There is less willingness to invest in the Nigerian and African power sector because of revenue losses, inadequate regulations, lack of trust, among other concerns in the industry.
Sahara Group, a global energy player in power generation and distribution, disclosed this in its November 2022 report titled, “Energy Mix – The Challenges with Funding and Deploying Commercially Viable Renewable Energy Solutions.”
“Investors are less willing to invest in the African Power Sector at large due to some challenges,” the report, seen by our correspondent in Abuja on Thursday, stated.
It outlined other challenges to include: transmission and distribution losses, lack of cost reflective tariff, and issues around regulatory standards.
On transmission and distribution losses, the report indicated that this was mainly caused by inadequate maintenance, aged infrastructure (such as transmission lines), and slow expansion of infrastructure to match the growing population and development.
“This sometimes leads to trips and eventual system collapse which are significant financial losses,” it stated.
Nigeria’s power sector has been characterised by incessant system or grid collapse. The country’s power grid has collapsed about seven times in 2022, throwing many parts of Nigeria into darkness during the periods.
On cost-reflective tariffs, the report by Sahara Group stated that a significant number of African countries did not have cost-reflective electricity tariffs. Nigeria is not an exemption, it said.
“The electricity tariffs set by the country’s regulatory bodies are below the cost of generation and distribution for reasons of socio-political expedience,” the report stated.
It added, “This reduces the amount of money coming into the utilities which can impact their ability to fund the value chain. This can then create a liquidity crisis, which will deter private investment.”
It named the next challenge limiting power sector investment as bill collection losses from electricity billed to consumers but not paid for.
“This occurs when customers fail to pay their bills. These bill collection losses can also occur as a result of inadequate metering across the customer base,” Sahara Group stated.