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A Monster that Must Be Tamed

Nigerians want President Goodluck Ebele Jonathan to keep to his election promise to give the power sector high priority attention in his new regime

Since the military era, the Nigerian economy has been wobbly and most people hoped that the coming of civilian administration will change the situation for the better. But 12 years after the advent of civilian administration in 1999, the economy is still in coma. No doubt, different policies and economic blueprints such as the Structural Adjustment Programme, SAP, Vision 2010, National Economic Empowerment Development Strategy, NEEDS and Vision 20:2020 have been espoused to reinvigorate the economy under the administrations of Ibrahim Babangida, the late Sani Abacha, President Olusegun Obasanjo and the late President Umaru Yar’Adua, respectively. These blueprints did not succeed mostly because of inefficient power sector.

Of all the administrations, Obasanjo realised the importance of power in stimulating the economy. Hence, he pumped about N10 billion into the national integrated power projects, NIPP. The amount which was hotly disputed by the administration and members of the National Assembly who investigated the matter, did not revive the power sector which is pivotal to any economic advancement in the country. Worse, the administration placed the cart before the horse by building the NIPPs without the requisite infrastructure to supply gas to them and as a result some of the power plants that are ready like that of Geregu and Papalanto Power Plants are not functioning. Consequently, the nation has continued to suffer incessant power outage. Every sector was affected by the incessant power outage including hospitals where very expensive equipment were damaged and lives lost. 

It appears that the worst hit by the power problem is the manufacturing industry, especially the small and medium-scale industries which are the engine of growth in any developed economy. The high cost of production occasioned by hike in the price of diesel used to power generating plants ensured that companies either retrenched, closed shop, or move to neighbouring countries like Ghana where electricity supply is more stable. The Manufacturers Association of Nigeria, MAN, says power supply accounts for as much as 30 percent of members’ operational costs.

The closure of the companies escalated unemployment in the country with many jobless youths roaming the streets. According to Sanusi Lamido Sanusi, Central Bank Governor, self-generated electricity costs Nigeria about 13 billion dollars annually. The situation of power supply in the country was so bad that as at last year, the Power Holding Company of Nigeria generated 3,500 megawatts of power as at November 2010. Worse, the problem is not just with generation. Its transmission and distribution infrastructure is also in a shambles. Another bad news is that no serious efforts were made to address the question of fuel-to-power in a comprehensive manner. Hence, thermal power generating stations have, from time to time, been shut down on account of lack of natural gas supply. Luckily, the federal government decided to intervene in the debt crisis between the Power Holding Company of Nigeria, PHCN, and gas suppliers like the Nigeria Gas Company, a subsidiary of Nigerian National Petroleum Corporation.

At present, the current power generated and wheeled across the national grid is less than 4,000 megawatts which is hardly enough to meet the needs of the people. Hence, Nigerians would want President Goodluck Jonathan to give power high priority as one of the key things he will tackle after he is sworn-in on May 29, for a four-year term. Interestingly, Jonathan made a promise during the campaign to revive the power sector. But the urgency of this mission and how Nigerians feel about it was captured by Ayo Oritsejafor, president of Christian Association of Nigeria, CAN, when he urged the president to make haste to fulfill the promises he made to revamp the power sector. “The dream of becoming an economic giant by 2020 depends on the ability of the present government to overcome the saboteurs in that sector because, it is a well known fact that  nations develop faster if they have a very strong small scale industrial base, which relies mostly on electricity.”

Oritsejafor’s perspective is instructive given that countries like South Africa with a population of about 47 million people generates 43,000 megawatts, a sharp contrast to our paltry 4,000 megawatts, MW, of which 1,100MW is generated from the private sector including Shell and Agip. Also, Brazil with a population of 180 million has an installed capacity of 90,000MW. Thailand, with 70 million citizens, has 40,000 MW; the United States of America with 300 million people generates 937,000MW; the United Kingdom, with 60 million people enjoys 77,000MW while Germany, a country of 83 million people, generates 11,5000MW. In terms of per capita power capacity measured in watts per person, Nigeria’s record is anything but inspiring. It is 29 watts per person compared to Brazil’s 480 watts per person or America’s 2,900 watts per person or India’s 110 watts per person. Even neigbhouring Ghana has a superior record because it has 1,800MV for its 21 million people which amounts to 85 watts per person.

This scenario makes it mandatory for Jonathan to realise that his campaign promise to wipe power outage in the country should not end up as a mere rhetoric. More importantly, he should realise that Nigeria has a vast and energy hungry population of 150 million people. This population is expected to exceed 200 million in 20 years. It goes without saying that the energy need of the present and future population will not be met by the current figures of electricity being generated in the country now.  “For a country whose population will soon exceed 200 million, this is an extraordinary situation. We need to generate at least 40,000MW to meet the challenge of becoming one of the 20 largest economies in year 2020,” says Bart Nnaji, special adviser on power and chairman of the Presidential Task Force on Power.

To reach this target, there is the need to make investments all the way along the value chain: in gas production and gas transportation; in power generation; in the transmission sector; and in the distribution. More specifically, Nigeria has to make at least $10 billion investment in the power sector annually for the next decade. “According to Nnaji,  the Nigerian Government, at all levels, is acutely aware that the public sector cannot afford to fund this enormous capital investment programme.”  There is also the belief that the rapid growth of the industry and the efficient management of its assets can only take place through the exercise of the managerial discipline and technical expertise which resides in the private sector,” he said.

There is hope for the power sector if the road map which Nnaji is driving is implemented to the letter. Regular electricity supply may not happen since the government launched its Road Map for Power Sector Reform on August 26, last year, but the pace of activity, according to Nnaji, has caught many sceptical observers by surprise.  For example, the actions which have been particularly noteworthy from the perspective of potential investors in the Nigerian power sector is that the present administration has appointed new Commissioners for the Nigerian Electricity Regulatory Commission, NERC, thereby reassuring investors that the market will be regulated in a manner that promotes growth and is devoid of interference by government.

The government, in line with the Electric Power Sector Reform Act, has established a new bulk buyer of electricity (the Nigeria Bulk Electricity Trading Company) which will be empowered to sign power purchase agreements with independent power producers.

It has been working intensively with the World Bank to deliver a package of payment support guarantees in the form of Partial Risk Guarantees, PRG.  Indeed, the PRG package that the World Bank is preparing for Nigeria will be on a scale that is unmatched anywhere else in the world.  And the speed with which the World Bank has responded to this challenge is a testament to its belief in Nigeria’s ability to unlock its tremendous potential for GDP growth. The Bureau of Public Enterprises has also appointed transaction advisers as a key step in the reform process and it is working to ensure that all the legacy liabilities of PHCN are successfully transferred to the Nigerian Electricity Liability Management Company.

The Government has introduced a radical change in its gas pricing regime – with a view to stimulating private sector investment in a key component of the electricity supply chain.  Also, the Central Bank has established a multi-billion Naira intervention fund to help catalyse investment in certain key sectors, the most important of which is the power sector. The government also has worked at speed to resolve all the legitimate claims of the PHCN workforce with regard to unpaid arrears of salaries and benefits.  Fifty-seven billion Naira has been spent on the payment of monetisation arrears of PHCN employees.  President Jonathan has also set aside N140 billion in this year’s budget for the prompt payment of all entitlements of PHCN employees once the process of enhancing private sector participation in the power sector has been concluded. The Government has released its call for expressions of interest in the acquisition of the PHCN thermal power plants and all the distribution companies, and it has set firm deadlines for the subsequent transactions.

All these notwithstanding, Jonathan will still have to go a step further by appointing an expert in power to run the power ministry to continue the reforms which hopefully will fulfill the aspirations of Nigeria to have regular power supply.

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