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TCN2It was widely anticipated that when the Nigerian power sector was privatised that new investment would bring increased capacity and efficiency to the sector. If anything it has excacerbated the legacy issues and highlighted the risks that investors are keen to avoid in emerging market ptojects. The sector is currently trading insolvent in part due to poor policymaking on the part of the Regulator, but also inherent structural deficiencies the stakeholders seem powerless to overcome.  The Distribution Companies are unable to either distribute power to their customers or indeed collect payment for the power they do distribute. The Transmission Company of Nigeria (TCN), operate a network which is incapable of tramsitting more than 60% of the energy that is produced and requires substantial investment from the Government. As a consequence the Nigerian Bulk Trader (NBET) that was set up to eliminate counterparty payment risk and boost investor confidence owes over NGN1Tr in  outstanding payments to the Generating Companies (GenCos.This in turn has resulted in a liquidity crisis for the GenCos which rely on gas supply as they are unable to settle their accounts with the gas companies.

The Transitional Energy Market  (TEM) was always going to be a work in progress and there are clear signs that both the Regulator (NERC) and the Government policymakers realise that in order to attract investment into the sector the Investors must be able to obtain a yield which  aptly prices risk. Contracts have to be invoilate and fastidiously enforced. The process of eliminating estimted billing must be accelerated as must the work being done with the World Bank to improve network efficiency.

A good policy step is the Eligible Customer policy which is contained in the Electric Power Sector Reform Act (EPSRA) and when perfected in practice should provide significant improvement  to manufacturing hubs.  You can Download our report which provides an overview of the sector.


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