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00:00As the Nigerian Electricity Regulatory Commission has issued new regulations on the procedure for electricity tariff reviews amid ongoing controversies of a perverted tariff hike by the government.
00:12Now the latest order signed by the NARC chairman outlines the Commission's obligations to ensure fair tariffs that allow licensees to recover costs and earn a reasonable return on investment.
00:24Chief Executive Officer of Proton Energy joins me now live in our LEGO studio to discuss this and more.
00:29Thanks a lot for joining us on the show today, Mr. Okomi.
00:31Thank you, David.
00:32And it's good to have you in the studio.
00:33Now really going through these new guidelines for the tariff adjustments and going through the details here, there's nothing really new at this point in time.
00:43But clarities of essence when we are looking at the news that filters through, especially on the back of the quotes of about 65% tariff hike, that really raised a whole lot of concerns.
00:53What's your reaction to this latest guidelines?
00:56Thank you, David, again.
00:58The guidelines from NARC, the regulator, it basically restates current policy.
01:07And it states that there will be a major review every five years and a minor review of tariffs every six months or as required.
01:15What leads to changes in tariff?
01:18Changes in U.S. inflation rates?
01:21Yes.
01:22Changes on Nigerian inflation rate and changes in exchange rate.
01:26Of late, we've actually had an improvement positively in the exchange rate in Nigeria.
01:32So really, there should not be a cost for a tariff increase.
01:36So I think what happened was, and I like to describe it as a bit of a hysteria, unfortunately, from the recent 300 conference in Dar es Salaam, Tanzania.
01:48There was a quote, I think it was Bloomberg or Reuters with a special advice on energy.
01:54And she was just trying to explain that only 65% of the cost is being met.
02:01Basically, and there's still subsidies.
02:03There's subsidies of the order of 200 billion naira per month in the Nigerian electricity sector.
02:10Only band A is fully cost-reflective.
02:13Bands B, C, D, and E still have subsidies.
02:17The expectation by the government is that the lifeline contracts, band E, the social tariff, will continue to have subsidy.
02:25But all that should progressively be whittled down.
02:28So that's the whole idea.
02:29And NEC was just trying to restate it and also calm the nerves of society.
02:34And talking about calming the nerves of society, why is also the MITO methodology difficult to understand?
02:40It's, you know, I mean, yes, it may look a bit difficult, but for people in the industry, they understand it.
02:49Basically, MITO stands for the multi-year tariff order.
02:53It has a range of formula that determines, based on all the input costs, what should be the cost-reflective tariff.
03:01And the scenario in Nigeria is that, and I think we are all beginning to gradually appreciate that point, you have to be able to pay for a service.
03:10For a long time, historically in the country, we didn't pay proper value for proper price for electricity.
03:15But of recent times, and this actually started not just with the current administration, with the time of Vice President Oshiba Jo and the previous government, they were pushing that direction.
03:23So, yes, we are moving to, we need to have cost-reflective tariff so that you can have enough generation to sustain through the value chain,
03:30so that the distribution companies can give us power and all the other types of elements also can come in.
03:36And, you know, we've had numerous conversations around the viability of our DISCOs at this moment.
03:40Now, when you unpack the first nine-month figures for 2024, for example, we are seeing a dip of about 156 billion Naira, looking at the remittance to NBET.
03:50At this moment now, would you still say the DISCOs are viable?
03:54And in terms of the strategy to ensure that they stay afloat, how would you say we should make adjustments going forward?
04:01The fundamental issue is that we have A, T, C, and C, which is the aggregate technical, commercial, and collection losses across the system of 47% on the average.
04:13That means that for every one Naira that we're putting, 47 COBO is lost. Only 53 COBO effectively goes through the system.
04:22So you have various issues. A lot of that is around transmission, some of that is around collection, and some of it is around distribution.
04:30The DISCOs are, some DISCOs are increasingly viable. Some are under kind of administrative management by NEC boards and all of that, and also some involving the banks.
04:42But of note, of recent, there was a recent transaction, it's in the public domain, that one of the leading DISCOs, a co-DISCO, is actually going through a sale process.
04:50So that shows that there's viability in the sector. But the key thing is, what is very important is, which is the Mission 300.
04:58It's a new initiative that the World Bank and the AFDB put together, and that was where President Tidwimu was in Dar es Salaam, Tanzania, about two weeks ago.
05:07So we've come up with a Nigerian Energy Compact, and the Mission 300 says they want to take 300 million Africans to have improved energy access by 2030, in five years.
05:18Of that, Nigeria, we are currently at 62% that don't have energy access. We want to have universal access by 2030.
05:25And not just universal access, it's not only on electricity, even also on clean cooking, LPG for your gas stoves, 1% for energy for the women and the unsafe communities.
05:37So, but the key thing in Nigeria has always been lack of effective implementation.
05:42A decade ago, during President Jonathan's time, we had a Power Sector Recovery Plan, PSRP, all well documented.
05:48Now we have a new Nigerian Energy Compact. A lot of it is in there, but we need to just implement it. We also need new generation.
05:54Yes, Mr. Ekomi, talking about new generation now, we also need that financial muscle to be able to do some of the heavy liftings here.
06:01Now, we clearly understand the role of the private sector and attracting that volume of investment.
06:06But going back to some of the mentions we have from the presidential, the special advisor to the president on energy now, looking at a target for the year 2030,
06:14do you think we have the infrastructure base and the enabling environment to weigh in that sort of capital from the, leverage that sort of capital from the private sector here?
06:24Proton Energy is one of them.
06:27Yeah, my company Proton Energy is, and we'll be giving an announcement in that in due course shortly.
06:32But they are looking at about $23 billion of new investment coming in, you know, in Nigeria to meet this new Mission 300 initiative and the Nigerian Compact.
06:44The environment is right now, you know, we're a bit fortunate, despite all the global dynamics with President Trump, you know, he's a big supporter of fossil fuels.
06:55So this is a time for Nigeria to ride this wave. Let us work with our international partners.
07:00This is not necessarily a U.S. government thing because it's the World Bank and the AFDB that are leading the funding.
07:05So there'll be GFI funding, there'll be private sector funding.
07:09We just need the government to make sure they implement and get that enabling environment, consistent policy, encourage new generation.
07:16Most of our power plants are over 20 years old.
07:19So you need new generation. You also need new hydro because they want hydro to become renewable, to be like 50% of the mix by 2030.
07:26All of this is doable. We just have to be focused clinically on implementation, implementation, implementation, and make sure the whole value chain is kept sustainable.
07:34Well, we'll have to leave the conversation here for now. Thank you so much for your time and the contribution on the show today.
07:39Lachance Okomi, the Chief Executive Officer of Proton Energy.