“Most of Nigeria’s power generating plants are thermal plants. They use gas as their fuel and as long as the price of gas is high, the cost of generation – and the eventual tariff to the end user – will also be high.
“At present, the energy generation mix is around 80 per cent thermal and 20 per cent hydro.
“More so, the cost of gas is also affected by fluctuations in Foreign Exchange (Forex). So while the cost of gas and generation will rise due to Forex fluctuations, the tariff is fixed in Naira and may not account for this difference.
“Especially because of the absence of a commitment to adhering to periodic tariff reviews,” he said.
According to Oduntan, As at today, the price of gas for local power production was a little over three dollars for one million British Thermal Units (MMBTU), whereas the cost at which LNG was exporting gas was less than half the same amount.
He said that some International Gas Companies were still flaring much-needed gas into the atmosphere, and that there were several options available to the government to make electricity more affordable.
“This cost of gas presently accounts for almost 70 per cent of all the input the plants utilise to generate power.
“Except we begin to consider solutions from that angle, we may not make much headway in providing the cheap electricity Nigerians need to move the country to an industrial giant,” he said.
Oduntan noted that the absence of a market-reflective tariff had continued to bedevil the sector and had contributed majorly to much of the N1.5 trillion liquidity gap in the sector.
He said that with effect from July 1, a new performance-driven increased tariff structure would be implemented as a step towards narrowing the liquidity gap.
“If the cost of the major input in any production process is reduced, it will have a ripple effect across the entire chain.
“That is what we are advocating for. It will be in the interest of the end users and by implication, the Nigerian economy as a whole,” he said.
There are 11 Electricity Distribution Companies (DisCos) in Nigeria. The 11 companies are: Abuja Electricity Distribution Company (AEDC), Benin Electricity Distribution Company (BEDC), Eko Electricity Distribution Company (EKEDC), Enugu Distribution Company (EEDC), Ibadan Distribution Company (IBEDC), Ikeja Electric Distribution Company (IKEDC), Jos Electricity Distribution Plc (JEDC), Kaduna Electricity Distribution Plc (KNEDC), Kano Electricity Distribution Plc (KEDC), Port Harcourt Electricity Distribution Plc (PHEDC), and Yola Electricity Distribution Company Plc (YEDC).
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