Nigerians continue to endure epileptic power supply despite huge investments in the sector by successive governments. Even the latest privatisation of the sector by President Goodluck Jonathan has continued to defy all solutions implemented to move it forward. It has been said that only about 40 million Nigerians have access to electricity. Ag. Head of Investigations, YEMI OLAKITAN, examines why the privatisation of the power sector has not provided stable, uninterrupted electricity for Nigerians.
Electric power is the engine that drives industrialisation, improves communication, helps innovation in science and technology, provides sound healthcare delivery system and improves citizens’ standard of living. It is the key for Nigeria to become one of the most 20 developed economies in the world, but apparently, the biggest problem facing Nigeria aside from Boko Haram is a huge lack of power.
Ironically, the nation is said to be one of the energy rich countries in the world, rated the top oil producer in Africa, second in natural gas reserves (with an estimate of 176 trillion cubic feet) and estimated two billion metric tonnes of coal. This is apart from the huge potential for renewable energy including solar, hydro and wind. Yet, Nigeria has continued to suffer under the weight of a huge energy deficit which has remained uncertain due to massive failings by successive government’s to plan and invest in new power infrastructure, corruption and in most cases sheer cluelessness.
The electricity industry in Nigeria had a promising start in the colonial era when the Electricity Corporation of Nigeria, ECN, was established by Act of Parliament in 1951 to provide electricity to the colonial masters. In 1962, the Niger Dams Authority, NDA, was set up to develop hydro electricity which was merged with ECN to form National Electric Power Authority, NEPA. By 2000, the problem of population explosion and low supply of electricity sent Nigeria into a crisis of electricity. This led the Federal Executive Council, FEC, to approve the National Electric Power Policy, NEPP, in 2001 which called for deep-seated changes to ownership, control and regulation of the power sector.
NEPP set the roadmap for Nigeria’s power sector privatisation. However, because of bureaucracy in government, the policy could not be signed into law until 2005. The signed document became the Electric Power Sector Reform Act of 2005. The 2005 Act translated NEPA into the Power Holding Company of Nigeria (PHCN) Plc – comprising 18 separate successor companies that took over the assets, liabilities and employees of NEPA, and responsible for the six generation companies, Gencos, the transmission company and 11 distribution companies, Discos.
The PHCN’s incorporated successors in the unbundling process are, Kainji Power Plc, Shiroro Power Plc, Ughelli Power Plc, Sapele Power Plc, Afam Power Plc, Geregu Power Plc, Transmission Company of Nigeria, Eko Electricity Distribution Co. Plc, Ikeja Electricity Distribution Co. Plc, Ibadan Electricity Distribution Co. Plc and Benin Electricity Distribution Co. Plc. Others are Abuja Electricity Distribution Co. Plc, Port Harcourt Elect. Distribution Co. Plc, Enugu Electricity Distribution Co. Plc, Kaduna Electricity Distribution Co. Plc, Kano Electricity Distribution Co. Plc, Jos Electricity Distribution Co. Plc and Yola Electricity Distribution Co. Plc.
On assumption of office in May 2010, President Goodluck Jonathan made a solemn promise that his priority would be to tackle Nigeria’s decade-long electricity problem and ensure that the citizens enjoyed steady power supply. The president reasoned that the erratic nature of the country’s power supply cannot guarantee any meaningful industrial development and can also not lead the country to her vision of becoming one of the top 20 industrialised nations of the world by 2020. To make good his pledge, Jonathan on August 26 of same year unveiled a detailed power sector roadmap as part of the implementation of the reform process, which legislative groundwork was laid by the Electric Power Sector Reform, EPSR, Act of 2005.
Jonathan, no doubt, set about the new task with vigour as the power sector, under his administration, witnessed unparalleled level of investment and unprecedented enthusiasm from local and international investors to invest in the Nigerian economy. Projects initiated by his predecessors, Presidents Olusegun Obasanjo and the late Umaru Musa Yar’Adua were reportedly completed, while other new ones are ongoing. Government’s efforts to increase power supply paid off initially, especially in 2011 and 2012 as power supply first hit an unprecedented peak of 4,321.3 megawatts on August 31, 2012.
Power generation also continued to hover around this figure throughout the remaining part of 2012, hitting an all-time peak of 4,517mw on December 21, 2013; thus setting a new record in the country. However, a sharp drop in power supply was first noticed in January 2013 when Nigerian Agip Oil Company, NAOC, shut down the Okpai Power Plant in Delta State for repairs, reducing generation by 460mw before it rose again to 4,286mw peak for the month. Although it hit 4,350mw peak in February, by March 26, 2013, the figure had dropped to 3,670.3megawatts.
After a slight improvement, the situation worsened further to 2,866.4mw in the same month as a result of general system failure, which was very rampant during the first half of 2013. Today, power outages have metamorphosed into complete darkness in most parts of the country, while many urban cities and towns across the country hardly enjoy three to four hours of uninterrupted power supply.
Only recently, the president said he had fulfilled his campaign promise to Nigerians. According to him, he had promised Nigerians that he would make the power sector his administration’s priority. He was speaking at the inauguration of the Olorunsogo II Power Station in Ogun State; a 750MW Nigerian Integrated Power Project.
“I have lived up to my campaign pledge to make the power sector a priority, although it this is a capital intensive sector, we had been addressing it head-on,’’ he had claimed.
Jonathan said he was confident that Nigeria was moving in the right direction under his watch. He described the power plant as the second largest NIPP power station in the country and urged Nigerians to support the Federal Government in its desire to improve electricity.
But contrary to this, investigations revealed that Nigerians have continued to experience unstable power supply up till this moment.
Kate Adisa, a Chinese Nigerian, who spoke with Sunday Mirror on the subject, said, “Electricity is a struggle in Nigeria. I am married to a Nigerian and I do business here. The situation is very bad, we have to depend on diesel generators all the time and this is affecting the cost of doing business in Nigeria. In China, even the remote villages have stable power supply. We do not have that in Nigeria. The government needs to tackle the problem as a matter of urgency. If they really want Nigeria to move forward, they will tackle electricity first, no matter what it will take for them to do it because I believe that economically, it is the lack of stable electricity that is keeping Nigeria from moving forward. The problem is affecting Nigeria negatively and this is the only country we have.’’
However, our correspondent gathered that some of the challenges faced by the electricity companies are, limited access to infrastructure, inadequate power-generating capacity, lack of capital for investment, ineffective regulation, high technical losses, vandalism, insufficient transmission and distribution facilities. This is why government has continued to receive a lot of knocks from individual citizens and stakeholder groups over the parlous power situation despite the privatisation of the sector and the hope raised for a marked improvement which have not been met.
Former President Obasanjo, while speaking on the subject of power, attributed Nigeria’s continued electricity challenge to the failure of his successors to implement his administration’s initiative of the National Independent Power Project (NIPP) aimed at improving power generation towards national growth. He noted that the country, with about 180 million population, still generated 4,000 megawatts, as against 20,000 megawatts annually if it wanted to attain the status of an industrialised nation. He identified power as one of the critical factors in developing any country socially, economically and politically, while wondering why his successors abandoned the NIPP project. The former president explained that for the country to be categorised among industrialised countries, it must generate as much as 45,000 megawatts, as it is in South Africa with a population of 55 million people.
Obasanjo stressed that Nigeria could achieve greatness in the power sector if what was achieved in the telecoms sector could be applied, but not by privatising the power sector and leaving it to cronies. “It sounds very discouraging but that is the reality. I believe that what we have achieved in the area of telecoms can be achieved in the area of power, but privatising the power sector to friends and families who do not have the technical expertise cannot bring desired results,” he had said.
Similarly, the opposition All Progressives Congress had recently described the privatisation of the power sector under President Jonathan as a “total failure”. APC spokesman, Lai Mohammed, lamented that Nigeria had been left behind her counterparts because of its inability to tackle power challenges.’’
However, Chairman of the Nigeria Electricity Regulatory Commission, NERC, Dr. Sam Amadi, said that the privatisation of the power sector has recorded huge success. Amadi said the privatisation of the power sector had increased influx of foreign capital into the country. He added that the present administration privatised the sector to enable Nigerians to have effective, adequate and reliable power supply. He lamented that gas pipeline vandalism has been the major challenge confronting investors, pointing out that Nigeria is the highest vandalised market in the world. According to him, hydro-power supply was the only source of power generation in the country in the past but the present administration has introduced other means of power generation. “Nigeria has licensed many solar plants, wind farms in Kastina, Jos, Lagos, Abuja and for the first time she has coal energy.’’
Minister of Power, Professor Chinedu Neb, also insists that the country was generating more power now than ever before. He said though the implementation of the NIPP had not been easy, there were other factors militating against adequate power supply in the country, particularly lack of gas, but they were being addressed by the present administration.
“It is not totally correct because even the NIPP projects that are done haven’t been that easy. But remember that the total of the NIPP power plants are still less than 5,000 mega watts. But right now, we don’t even have gas for all those power plants. So, it is not the implementation of the NIPP projects. There are other inputs that are involved. By the grace of God, they are getting resolved. For instance, we are generating more power now than Nigeria had ever generated in the past and it is part of the policies of this administration that is making that possible,” Nebo claimed.
Several observations and comments by observers see the cause of slow growth in generation to be due to transmission and distribution infrastructure problems, corruption, and failure of the new owners of power infrastructure to mobilise new investments even as many apparently lack the technical competence to run the firms. During the privatisation exercise, there were allegations of misdeeds in the bidding process. It was alleged that political brinkmanship was exercised; past political and military leaders were the beneficiaries. It was also alleged that the process was not transparent. Prof. Bart Nnaji – then Minister for Power lost his job in the process. The issues of transparency and political will were also raised on the contracting of transmission rights.
Another key issue is corruption discourages private investment, retards growth and inhibits poverty-reduction efforts. In the energy sector, for example, the delivery of energy moves from generation to transmission, to wholesale distribution and finally to retail distribution. Corruption can occur anywhere along the line since it had become a national issue. In generation, for example, it can occur in the licensing stage – where government officials might be tempted to ask for kickbacks in the issuance and renewal of generation licences. Also, contracting for Power Purchase Agreements with state entity including payments for power generation can attract corrupt practices. Inadequate gas supply, shortage of water in the dams, vandalism or theft of power equipment, poor funding and presence of “demons” or “mafia” as claimed by the Minister of Power, Prof. Nebo, are also major causes of the power sector woes.
Perhaps, the biggest problem facing the new investors in the sector is the suspicion if not discovery that many of the power plants they bought were overpriced. They were said to have submitted their bids without taking into cognisance the fact that the power plants have been in bad condition for decades due to poor maintenance. Their bids were more of a show of status rather than a realistic business submission. Now they are saddled with responsibility of raising funds for the business.
It was learnt that many of the foreign financial institutions are reluctant to lend money to the owners of the power plants due to what they described as unpredictability of the Nigerian economy, which is often seen as volatile. The financial institutions are mostly worried about government’s regular policy reversal, which many feel may affect the power privatisation. As a result, the new owners of the power plants are finding it difficult to raise funds for their new found projects.
Spokesman of the Chairman of Presidential Task Force on Power, PTFP, Mr. Beks Dagogo-Jack, noted recently that the trend of blackouts was due to the fact that Nigeria’s current available peak power cannot satisfy the demands of its population of 160 million people.
He had argued that “current generation, transmission and distribution capacity of the country were simply not enough for its population, hence the blackouts”.
While weak transmission network had also been identified as a major cause of frequent drop in electricity supply, the Transmission Company of Nigeria, TCN, claimed that the massive load-shedding experienced nationwide recently had been caused by vandalism of two major gas pipelines supplying gas to eight power generation stations in the country. The power generation stations, which include the Egbin/AES Thermal Stations; Olorunsogo, Omotoso, Geregu NIPP, Afam IV and VI Thermal Power Stations as well as Rivers State Independent Power Station, had been affected, resulting in drastic reduction of power supply by 1,598 megawatts. The TCN has also complained of incessant pipelines breached by vandals, which routinely disrupts gas supply to the generation companies.
Another identified problem is that oil companies, which produce the gas that are piped to the power stations, are reluctant to invest in domestic supply because the current pricing template does not guarantee adequate return on investment. However, contrary to repeated pronouncements by the Ministry of Power that inadequate gas supply was one of the factors hampering electricity supply across the country; the Nigerian National Petroleum Corporation, NNPC, said, it had exceeded its target for Gas-to-Power aspirations. Confirming the claim of availability of adequate gas, Group Executive Director in charge of Gas and Power at the NNPC, Dr. David Ige, insisted that gas supply had grown significantly over the last three years.
Ige disclosed that, “There is no power plant on the western axis that does not have gas pipeline currently. Our overall gas supply right now is meeting the demand. If you look at the demand on the ground, we can meet them; as we are speaking today, gas is not the restraint of power. We are basically shutting in our gas supply as we speak today.”
He however admitted that gas availability might not be adequate for all the new power generating plants brought on stream would require, but noted that additional programmes of supply are coming on.
Apart from that, the unresolved issue of gas supply to the power plants is seen as another factor that would affect the operations of the companies.
For example, when former President Obasanjo’s regime approved the construction of some plants such as the Alaoji 1,074 mega watts (MW), Egbema 338MW, Geregu 848MW and Omotosho 786MW gas turbines, the government did not factor in the issue of gas supply to those plants. As a result, the plants remained unutilised long after they were commissioned.They have been in that position till the present administration privatised them.
Nevertheless, investigations reveal that some foreign companies are coming into Nigeria as a result of the privatisation efforts of the Federal Government. One of them is a German Consortium efs-greentec, which is set to invest over $1bn (N200bn) in power plants in the country. The German group’s major activities are in renewable energies and projects that seek to protect the environment e.g. waste to energy (biomass), landfills, power plants fired with coal or gas, hydro-electric power plants, transmission power lines/cable installations, public water and waste water treatment, recycling, water purification, sea water desalination, among others.
It is clear that for the power sector to really see the required transformation, Nigeria needs help; not from emergency power firms that appear to have taken over the sector but from tested offshore partners that can help take a new look at our systems and fashion out ways to move forward. Some experts have canvassed a decentralisation of the national grid and allow each region or state to take care of its power needs in partnership with the private sector. This is the model in many developed countries.
The power companies need to look at this. However, the failure of government to bring gas, which is relatively cheap and clean securely to thermal plants continues to be the albatross of the sector. It has been frustrating for the privately-owned power generation companies to operate optimally and this does not encourage new investments except for the very brave. As it is, it is still a long way from where we want to be despite all the promises and posturing by government officials.
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