A document obtained over the weekend has revealed that some electricity Generating Companies (GenCos) in Nigeria are selling electricity to neighboring countries at a lower cost than the Distribution Companies (DisCos) within the country. Although the document does not provide specific price differentials, it highlights the GenCos’ engagement in “unregulated sales or secret deals” to earn foreign exchange at the expense of the Nigerian government’s directives.
These GenCos are reportedly bypassing the Nigerian Bulk Electricity Trading Plc (NBET), the government agency responsible for international agreements in the energy sector. It is estimated that there are 24 registered GenCos operating in Nigeria. The Federal Government has consequently been losing revenue from the sale of electricity to neighboring countries.
According to the document, during the second and fourth quarters of 2022, approximately $16.92 million worth of invoices were exchanged between the GenCos and international customers in Niger, Benin Republic, and Togo.
In 2019, the Federal Government implemented measures to regulate the sale of electricity to foreign countries. However, investigations have revealed that some GenCos have violated the transfer order issued by the National Council on Privatization (NCP) in accordance with Section 10 of the Electric Power Sector Reform Act (EPSRA). Former President Muhammadu Buhari’s administration intervened to address non-compliance with the International Power Sale Agreement (IPSA), directing NBET to oversee its implementation.
An anonymous industry source has called on President Bola Tinubu to address the breaches committed by the GenCos in international power sales. The source expressed concern over the sidelining of NBET and the lack of regulation in the sale of electricity to neighboring countries.
The source explained, “Electricity is now being sold to neighboring countries in an unregulated way. Buhari had directed that all international sales and purchase agreements must be negotiated directly with NBET unless otherwise approved by him. The directive became necessary to align with the configuration of the Nigerian electricity industry after privatization, but this is not the case.”
Another source, familiar with the “secret deals,” emphasized that the quarterly reports released by the Nigerian Electricity Regulatory Commission for 2022 expose how a few GenCos are benefiting at the expense of others. The undisclosed deals allow these GenCos to exploit foreign exchange opportunities, while the proceeds from such transactions were traditionally shared among all GenCos through NBET.
It is worth noting that part of the energy sold to international customers originates from Hydro Electric Generating Companies, which is the cheapest source of energy in Nigeria compared to thermal generating plants. The document suggests that the cost of energy from thermal plants is approximately six times higher than that of hydro plants.
Prior to the alleged cornering of foreign exchange by a few GenCos, the proceeds from international sales were distributed among all GenCos to alleviate challenges in sourcing foreign exchange.
The revelations raise concerns about the transparency and adherence to regulations in the electricity market, prompting calls for corrective action to ensure fair practices and protect Nigeria’s revenue and energy resources.
