Attracting private sector capital will improve power generation and rural electrification

Solomon Ezeme

Since the presentation of the Appropriation Bill by the Presidency on Thursday, October 7, various stakeholders and industry experts have given their opinions and suggestions, discussing its feasibility and prospects for the sector if it is eventually assented to.

Analyzing the proposed budget in a chat with EnergyDay, energy finance/research and investment expert, Olawunmi Olatunji who is also the CEO of Brockville Investments Limited (an Asset Management firm), said that the best approach the Government can take to improve power supply, generation, distribution and rural electricity access, is by attracting private sector capital through tax concession and subsidy.

She spoke about the huge deficit in power generation, rural access to electricity and Nigeria solar power projects such as the ongoing 3,050 MW (Megawatts) Mambilla Hydropower Plant Project ( soon-to-be largest power-generating installation), among other issues in the power sector.

Mrs. Olawunmi emphasized that if the Government could use the budget to influence resource allocation through tax concessions and subsidies to private investors, there will be increased power generation, transmission expansion & distribution, as well as, improved access to electricity in rural communities.

She stated that private capital will help the Government develop the power sector if it could grant subsidies and tax concessions to private entrepreneurs, both indigenous and foreign.

She was of the view that the approach is less difficult to achieve and will be more advantageous to the sector, on the long run.

“The Mambilla Project is highly controversial and twisted. It is a project that has been conceived since the 80s. There has continued to be delays on the project.

“If you look at Azura-Edo Independent Power Plant, it is a $900 million investment involving 16 different bodies, local and international.

“It started in 2016 and was already completed by 2018, earlier than was planned. About 460MW of electricity is now being generated at that plant.

“This kind of project is a good indication that private partnership, equity or investment is more effective. So, we can learn something from it for the Mambilla case.

“Private capital will go a long way once the government is able to establish very significant concessions that will help in the power sector.

She explained that Nigeria has a huge power infrastructural gap which has contributed to the challenges of its power distribution.

“There is this huge deficit in our power generation. Currently, we generate about 12.5MW, but our distribution hovers around 6000MW.

“In allocating the budget, focus must be on empowering private sector capital to improve supply – generation, transmission expansion, distribution, and rural electricity access. All the losses and things that we’ve had should be eliminated.

“Through budgetary allocation, government can come about improving those areas by encouraging investments in ways such as giving some sort of concessions.

“This could be through subsidies or tax concessions that would encourage investment into the nation’s power sector,” she said.

She further explained that infrastructure development is key to economic growth, especially in the power sector.

She stated that poor planning and funding have both led to the infrastructural gap in the Nigeria power sector.

She noted that : “If you look at the energy sector, the infrastructural gap we have is as high as having the need of a $1 trillion over the next 30 years, to cover what we need in infrastructure.

“Fortunately, this can actually be gotten from budgets that has been allocated from debts, from private capital or from public-private partnerships.

“Infrastructural development is a precursor to economic development, here in Africa or any other part of the world.

“It’s been laced with several problems – poor planning, poor funding, and these have resulted in the huge infrastructural gap we now see.

“The lesson here is that commercial infrastructure development is easier and more sustainable if we focus more on encouraging private capital.”

In the 2022 Appropriation Bill presented to the National Assembly, the Federal Government proposed an allocation of N301.26 billion to the Federal Ministry of Power to help the nation improve its power generation, transmission and distribution to electricity consumers, especially in rural areas.

N294.99bn was appropriated for capital projects, N4.87bn for personnel and N1.36bn for overhead costs. N114.64bn – about 38.86% of the total amount budgeted for capital expenditure – was appropriated for 2022 rural electrification projects.