Several road blocks stand against President Goodluck Jonathan’s promise of uninterrupted power supply by mid-2013
| By Pita Ochai | Dec. 31, 2012 @ 01:00
EVEN before President Goodluck Ebele Jonathan was sworn in in May 2010, he left no one in doubt about his desire to end the inefficiency in Nigeria’s power sector. He had taken the task of making power available to Nigerians with all seriousness that he had to establish a Presidential Task Force on Power, PTFP, on August 26, 2010, with Barth Nnaji, a professor, and a known hand in the industry, as its chairman. This task-force came up with a road-map for power in the country which was launched with a lot of enthusiasm that the problem of the power sector in Nigeria was about to be given a serious knock. Then the target was that by the middle of 2013, Nigerians would have no use for generating sets in their homes, industries, and factories.
More than two years after, happenings in the sector have raised fears that the government might not meet its target by 2013. The much-touted reform in the power sector has witnessed a lot of hiccups including incessant labour issues and controversies that dogged the privatisation of the Transmission Company which is the bedrock of the reform programme. Even when the federal government agreed to meet part of the contract terms, the companies that won the distribution and generation bids are yet to commence work.
Another contentious issue is the payment of staff pension and terminal benefits of staff of the Power Holding Company of Nigeria, PHCN. The union has been at loggerheads with the government and this contributed to the ouster of Nnaji from the ministry after being entangled in a case of conflict of interests with regards to his companies which bid for some of the companies that were being privatised by the same ministry and the Bureau of Public Enterprises, BPE. The federal government, through the ministry of Labour and the secretary to the federal government, brokered a deal with labour leaders which, it is hoped, will solve the problem to allow the reform to continue.
After several efforts to stop the privatisation processes over fear of its members’ welfare, the staff of the PHCN seem to have won a major battle in the struggle to have their terminal benefits paid by the government. To most Nigerians, the government should hasten to meet whatever agreement it has made with the workers if it is sincere in making the power reform work. So far, the federal government has signed an agreement with the workers to pay their severance packages, pension and gratuity.
Based on the agreement, a three-month salary in lieu of notice will be paid to all active employees of the PHCN that had served for more than 10 years, while those that had been in service for less than 10 years will get one month salary. The disagreement over the workers’ severance package had remained the major setback in the privatisation of the PHCN and the implementation of the Power Sector Reform Act 2005.
The two parties had been involved in discussions and negotiations since May last year, with the aim of resolving the dispute. Joe Ajaero, deputy president, National Union of Electricity Employees, NUEE, said he was happy that the issue was about to be resolved. But the government, he warned, should keep whatever agreement it has entered into with the staff as that would ensure further industrial harmony.
Apart from resolving labour matters, the controversy of the management contract of the Transmission Company of Nigeria, TCN, is still on and must be resolved soon for the power reform to succeed. One of the most crucial aspects in the power reform is the TCN – one of the 18 unbundled business units under the PHCN. It is responsible for evacuating electric power from generating companies and wheeling it to the distribution companies. Months after a management contract that would have enabled Manitoba Hydro International run the TCN for three years, the former management is still contesting with Manitoba over the running of the company. Presently, the company is being run by two different chief executive officers, CEOs. Olusola Akinniranye, a Nigerian from its parent PHCN, and Don Priestman, the expatriate CEO from Manitoba, are in conflict over the management of the TCN. Both are being addressed as the chief executive officer of the TCN.
The management impasse became obvious at the Seventh General Assembly of the West African Power Pool, WAPP, where Akinniranye and Priestman variously introduced themselves as CEOs of the TCN. This development raised the suspicion that all was not well at the transmission company which is pivotal to the success of the power sector reform. The management contract with Manitoba Hydro International was signed in July and based on the contract, Manitoba was to have started running the transmission company since September 1.
Although, the president took a decisive step on Thursday, December 20, when he constituted the board of TCN with Hamman Tukur, former chairman of the Revenue Mobilization Allocation and Fiscal Commission, RMAFC, as its chairman, board of the TCN, the action has come very late. Even when the government on Monday, December 17, agreed to pay $5 million as part of the fees that Manitoba charged for the management of the TCN, the Canadian firm will not be able to fully take over the company without a well-constituted board. The board of TCN is a vital requirement for the execution of the three-year management contract.
According to the Bureau of Public Enterprises, BPE, the TCN board, will issue the scope of delegated authority to Manitoba. The delegated authority will be a mandate within which the company will operate. Priestman, agreed that all is not well with the contract since his company has not received the delegated authority to manage the TCN. “The first month, after we signed the contract, that is, August, was meant for transition; and according to the contract, starting from September 1, the schedule of delegated authority, which would have given us full authority for running the TCN should have been issued immediately. That has not happened. It is unfortunate,” he said. According to him, Manitoba is ready and keen to proceed. “We have the people here, we know what to do. We have done something similar in other countries with success. So, we hope there won’t be much more delay before we can start doing what we came here to do. It is difficult to do a job when you are not in charge,” he said.
However, the payment of the first part of $5 million has raised hope of resolving the management issue of the TCN. The Manitoba management contract crisis started when the National Council on Privatisation, NCP, headed by Namadi Sambo, the vice president, sanctioned the contract. A memo to the president from Emeka Eze, director general, Bureau for Public Procurement, BPP, finally led to the decision that the contract be revalidated. The main grouse of the BPP was that the contract awarded to Manitoba was illegal because the privatisation council failed to secure the required no-objection certificate from it, via the federal executive council, FEC. Questions were also raised about the contract price of $23 million, when $8 million was agreed for a similar contract five years ago.
Some Nigerians view the action of the BPP as a stumbling block to the power process describing what it did as illegal because of the non-existence of a ‘national council’ of BPP as provided in its enabling law. According to Section 6:1 (A) of the Act establishing the BPP, “the Bureau shall have the power to enforce the monetary and prior review thresholds set by the ‘COUNCIL’ for application of the provisions of the act by the procuring entities.” In the past two years, the BPP has had no council, and the director-general has been acting unilaterally.
Bismarck Rewane, CEO, Financial Derivatives Company Limited, believes that the politicking over the Manitoba management contract was a mere cover for those in government who always wanted the status quo to be maintained, and whose actions have now put the entire privatisation process and all its gains in jeopardy. If the management contract with Manitoba does not work out, it will be the second failed attempt at enthroning a credible manager for the TCN, after a botched process in 2006.
Scott Desmarais, partner, Mckinsey and Company, a research and business firm, agrees with Rewane. According to him, the TCN is by far the biggest blocking agent to a successful power sector in Nigeria. He said that 4,500 MW is the highest volume of power the country can transmit across the grid today, and there are no facilities to evacuate power if the generating companies begin to pump in more. “If the government does not fix the TCN, it will be a problem distributing the generated power,” he said.
Desmarais agreed that although there have been some signs of progress since the launch of the power sector roadmap by Jonathan in 2011, 2013 should be the year to leverage that progress and define power in Nigeria. “After you get some initial success, you will get a tsunami of investor’s interest, just like it happened in Indonesia. The first steps in 2013 are critical to changing the dynamics of power in Nigeria. The year is an inflexion point where you begin to take off,” he said.
Another problem that will derail the power programme is the inability of the companies that won the bids to take over the management of the distribution centers immediately. While some are still sourcing for funds to complete payment to enable them take over next July, some of the host states have not accepted the consortium of companies located in their areas. The Governors of Edo, Delta, Ekiti and Ondo, under the Benin Distribution center, have rejected the result of the privatisation bid that presented Vigeo Power Consortium, as the preferred bidder. The governors still maintain their stand that the security of the company that won the bid cannot be guaranteed in their states. That has scared the consortium from taking over the Benin distribution center.
Adams Oshiomhole of Edo, Olusegun Mimiko of Ondo, Emmanuel Uduaghan of Delta and Kayode Fayemi of Ekiti held a joint press conference two days after the results were announced, in Abuja, to denounce the exercise insisting that they would not allow Vigeo Power Consortium take over the distribution center on whose bid their company had invested heavily in. The governors insisted that “the process that produced Vigeo was fraudulent and unacceptable” and argued that the company had no capacity to run the distribution center efficiently to give the people of their states the desired results in power supply. Meanwhile, the NCP has stood its ground by releasing a list of approved preferred and reserve bidders for the 10 distribution companies and six generating companies. The list showed Vigeo as the preferred bidder of Benin distribution center.
Another reason the power generation target might not be feasible is the corruption associated with the clearance of equipment for the National Integrated Power Projects, NIPP. It is alleged that the equipment got into the wrong hands after the presidency approved their release, at the Ikorodu light terminals. In April last year, thousands of containers were moved from the Lagos ports to Ikorodu light terminals in an effort to decongest the ports. It is alleged that the equipment were released into wrong hands and their whereabouts cannot be traced. Meanwhile, many IPP contractors are still waiting for the equipment to complete their projects. At the PTML Nigeria Customs Command, Apapa, Lagos, some of the containers are still to be cleared after two years of importation. According to the customs unit command, the containers are not cleared because there is yet to be a presidential order for their release.
The slow pace of work at the IPP sites is also alleged to be the result of diversion of funds by the contractors handling the projects. It is alleged that money paid to them by the federal government were diverted to other uses. The government had threatened to revoke the contracts from those who failed to meet their deadlines but none has so far been revoked to serve as a deterrent.
Desmarais is of the view that some other issues that will have to be dealt with in 2013 to move the power reform forward include the conclusion of the sale of the generating and distribution companies by the BPE, the negotiation of which will begin on January 14, 2013, the raising funds of for the TCN, IPPs, generating companies and the distribution companies as well as the successful resolution of the labour disputes with PCHN staff, the ability of the National Electricity Liability Management Company, NELMCO, to take over the PHCN liabilities from successor companies.
The key risk factors in 2013, include the need to reduce political and regulatory uncertainties, strengthening of institutional leadership, and the enormous challenge in getting financing for Nigeria’s power sector. The financing needs of the whole sector, which will begin in earnest in 2013, are estimated at $75 billion by 2020. This includes the $4.3 billion necessary for the upgrading of the TCN infrastructure by 2015.
Joseph Ngutsav, an energy economist, is of the view that from the happenings so far, the President may not be able to fulfill his pledge to Nigerians that by the middle of 2013, electricity in Nigeria would be steady and constant and that Nigerians will give away their generators because it will not be needed anymore. He urged that the President needs to move fast, if he must save the bad situation. But from all indications, the presidency does not seem to have confidence in his own promise that Nigerians would not need generating sets next year because it has budgeted N72, 510,832 to power the generating sets at Aso Rock next year.
However, it is not all bad news for Nigeria which needs an estimated 40,000 megawatts of electricity over the next decade. Currently, it generates less than 6,000 megawatts. But Beks Dagogo-Jacks, chairman, PTFP, was happy to announce that a new power generating record was set on Monday, December 17. According to him, the country now generates 4,349.7 megawatts. Hitherto, electricity generation had hovered between 3,000 and 3,700 megawatts for most part of the year. Even with the increase in power generation, most Nigerians do not have access to power in their homes and factories. What is painful to most Nigerians is that electricity tariffs have been on the increase without a corresponding improvement in generation.
But Zainab Kuchi, minister of state for power, has assured Nigerians that the government’s power target would still be met by the year 2013. She explained that the successor companies to the PHCN have been mandated to generate 3,879 megawatts, while the NIPPs would generate 2,500 megawatts to increase the generated power to 6,873 MW by 2013. According to Kuchi, some of the NIPP units have been completed and inaugurated but cannot run due to gas supply associated-problems which the government is making efforts to solve.
In the short term, medium target of the power road map, the total generation capacity of the country would have been built to 14,218 mw by December 2013, while fuel power capacity would be 11,780 mw, and transmission capacity would be 8,653 mw. The distribution capacity would be raised to 9057 mw. Babatunde Fasipe, director, Solon Natural Energy, believes that Nigeria’s power problem is not with generation but with transmission. To him, the incessant electricity outage in the country has led to every household owning a generator, no matter how small; and the use of inverters with battery backup has been on the rise for affluent Nigerians. He suggested that Nigeria should consider the use of alternative power source especially solar to reduce reliance on power from the national grid.