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        Challenge of Power Supply in Nigeria

By Dr Bukar Usman

                                                                          

When will the power outage in Nigeria stop? This is a million dollar question which no one seems ready to answer.

     Shortage of power supply in the country was such that at the inception of the Obasanjo administration in 1999 he made a commitment to raise the level substantially. Though 10,000MW was targeted for generation, nothing near that figure was eventually achieved by the time he left office eight years after.  As a mark of President Obasanjo's determination he appointed Chief Bola Ige, a former state governor and successful lawyer to supervise the Power Ministry.  He also set up a task force and committed a lot of money in local and hard currencies for that purpose. He also gave personal attention and a lot of time to the rehabilitation of the power sector.

    By 2005, President Obasanjo ensured the passage of an Act which replaced the scrapped National Electric Power Authority (NEPA) with 18 companies 17 (6 generation, 11 distribution) under an umbrella organisation, the Power Holding Company of Nigeria. All the 18 companies, excluding the Transmission Company of Nigeria, would be sold to private investors. Though the Transmission Company would remain in government control, it will have an outsourced management.

     In implementing the provisions of the Act, President Obasanjo established the National Electricity Regulatory Commission (NERC) in October 2005. The Agency is to open the power sector to private investors.  The NERC moved quickly to licence 31 companies which are to invest in electricity generation (gencos), distribution (discos) and transmission (transco). In spite of the promising start, not much progress was made thereafter as the Commission's members were enmeshed in financial irregularities uncovered during President Yar'Adua's administration. This led to the removal of the chairman and six commissioners.

     Before committing further resources, President Yar'Adua's administration decided that it was prudent to await the outcome of the House of Representative's probe into the Obasanjo administration's expenditure on power.  In the meantime, Nigerians continued to groan under poor power supply in spite of the enormous amount of money committed to the sector. An amount ranging from $3-16 billion was taunted and disputed. The probe was unfortunately engulfed in high politics. Under the circumstances, the nation could hardly arrive at any firm figure of what was committed. Meanwhile, the execution of on-going power projects was stalled as NERC was virtually rendered inoperative while the inquiry was on.

     Yar'Adua administration again picked up and targeted the 10,000MW.This remains the target to date, with a new resolve and emphasis from the Jonathan administration to generate more power. This time, the focus is not only to meet the nation's current power demand, but also the ambitious developmental goals articulated in the newly conceived Vision 20:2020.

     Consequently, President Jonathan gave a new impetus to effort designed to solve the problem of the power sector by launching his ‘roadmap to power sector reform' on August 26, 2010. The event was heralded with much fanfare, but it was unfortunately preceded by a strike embarked upon by the Nigerian Union of Electricity Employees (NUEE), ostensibly to protest non-payment of arrears of monetisation. However, there were other more fundamental reasons behind the protest. The union leadership with ideological bent similar to the union in the oil industry is resolutely opposed to ‘privatisation' and so tends at every turn to question and frustrate nearly every move by the Government to implement the reform in the power sector, especially the privatisation aspect.

     The leadership of the union opposes subsidy withdrawal; it fears that a massive retrenchment of its members is inherent in the policy; it insists on full payment of all benefits to its members; it calls on the President to remove Professor Barth Nnaji, the Presidential Adviser on Power, whom it alleges owns Geometrics, a private power enterprise which stands to benefit from the privatisation of PHCN; it points at the non-performance of the licensed companies. In fact, most of them have not taken off in any form, several years after they were licensed.  They appear to be phantom organisations with no real programme or even a capacity to think of one, talk less of investing in the sector.

     Statistics about the actual power needs of the country to meet up the objectives set out in Vision 20:2020 are hard to come by as official data and that from private sources differ greatly. The Vision 20:2020 Blueprint targets 35,000MW while Professor Ibidapo-Obe, President of the Nigerian Academy of Sciences came up with 150,000MW (Daily Trust, August 11,2010,P.19).

     As a result of the embarrassing lessons learnt from past failures to meet deadlines of delivering adequate electricity to Nigerians, officials now shy away from giving definite time line for achieving the targets in power generation.  Nevertheless, in the short run, President Jonathan has projected power generation to 6,939MW by April 2011 and 14,019MW by December, 2013 (Daily Trust, August 12, 2010, P.10). But as the days go by, there is increasing reluctance on the part of the authorities to be firm on the dates. Official assurances are now framed in ambiguous manner.

     When President Jonathan visited the Emir of Kano after commissioning some projects in Kano State, he said that his administration would no longer set deadlines for stable power; rather it would try to improve the situation (Daily Trust, October 27, 2010, P.2). This resolve was re-echoed a couple of days later by the Presidential Adviser on Power, Professor Barth Nnaji at a private reception in his honour. He remarked at the occasion that he would only promise to deliver electricity to Nigerians in a ‘reliable way' (Next on Sunday, October 31, 2010, P.4).

     Several reasons have been advanced by stakeholders in the power sector for the lacklustre performance. Among these are bottlenecks at the ports which saw vital power equipments imported into the country abandoned for up to a year; disruption of execution of power projects by the crisis in the Niger Delta; Policy reversals; resistance to reform by employees in the power sector; inadequate gas supplies as a result of which most of the newly constructed independent power plants remain idle. Up to now there is no guarantee that gas would be steadily available in 2011 to meet power generation needs. Above all, there is the sheer magnitude of the cost of power projects. The Presidential Adviser on Power said it costs about $1-1.3 million to generate 1MW of electricity in terms of capital investment. The President has also lamented that while the country needs to invest $10 billion annually in power generation capability about $13 billion is spent yearly by Nigerians on private power generation (Daily Trust, October 15, 2010, P.3).

     The Minister  of Petroleum Resources, Mrs Diezani Alison-Madueke  had told the Senate and House  Joint Committee on Gas Resources that the  Ministry was committed to ensuring regular supply of electricity with current supply of gas at an all time high of one billion standard cubic feet(1bscf), (Thisday, May 24,2010,P.11).

     Elsewhere, the Administrator of the National Electricity Regulatory Commission (NERC) Malam Inuwa Talba stated that 17 of the 39 licensed Independent Power Producers are operational and have added 1779.5MW to the national grid (The Nation, October 8, 2010, P.105). At the State level, the Rivers State Government had given an assurance that by December 2011 the State would enjoy 24hr power supply. These are encouraging developments.

    The Bureau of Public Enterprises (BPE) is to handover about N300 billion debts owed by the Power Holding Company of Nigeria to a new body to be known as the National Electricity Liability Management Company (NELMCO) to manage the debts on behalf of PHCN. This arrangement was scheduled to take off in December 2010.

    It is quite apparent that all concerned are sufficiently sensitised to the power needs of the country and seem somewhat feverishly committed to finding solutions to the enormous problems confronting the sector.

     However, as a citizen, who would be positively affected by achieving success in the sector, it is worrisome that so far actions are yet to match statements and consumers are yet to experience any appreciable improvement in power supply. If anything at all, the disturbing sounds of the generators in the neighbourhood, the air pollution they cause and the soaring expenditure on diesel borne by corporate and individual citizens, sufficiently tell the story. It was comical and embarrassing that while President Jonathan was paying homage to the Emir of Kano, there was a sudden power outage at the palace.  That has been the daily experience in that city and in most parts of the country. I cannot imagine what could be more instructive about the level of power shortage in the country!

    Public officers, in the past as it is now, employ the blame game and buck-passing in trying to explain away why power stability has eluded Nigeria. President Jonathan blamed past governments with an indirect reference to former President Babangida who is one of his opponents in the 2011 presidential race. Hence the blame is dismissible as a political gimmick, especially given the fact it was Babangida's administration that built the Egbin and Shiroro power plants.

    In an exclusive interview granted to a correspondent of Daily Champion November 18, 2010 Malam Nasir El-Rufai the former Minister of the Federal Capital Development Authority blamed the failure to achieve adequate power supply on the stoppage of former President Obasanjo's ‘strategic plan' for the electricity sector. He said the plan included the enactment of the Power Sector Reform Act of 2005 which unbundled NEPA into 17 companies, the establishment of the Electricity Regulatory Commission, the construction of 14 gas-powered electricity generating plants under a National Integrated Power Projects (NIPP) and raising the electricity tariff by 400 per cent. The projects were scheduled for completion by December 2007. He said only the upward review of the tariff was deferred for political reasons, some would say as a reflection of reality because it would be unfair to raise electricity tariff when its supply is dismal. As a matter of fact, the tariff level remains a touchy matter.

    Although some progress has been made in the NIPP projects, the fact that gas could not be supplied to the plants that have been completed to put them in full operation is indicative of faulty planning or haste in conception. Ideally the power plants and gas projects should be synchronised to reduce time lag and wastages. The fact that some of the project delays were also caused by restiveness in host communities indicates poor judgement in strategic planning, total reliance on gas and choice of location for the generating plants. Had President Yar'Adua not made the singular effort to secure some peace in the Niger Delta, the realisation of President Obasanjo's power plan would remain just a dream.

     For the Jonathan Government to successfully implement the power sector reform, it needs to accommodate the views of the labour leaders who seem resolute in their opposition to the ‘privatisation' of all sensitive public utilities.  Similar resistance has stalled the selling off of the country's refineries. The labour has some point here. Globally ‘privatisation' has been under review for the harm it has done to economies in the countries that championed the policy in the past. In the US government is regulating and investing in banks, the same in the UK, Germany, France and even Japan, all of them bastion of pure capitalism. 

     In Nigeria, telecommunication changed positively NOT because the State is not a player or the privatisation of NITEL, but because investors put their money into it from the scratch, even though they still rely on the backbone  provided by NITEL for some of their operations.  They have failed to do that in the energy sector; they want to buy existing facilities which they condemn as obsolete.  If they are obsolete, why are they putting pressure to buy them up, not through competitive bidding, but through private arrangement?  They should take real risk by starting refineries and power plants from the scratch with their own or borrowed money.  That is what can lift the economy.  The Chinese came with money for the Greenfield refinery project because they are ready to take risk: they did not go for a cheap arrange privatisation of aged refineries based on ancient technology because they are genuine, serious and know that they will recoup their investments within a maximum of 48 months of efficient, accident-free operations.

     The energy sector is known to be highly profitable, implying that any serious business concern should have the courage to take the risk by investing its own money in establishing power plants or refineries.  But alas, they want to have publicly-owned entities transferred to them at a nominal price.

     The case of the Nigeria Telecommunications Limited (NITEL) is sad.  The company that won its arranged bid could not make the initial payment for the company despite extension of time on two occasions.  Why this preferential treatment? Government's attitude in this case can give room for speculation, suspicion and even allegation of wrongdoing, if not corruption.

     The Minister of Petroleum Mrs. Diezani Alison-Madueke in company of the Group Managing Director of NNPC, Mr. Austin Oniwon had told the house committee on petroleum on (December 9, 2010) that Nigeria would in the next 18 to 24 months rely 100 percent on importation of refine petroleum products until the pipes supplying crude to our refineries which were blown up are repaired. It is also known that the new power plants at Papalanto and Ilaoloji have no gas. Our public corporations are a serious financial drain and I can't see how we will make progress with this impasse. With electricity tariff again we are faced with the dilemma of which comes first, the egg of the chicken, i.e. tariff freeze pending improvement of power or increase tariff in the hope encouraging private investment etc. Meanwhile we buy diesel and import oil. How, when and where is the salvation?

     Something must give in. It is obvious that ‘privatisation,' with all its faults, is widespread in the world. The labour vanguard in Nigeria seems out of tune with such developments. It can only hold back the privatisation plan of the government for a while. Otherwise the public utilities will continue to deteriorate in value with the inconvenience this inflicts on ordinary Nigerians.

     How would the telecommunications in the country fare without the reform of the last decade in that sector within a short time? Some of those who are privileged to own mobile sets never thought of owning one so soon. But I have to admit that it came about not because NITEL has been privatised or reformed, but because private investors put their money there and technology made it possible for them and users to jointly benefit.  They should also invest their own money in the energy sector.

     To conclude, the current power supply at under 4000MW is intolerable as it constitutes a serious handicap to the ambitious developmental programmes of the nation. In this context the challenge facing the government is that of making further progress in reforming the public utilities, including privatisation. All that is required is to win and carry the labour movement along while labour refrains from being unnecessarily obstructive.  The sooner this understanding is arrived at amicably, the better.

 

21-12-2010

 

 

 

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