As Nigeria moves out of economic recession, we explore some of the measures being implemented to restore the power industry to one that epitomises good governance and a regulatory framework that supports economic and investment growth.
The Nigerian power sector has gone through a period of reform and has been privatised, raising $3.1 billion for the Federal Government. New institutions and regulations are in place, all to be overseen by an independent regulator, the Nigerian Electricity Regulatory Commission (NERC).
ESI Africa recently spoke with an esteemed member of the Future Energy Nigeria conference Advisory Board, Olabode Sowunmi II, to delve into current sector developments, which are deemed proactive measures to boost foreign investment potential.
The market eagerly anticipates results from the Meter Asset Provider (MAP) and Eligible Customer Bill coming into effect. What is the potential for these laws to advance the sector?
The Meter Asset Provider (MAP) regulation introduces a new set of service providers in Nigeria responsible for the supply, installation and maintenance of end-user meters by other parties approved by the Commission. The MAP regulation is expected to fast track closure of the metering gap and encourages the development of independent and competitive meter services in the industry.
MAP provides a fresh pair of eyes in the form of independent private sector stakeholders tasked with offering additional perspectives on problem solving. Aside from that, MAP is expected to have an immediate impact on revenue management by reducing collection losses.
As the revenue processes become more streamlined and professional than the current system, the industry’s balance sheet can only improve. This will result directly from improved customer service. The increased revenue and operational efficiency will result in higher productivity levels and emphasis on data acquisition. Ultimately increased private sector participation and reduction of collection losses will attract and boost investor confidence.
On a similar note, NERC’s Eligible Customer regulation, which is not yet considered law, permits certain electricity customers to buy power directly from the generation companies, thereby bypassing the discos. The main effect on the discos is that of the reduction of collection losses, which is a critical aspect of the ATC&C losses.
Renewable energy projects are taking off in the country. How is this impacting the grid and the sector at large?
In my opinion, the single most important impact of renewable energy projects is the injection of financial investment into the industry and the economy.
The impact of renewable energy on the grid is resulting in increased and dedicated spending on the expansion of the grid. This is an obvious response to the expected input into the grid resulting from increased generation.
We need to be clear that this is purely an economic and entrepreneurial issue. Power and infrastructure investments look to developmental finance for its operations. Once we tick the right boxes and enter the business for the long haul, then the investment options will always be the right ones.
What regulation/policy is in place to protect developers?
The Nigeria Renewable Energy Master Plan (REMP) is a policy being implemented by the Federal Ministry of Environment. The aim of REMP is to increase the supply of electricity from renewable sources from 13% of total generation in 2015 to 23% in 2025, and 36% by 2030. Renewable energy would then account for 10% of Nigeria’s total energy consumption by 2025.
It is important to keep in mind that REMP was formulated in 2006 with support from the UNDP and the Energy Commission of Nigeria (ECN), which have some overlapping responsibilities to regulate renewable energy.
To my knowledge, there is currently no auction process in place such as the one in South Africa; however, given the evolving stage of the market, you can apply to the regulator for a licence for a desired service.
How are competing renewable technologies going to be managed, to operate effectively on the national grid?
Perhaps one of the more prominent functions of the regulator is to ensure that the prices charged for the technology are fair to all and sufficient to allow the licensees to finance their activities and obtain reasonable profit for efficient operations.
It is in that light that the regulator established a methodology for determining tariffs called the MultiYear Tariff Order (MYTO) that sets out tariffs for the generation, transmission and distribution of electricity in Nigeria. MYTO is a proactive response to the competing technologies issue. It takes into cognisance the circumstances and investment outlay that is particular to each technology and fuel source.
In your opinion, what role does governance play in enhancing investor confidence?
In order to boost investor confidence, investors need to believe that two things will happen. Firstly, that there is a level playing field for everyone. Secondly, investors must believe that individuals in the corporate system that have misbehaved will be punished. The tough rhetoric from regulators, judiciary, and politicians makes punishment seem very likely but it needs to be backed with actions as well.
Another important aspect is that investors need to see changes in the system that will preclude bad behaviour in the future. Finally, where laws and regulations are seen to be evolving and helpful to the free market enterprise, investor confidence will prevail.
How can stakeholders encourage foreign investors to capitalise on the opportunities within Nigeria?
There is the school of thought that the current approach to attracting investors needs to change industry-wide. From the participating companies to the Government Ministries Departments and Agencies (MDAs), many things need to be altered. First and fundamentally the organisations needing investments should set up an Investor Relations (IR) department.
An effective IR department will combine finance, communication and marketing to effectively control the flow of information between the company in question, its investors and stakeholders. In the modern economy, investors play a major and vital role in the success and growth of an organisation. In simple terms, new skills aimed at investor communication and encouraging investments need to be developed.
What is the country’s position on rural electrification and how is this area of the industry being pursued?
In August of 2016, the government came up with a developmental agenda called Vision 2020. The physical embodiment of this vision is to power 19,888 homes by the year 2020; i.e. supplying 9,388 solar panels to 5,342 communities that will affect 153,188 families.
The main agency in charge of this process, the Rural Electrification Agency (REA), is fully backed by law. The agency has the mission to provide access to reliable electricity for rural dwellers in a way that would allow reasonable ROI through an appropriate tariff that is economically responsive to the industry but also supportive of the average rural customer. ESI
Register to attend Future Energy Nigeria conference and exhibition is taking place at Eko Hotel in Lagos on 13-14 November 2018. Attend to meet with Olabode Sowunmi II and other industry experts. firstname.lastname@example.org