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The new minister of power has the obvious task of driving the power sector reform, which has not recorded any significant improvement despite the billions of dollars invested in it. Nigeria will certainly lose out in the anticipated gains of the African single market since no serious investor will depend on generators to power his industrial plants and remain competitive in the new African market regime
By Anayo Ezugwu
UNINTERRUPTED power supply they say is as important as life itself because virtually every economic growth of a nation is tied to it. To most countries that understood its importance, life without electricity is almost impossible. But the reverse is the case when it comes to Nigeria and electricity supply.
In today’s Nigeria, living without electricity is a norm to the extent that consumers always celebrate whenever there is electricity. This pathetic narrative is the everyday story of Nigerians despite the humongous amount of money successive governments in the country have invested in the sector.
For instance, President Muhammadu Buhari-led administration has invested over N900 billion in the power sector without any result to show for it. This story is quite different when compared to some African countries, including Ghana that have not spent a quarter of what Nigeria has wasted to supply darkness to her people.
Ghana has celebrated not less than three years of uninterrupted power supply. South Africa, with a population of about 60 million, produces 51,309mw, while Nigeria, with a population of more than 190 million, produces just 4,000mw. This situation is one of the reasons why the federal government is considering recapitalisation of the electricity distribution companies, Discos, as way of repositioning the sector.
According to some local media reports, the federal government will require about $2.4 billion (N736 billion) to recapitalise the privatised distribution assets from the core investors if it finally takes the decision. Giving clue that it could recover the assets from the core investors, the ministry of power in a document, has described the co-owners of the distribution companies as ‘failed investors’.
Vice President, Yemi Osinbajo is championing this move. He has stated it categorically that the government will create policies that will open up the nation’s electricity market to new investors in generation, transmission and distribution infrastructure.
Recently, Osinbajo reiterated government’s determination to resolve the power supply problem. He said the current structure of the market could not deliver on the government’s promises for power for domestic and industrial use. He said a substantial change of strategy is being pursued.
The government has started this process in earnest with the signing of Electricity Road Map agreement with Siemens. The German company is expected to increase generation and distribution to 7000mw by 2021 and 11000mw by 2023. Osinbajo said government could not afford to restrict the electricity space to those who currently occupy it.
“The Discos simply must come up with more resources one way or another. And part of that recapitalisation is embedded in the Siemens electrification roadmap. The whole idea of the Siemens electrification roadmap is to deploy financing and technology on commercial terms agreed to, by transmission and distribution companies in partnership with the German Government and Siemens in the first phase, increase transmission and distribution capacity to enable power delivery of at least 7,000mw and up to 25,000mw in the second phase,” he said.
According to Osinbajo, the intervention of Siemens in transmission projects does not in any way abdicate Transmission Company of Nigeria, TCN, of its mandate and as well for the Discos.
Likewise, Babatunde Fashola, former minister of power, works and housing, had in May this year hinted that the federal government has the powers to revoke the licenses of non-performing Discos.
He said the power not to renew or to cancel the license of non-performing Discos exists and it is vested in the Nigerian Electricity Regulatory Commission NERC and not in the minister.
He said the regulator could on its own, upon complaints of consumer or a group of customers amend or cancel the license of a non-performing Disco. According to him, the powers of NERC to amend or cancel licenses is applicable to all licensing authorities, the transmission companies, generation companies, distribution companies and others under the Act.
Over the years, the federal government tried various means, strategies and reforms to grow the power sector and to make it work, but all attempts have been an exercise in futility. Under the Electric Power Sector Reform Act of 2005, the Power Holding Company of Nigeria, PHCN, was established to take care of the functions, assets, liabilities and employees of the then National Electric Power Authority, NEPA.
The government then unbundled the PHCN into 18 successor companies; six Gencos, 11 Discos and Transmitting Company of Nigeria, TCN. By 2010, the power sector still yielded no tangible result. This called for another reform known as the roadmap of the power sector reform. This reform set the momentum for further privatisation and by September 30, 2013, the successor companies, aside the transmission company, were privatised with a $2.5 billion transaction. PHCN, therefore, ceased to exist.
Despite the privatization exercise, the Gencos and the Discos have failed with government declaring them technically insolvent. With all the investments since 2013, records on the operations of the sector from the Advisory Power Team in the office of the Vice President, the megawatts of electricity produced and supplied to Nigerians have steadily fluctuated between 3500mw and 4000mw. No economy in the world can grow with this level of electricity supply.
Osinbajo’s office explained that this is mostly caused by insufficient gas supply to some thermal power generation companies, especially to the Gencos owned and operated by the Niger Delta Power Holding Company of Nigeria, NDPHC, under the National Integrated Power Projects, NIPPs.
Besides the gas supply shortfalls, inadequate transmission and distribution systems have equally ensured that less power is supplied across the country. As a matter of fact, Prof. James Momoh, chairman, Nigerian Electricity Regulatory Commission, NERC, said in his formal meeting with the minister of power that the available power and the constrained electricity were now equal. He noted that what is generated and supplied were now equal to what were not generated or constrained.
The sector is also faced with the fact that there might be a new electricity tariff next year. The NERC is working to set a cost reflective tariff regime using its Multi Year Tariff Order, MYTO structure. NERC recently explained in a document it released that it analysed and found that the 11 Discos in Nigeria were owed a total of N1.2 trillion by electricity consumers over the last four years that it failed to review and allow them to operate with cost reflective tariffs.
These shortfalls, which were all in the books of the Discos, came about because the regulatory commission had reportedly on the orders of the federal government, failed to conduct statutory periodic tariff reviews for the Discos. According to the laws of the NERC as contained in the MYTO, the reviews are usually done in two phases of minor and major reviews wherein extant economic factors such as inflation and exchange rates, price of gas, which are relevant to power production and supply are reviewed and considered.
Since NERC failed to do this over a four-year period, it means that the Discos supplied electricity on terms that were not economically viable to their businesses.
Apart from the new tariff controversy, it has become a practice in the sector to see the TCN and Discos fight over poor transmission and distribution facilities. Both have constantly accused each other of failing to live by their obligations or even showing utter disregard for extant market rules.
Recent records from Osinbajo’s office indicated that in the first six months of 2019, an average of 3,948mw per day was supplied to Nigerians, while an average of 3,221mw every day was not supplied.
It also stated that the total amount of money lost or constrained for the period was N279, 806 billion. Financially, the sector is poorly managed, with a lot of buck-passing, especially between the TCN and the Discos.
Even in 2019, the national grid, which the TCN manages, still recorded collapses which the Discos said had occurred nine times so far as a result of poor protection of transmission infrastructure by the TCN. Revenue collections in the system have also remained largely poor, while technical and commercial losses amongst the Discos are still quite high.
Joy Ogaji, executive secretary, Association of Power Generation Companies, said the technical and operational inefficiencies of the TCN and Discos remain a critical barrier. “This practice of variabilising generation capacity is punitive on Gencos as it discountenances idle capacity and serves as an incentive on non-performance for other sector players such as the TCN and the various distribution companies, who represent the associated value chain operator in the delivery of power to the end-user in the country.
“The technical and operational inefficiencies by these operators negatively impact the Gencos in different ways. With a total available generation capacity of more than 7,500mw and maximum wheeling capacity of not more than 5,500mw, there will always be a recurring instance of about 2,000mw idle generation,” she said.
Ogaji noted further that idle generation represents capital investment not able to yield revenue that will impact the ability of the Gencos to support efficient operations and service loans used in developing the power plants. She said that out of the 5,500mw of transmission wheeling capacity, the Discos have not proven to be able to distribute more than 4,500mw continuously, leaving yet another 1,000mw of generation capacity unutilised.
But Saleh Mamman, new minister of power, has said that he is ready to work for the industry. According to him, he understood the centrality of the power sector to Nigeria’s desire to develop and create a stable environment for its people.
He gave assurance of his commitment to provide a conducive working environment in the sector after his inauguration on August 21. “I can assure you of my diligence and sense of commitment. I intend to apply myself totally to this assignment in order to justify the confidence entrusted on me by Mr. President and by extension, all Nigerians,” he said.
According to Mamman, he would remain accessible and open to honest interactions on how best to improve the lots of the sector. “I also intend to operate an open-door policy to avail every staff, no matter their status, the opportunity to contribute their quota to the new course of action. I will welcome every information or advice that would enhance our efficiency.”
As Nigerians await the decision of the federal government concerning the sector, the importance of electricity cannot be overemphasised. Unless the federal government fix the power sector, the much acclaimed economic diversification will never happen.
– Aug. 30, 2019 @ 19:25 GMT |
Tags: Nigerian power sector’s burden
