Local Content Bill for the Power Sector

Fri, Jan 31, 2014
By publisher


The Nigerian Electricity Regulatory Commission is to send a bill that will promote the establishment of support industries in the power sector to the National Assembly in February

|  By Anayo Ezugwu  |  Feb. 10, 2014 @ 01:00 GMT

THE Nigerian Electricity Regulatory Commission, NERC, is ready to send the power sector local content regulation bill to the National Assembly in February. The NERC, said its planned local content law would seek to promote the establishment of support industries that will sustain operations in the Nigerian electricity supply industry, NESI. It will also ensure that investors in the power sector employ the services of Nigerians in executing projects in the sector.

A statement issued by Maryam Abubakar, assistant general manager, media, explained that the law would address the identified lacuna in the development of the NESI. “With the entry of private sector participation (both Nigerian and foreign), the power sector will inevitably be exposed to massive growth both in size and in capital. However, not enough emphasis is being laid on how to encourage national development based on this growth. Emphasis should be on how many jobs will be created, in-country value creation, sustainability, safety, environment and above all, the need to maximize value from power activities.”

According to the regulatory agency, development within the sector should focus more on in-country value where licensees consider long term value and promote the use of local capacity. “There is therefore a need for the NERC to provide measure to ensure the active participation and growth of the Nigerian industry and citizenry, in the various services and activities that will attend the expansion of electricity access across the country. This is a deliberate utilisation of Nigerian human and material resources, goods, works and services in the NESI as a major step in the progress towards a reformed power sector. In the NESI, the tendency has been to buy rather than sell and as a result, a lot of job opportunities have been lost as Nigerian jobs have been exported.”

According to the NERC, the regulation on national content in the power sector is intended to “promote deliberate utilisation of Nigerian human and material resources, goods, works and services in the industry; opening the NESI at all levels of its complexity to ensure that Nigerian people get the expertise; building capabilities in Nigeria to support increased investment in the industry, as well as leveraging existing and future investment in the NESI in an effort to stimulate the growth of Nigerian and Nigeria-located enterprise.”

The commission further added that the “general focus is on breaking down service-by-service what proportion of work must be domesticated or reserved to a given degree for Nigerian companies. It also seeks to prescribe capacity limits and regulate the recruitment into key technical and executive positions.”

This, according to it, gives Nigerian companies the responsibility to employ more Nigerians to do these jobs thereby creating increased local economic activity. “The regulation therefore promotes a framework that ensures local competencies are built (to internationally acceptable standards) through the active participation of Nigerians, and the deployment of natural resources and raw materials in electricity industry activities. The nationality of the shareholders of a company operating in the industry will not be the paramount consideration, though NERC recognises that is an important element. Emphasis will instead be on progressively increasing the ‘Nigerian content’ of a company, which will be defined as ‘the quantum of composite value added to or created in the Nigerian economy by a systematic development of capacity and capability through the deliberate utilisation of Nigerian human, material resources, entrepreneurship and services in the NESI.”

Recently, Sam Amadi, NERC chairman, said while making a presentation at an event organised by Chatham House, UK, that the power sector local content law in this early stage of the transition, is intended to avoid the mistakes made in the oil and gas sector where it is still dominated by expatriates 50 years after. “We have a local content regulation that by February should become law, we don’t want what happened in the oil and gas sector where after 50 years Nigeria is still importing technology. We have come up with a local content regulation that provides a framework for every company to begin to localise both technology, and services. For example, a meter provider should within the next five years set up a factory in Nigeria. This is to ensure that the spill off from electricity reform goes to enhance the economy of the nation,” he said, adding that the power supply is expected to hit 7,000mw by the end of this year as increased capacities are expected from the NIPPs coming on stream, while generation benchmark is set at 20,000mw by 2017.

Amadi, however, noted that early passage of the Petroleum Industry Bill, PIB, was critical to achieving the set targets. He disclosed that the 7,000mw target set for 2013 could not be realised because of inadequate supply of gas to power, which the PIB can help reverse. “PIB is critical to move forward on gas to power, the law should be passed as soon as possible, although the debate over it is huge but we want the matter to be resolved in a way that makes gas to power commercially viable and bankable. At the  end of 2013 we had expected to hit 7000mw and that would have been possible if there were enough gas to fire the plants and the NIPPS come on board. By end of 2014, we will definitely cross 7,000mw because of the NIPPs; if you put all the capacity together you will get over 4,000, and the existing 4000Mw. The benchmark is that by 2017, we expect that Nigeria electricity market will have over 20,000MW trading then. The PIB is critical to us because the constraint of the sector now is gas to power and except you have a very intelligible, practical and commercial framework over gas in Nigeria you might not have sustainable solution to the crisis.”

On the need to diversify power sources, the NERC boss, said “The challenge over gas seems to suggest that focusing on renewable will be a strategic idea. But we are trying to build a strong load base and renewable will not in the short term be a strong load base for industrial take off.  Gas is still the best option. “There’s investment going on in coal. We have licensed over 2000mw of coal power, but in the short term focus on hydro and gas is Nigeria’s more strategic future. The Mambilla project and other big hydro projects could give us up to 10,000mw in the future. My view is that we have to keep increasing the load base through more investment in gas powered plants and hydro as well as keep encouraging micro entrepreneurs to put in more renewable power projects,” he said.

According to Amadi, the privatisation of the Nigerian power sector is not a sweetheart deal. He warned that government could withdraw non performing licences from any investor. “The agreement allows for takeover if investors fail, and what we did was before the sale we brought out the fit and proper guidelines to ensure generators have the technical and financial capacity to run the network. So at any time we feel that your technical capacity is weak; you are asked to get a proper technical team.  But if you cannot, you are asked to divest your shares to people who have the capacity to run the network.”