Why is PSRP important?
The Nigerian power sector faces several challenges which the government has identified
- Infrastructure constraints: Nigeria has 13,400 MW of installed power generation capacity of which on average about 7,000 MW is mechanically available. On average, less than 4,000 MW was dispatched to supply consumers between 2015 and 2017 due to constraints in gas supply, electricity transmission, and distribution. As a result, the lack of constant electricity supply has negatively impacted payment by consumers, contributing to revenue collection shortfall and consequent accrued sector cash deficit.
- Sector cash shortfalls: Due to end-user tariffs only reaching a cost recovery level for a brief period since June 2012, significant cash deficits have accumulated across the sector value chain. By 2019 the tariff shortfall (deficits caused by tariffs lower than the cost of service delivery) were estimated at ₦524 billion which had to be met through FGN budget allocation causing funds to be diverted from other social programmes.
- Slow pace of loss reduction by DisCos: The design of the power sector reform makes the viability of DisCos critical to the long-term sustainability of the power sector. NERC’s key performance indicators show DisCo performance declining. Lack of investment in network rehabilitation (in part because of low tariffs) and metering has seen losses remain persistently high and service to customers little improved.
- Ministries, Departments, and Agencies (MDA) debts: The MDAs on aggregate owed the electricity industry an estimated ₦26 billion as of the end of 2016, contributing a significant portion of the accumulated cash deficit in the sector.
There is a broad political consensus and strong commitment to start turning around the sector through implementing critical actions of the PSRP, some of which have already been taken.