A financial expert and former executive director of Asset Management Corporation of Nigeria, AMCON, Mr. Kola Ayeye has decried the level of default of of key operators in the Nigerian Electricity Supply Industry (NESI).
He therefore called for the creation of a platform that will enable the Central Bank of Nigeria (CBN) and commercial banks to collaborate with the Nigerian Electricity Regulatory Commission (NERC) to reposition the power sector for a quantum leap in performance.
According to him, both electricity generation companies (GENCOS) and distribution companies (DISCOS) are seriously exposed, stressing that the creation of the proposed entities when put up will allow for reconcessioning/reprivatisation either through voluntary collaboration with CBN/NERC/banks or through receivership where the operator refuses to cooperate.
Ayeye who is currently the managing direc tor, Growth & Development Asset Management Limited (GDL) stated that the time has come to admit the failure of the last power privatisation exercise, and recommended a new program where NERC, CBN and banks should, on a competitive basis, invite a global player in the caliber of GE (General Electric) or such similar player to commit to generate, transmit and distribute a minimum of 20,000 MW daily within five years, increasing same to 30,000MW daily by the 10th year.
All such GENCOs and DISCOs, together with TCN, he opined, will be concessioned to this new operator. The new program will require collaboration between CBN, the banks and NERC.
He said this radical reform in the power sector is necessary to address the abysmal performance of the present players who have failed to deliver constant power to users in Nigeria.
Speaking at an interactive forum in Lagos, Ayeye said, “We will be contracting to pay for power successfully delivered to the consumer rather than contracting for the execution of power projects. Execution of power projects has produced very poor results after huge investments in excess of $16 billion.
“The nation has invested massively in power projects with poor results so we should change the model. Rather than contracting to execute power projects, let’s contract best-in-class players to deliver power.”
He advocated that the contract with the new concessionaire will be backed with a 10-year payment guarantee for power delivered to the consumer which will be provided either by AfDB, World Bank or first class international banks.
Ayeye added, “Let us find a partner who will take over available power assets across the entire value chain. But our commitment will be to pay for power delivered to the consumer. This contract will be between $8 billion to $12 billion, and is definitely of a sufficient scale to attract a global best-in-class operator.”
Speaking on the country’s tariff structure, he said investors should not use the nation’s current tariff as an excuse for under- performance of the sector, saying “Tariffs are no longer a big problem. The current tariffs are already close to international parity. Existing tariffs are very close to international averages. Across the 11 Power Distribution Companies, if you add the estimated bills, they may in fact be billing paying customers’ more than international averages.”
Authored By: Olushola Bello