Exclusive interview with Rahila Thomas, Country Manager, AF-Mercados EMI, Nigeria and panel discussion moderator at WAPIC on “The Good, the Bad & the Future: Voices from the Private Sector”
Your company is involved in several power projects in Nigeria – any updates on these that are particularly exciting?
There are three major initiatives we have found both challenging and exciting over the past two years. Firstly we played a central role in establishing the baseline level of losses at the time of handover for six distribution companies (Discos). The level of losses was much higher than some anticipated. Such high losses, which are greater than 50% for some Discos, mean that the income of the sector is insufficient. Reducing loss levels to reasonable levels is a contractual commitment for the Discos under the privatization but unfortunately it cannot be achieved overnight, requiring significant capital investments as well as capacity building for employees and sector-wide public relations support.
Then we have assisted the Discos to work together in addressing industry wide issues, particularly in relations with the Regulator. Initially a roundtable of the Discos met very informally. Early this (2015) year the roundtable was officially and legally transformed into the Association of Nigerian Electricity Distributors (ANED).
Finally and very recently, we have assisted a number of Discos in preparing submissions to the Regulator to establish their tariffs over the next 10 years – tariffs that will, over that period, bring sufficient income to the sector to ensure adequate investments can be made in generation, transmission, distribution and supply so that the sector leaves behind its troubled history and starts to deliver reliable and sufficient electricity to Nigerian consumers.
The exercise involves minimizing tariff shock by projecting financial losses in early years that are recovered later in the period when electricity loss levels have been cut to internationally acceptable levels. We are looking forward to assisting our clients in gaining acceptance for their proposed tariffs and in developing realistic plans for financing the early years’ deficits.
What in your view is the most challenging about working in the power sector in Nigeria?
The most challenging experience(s) about working in the power sector is helping key stakeholders, including the consumers of electricity, to develop their understanding of the complex workings of the sector. A significantly greater understanding of these workings is essential for the Nigerian society to accept the changes that are required over the coming years. For example, the massive lack of investment over the past 20 years has left more than half of connected household customers unmetered.
We find that the Nigerian society generally does not understand the mechanisms for charging unmetered customers nor understand the scale of the metering investments needed to put things right. The supply of electricity touches many parts of Nigerian society aside from household customers. Federal and State administration are major consumers, which have an influence on licensing, sector policy and public relations. Bankers are needed in the sector to support capital investment as well as providing operational financial support.
Within the sector, there is very limited understanding of the complexities around market operations or the equally complex workings of sector regulation. My company offers training services by providing tailored training and capacity building in several areas within the sector including:
– Regulation and regulatory affairs
– Power project development
– Power procurement and power trading
– PPA and vesting contract administration operation
We have trained several companies operating within the sector and other stakeholders. Building capacity in terms related to electricity business in Nigeria in relevant sectors of the economy is an integral part of our plans going forward.