By 2018, Nigeria’s electricity distribution companies, DisCos, would have lost a whopping N164 billion to under-recovery of cost otherwise known as sculpting.
According to the Executive Director, Association of Nigeria Electricity Distribution Companies, ANEDC, Sunday Oduntan, sculpting, or cost under-recovery will result in N164 billion revenue shortfall for the period of 2016 through 2018.
He said shortfalls of the power sector is as a result of the numerous challenges faced by it.
“Indeed, anyone who has been following the privatisation of the Nigerian Electricity Supply Industry, NESI, would recognise that the sector has been bedeviled by a number of challenges that would make the most hardened risk – seeking investor to run in the opposite direction,” he said.
“The absence of a cost covers regime, regulatory uncertainty, customer non-payment of their bills, limited to no access to financing, gas supply limitation, neglected and aging power turbines, among others,” he listed as part of the challenges of the power sector.
Adding, he said, if the Genco and DisCo are being accused of anything, “it is that they believed in their country, and had a strong desire to put their money at risk, behind that belief, rather than those who may be considered nothing more than armchair experts, with a reluctance to dip their toes into the water”, he said.
“We have reduced technical and commercial losses, improved billing system, improved ICT and GIS infrastructure, set up call centres addressing over 2 million queries from customers, reduced down time due to improved maintenance and upgrades,” he listed among achievements of the sector.
On the issue of lack of adequate capital by the investors, Oduntan pointed out that – most of the generation assets were sold outright, with sale of the distribution assets structured on a 30%/70% equity and debt split, the tariff is also structured along same lines for Discos operations, the split between equity and debt follows conventional knowledge that it is cheaper to fund operations via debt than equity, adding that tariff does not allow for a complete cost recovery.
On Dangote’s assertion that investors “went in without even understanding what they were doing,”, Oduntan said “it would be difficult for anyone to suggest that people, seasoned and successful investors who committed $2.3 billion of their money, 30 percent or $690,000 of which is equity, did so without knowing what they were doing,” he said.
He said ANEDC does not believe that reversal of the privatisation is solution to the challenges of the sector.
“As a matter of fact, we believe that the Federal Government’s application of some of the favourable terms that Alhaji Dangote and his companies have, historically benefitted from – import and tax waivers, favourable terms of access to foreign exchange, FGN credit guarantees, etc, would go a long way towards addressing the challenges that NESI is currently facing,” he said.
He said while the FGN must be commended for pursuing the courageous direction of seeking to rehabilitate and revive a moribund sector of the economy, it must stay on course of the journey.
“It is a journey that has potentials for resulting in the growth of our economy, for minimising the huge drain on public coffers, for redirecting scarce public resources…,”he said.
As per the improvements required to push the sector to stability- total cost recovery, uninterrupted gas supply, increase in sector funding, curbing Energy theft, ready access to Forex and improved transmission capacity, Oduntan listed.

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