHIP.

Faniran explained that the sector’s contribution accounted for only 0.8 per cent of the total real GDP. This represented a huge growth compared to 0.22 per cent recorded Q1.

“Electricity is more or less a support sector. Improvement in power supply will be felt across many sectors beyond the electricity, gas, steam and air conditioning supply sector. It should be noted however that the sector is not entirely about electricity supplies, it includes others like gas, steam and air conditioning.”

“CBN intervened to the tune of about N2trillion in the power sector at the end of 2020. That’s about 6 per cent of the CBN balance sheet.

“Despite this level of intervention, generators estimated accounts receivable was in excess of N400 billion in 2020 alone. Interventions are central to ensuring operator’s profitability along the industry value chain. Has played a key role, but remains inadequate and unsustainable,” analysts at Agusto & Co said in a recent report.

The Agusto & Co report observed that since the privatisation exercise that commenced in 2013, the Nigerian electric power industry has remained fraught with many of the same challenges ranging from unreflective tariffs to high loss levels, obsolete infrastructure, weak policy implementation and gas shortages.

“All of these have culminated in weak and erratic power supply and a dependence on self-generation by many businesses and households.

“Furthermore, electricity distribution in Nigeria remains plagued by high technical, operational and commercial inefficiencies. In 2020, the country’s 11 Distribution companies (DisCos) only billed for 74 per cent of the energy received from the transmission company, below the 81 per cent reported in the prior year.

“Billing efficiency which has historically been impaired by a low metering rate and energy theft, with only 37 per cent of registered electricity customers metered in 2020.”

It also revealed that collection efficiency also fell marginally to 66 per cent from 68 per cent one year prior, and consequently, the aggregate technical, commercial and collection (ATC&C) losses for the 11 DisCos rose to 51 per cent in 2020 from 45 per cent in 2019. This high loss level remains one of the many reasons for the kickback from electricity consumers on tariff increases, especially in the absence of a significant and immediate improvement in power supply.

 

SOURCE; https://leadership.ng/power-sector-fails-to-reflect-114-3-gdp-growth-generates-3221mw/

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