First Bank Foresees Boom In Privatised Power Sector

As the federal government pays off  workers of Power Holding Company of Nigeria (PHCN) to allow  the new owners of the power firms  take possession of  the companies, First Bank Plc says the power distribution sector holds huge potential.


In its publication, Research Weekly, the bank highlighted  the huge potential in power distribution business in Nigeria and in medicals.

The potential in medicals according to the report, is based on a recent report from the Indian High Commission which revealed that 47 per cent of Nigerians (estimated at 18,000 persons) who visited India in 2012 did so to get medical attention in both private and government owned hospitals at a cost of N41.6 billion ($260 million).

 First Bank research unit  disclosed that  the inherent potentials in power distribution business in Nigeria was also based on recent report that distribution companies (discos) generated N189 billion ($1.18 billion) year to date as at May 2013.

The realised funds were said to amount to a 25 per cent increase in the funds generated in 2011. This increase in collections has been attributed primarily to the increase in the tariffs. Tariffs, notwithstanding, the potential to generate a significant amount of cash on a regular basis as is the case with the telecoms sector cannot be downplayed nor overlooked.

The bank’s research unit said, “These inflows could indeed be a tip of the iceberg as the reforms are still ongoing. If and when power is made available, adequate, reliable and perceived to be priced and delivered in a transparent and fair manner – these collections could be significantly larger. Consumers are currently bearing a considerable opportunity cost in terms of the opportunities lost and or the resources allocated to the generation of alternative power supply which is invariably more expensive.

“The reforms are ongoing but seem to be riddled by quite a number of setbacks some of which have been identified as inadequate supply of gas, incessant allegations of sabotage and vandalisation – which is quite similar to the reports of sabotage in the oil and gas sector. The metering deficit should hopefully be partially addressed by the Credited Advanced Payment for Metering Implementation (CAPMI). If the reforms are assiduously implemented in a manner in which the residual risks are manageable and the viability of the industry can be properly assessed then the industry would be well supported by the financial services sector.”

The research unit also highlighted  the unfolding changing pattern of trading between Nigeria and foreign partners, going by the trade statistics for the first quarter 2013, recently released by the Bureau of Statistics.