- N6.52trn wasted as darkness persists
WHEN the Federal Government on November
1, 2013 handed the successor companies of the Power Holding Company of Nigeria
(PHCN), Nigeria electricity consumers were upbeat that the long years of
‘Never Expect Power Always (NEPA) were ended for good.
But little
did they know that the future of the power sector under the management of
private investor would be darker than they ever imagined.
However,
nearly three years after the power assets were handed over to the new owners,
the situation has gone from bad to worse, with government expending over N6.52
trillion on the sector from 1999 till date with very little to show for it.
Regrettably,
despite the injection of these huge resources from the government and the
private sector, darkness has continued to envelop every nook and cranny of the
country.
Background
The Journey
to the country’s power privatisation process started in 2005 when the Nigerian
government signed into law the Electric Power Sector Reform Act (EPSRA) with
the aim of eventually privatising power supply which had been marred by
several years of corruption, lack of transparency, and the lack of required
investment to move the sector forward.
Prior to the
enactment of the EPSRA, the Federal Government was responsible for policy
formulation, regulation, operation and investment in the Nigerian power
sector. Regulation of the sector was done through the Federal Ministry of Power
with operations through the National Electric Power Authority (NEPA), a wholly
owned parastatal responsible for power generation, transmission and
distribution.
EPSRA 2005
provided the legal framework for the unbundling of NEPA, the formation of
successor companies and the privatisation of the latter. EPSRA also provided
for the development of a competitive electricity market, the establishment of
a dedicated regulatory body and the selling up of a rural electrification
agency.
On that
count, the Federal Government established the Power Holding Company of Nigeria
(PHCN) which served as the initial holding company that was subsequently
unbundled into 18 successor companies. The 18 successor companies include
Abuja Electricity Distribution Company (Abuja Disco), Jos Disco, Ibadan Disco,
Benin Disco, Enugu Disco, Eko Disco, Ikeja Disco, Yola Disco, Kaduna Disco,
Port Harcourt Disco and Yola Disco. Others are Afam Power, Sapele Power, Ugheli
Power, Geregu Power, Egbin Power and Kainji Hydro Power.
Privatisation
of power
From
November 1,2013, when the Federal Government handed over the assets of the PHCN
successor companies to the new owners; the mandate was to turn around the
fortunes of the defunct PHCN,increase power generation, replace obsolete
equipment, meter all customers and improve on customer service. The shares in
the 11 distribution companies and five generating companies came to an
aggregate price of approximately $2.5 billion.
Notwithstanding
the privatisation process took longer than expected because of labor issues
that needed to be resolved, especially with workers who threatened to strike if
their severance benefits were not met. The Nigerian government eventually set
aside up to 50 percent of proceeds from sale of the distribution and generating
companies for payment of workers emoluments.
Post
privatisation
But, since
taking over the assets, Nigerians have continued to lament the sale to private
investors as the new owners claimed they met a huge problem that prevented
them from delivering on their mandate. They have argued that their inability to
gain access into the premises of the discos and gencos denied them the opportunity
of taking inventory and knowing exactly where the problems are. Three years
after take over, some of the problems that they met on ground have worsened.
As at the
time they took over, power generation hovered between 2,700 mega watts to
3,000 mega watts. Today, and very unfortunately, the country generates a
paltry 2,800 mega watts,a development that has led to the closure of several
small scale businesses and the relocation of some factories to other West
African countries.
Beyond the
challenge of poor electricity generation and distribution, most of the discos
have failed to meter customers while the few that have done so,are moving at a
very slow pace.
Indeed, the
immediate past Minister of Power, Prof. Chinedu Nebo, had said that over 10 million
households were yet to be metered, a development that has pitched consumers
against the respective discos.
While
consumers are not metered, estimated billing has become the order of the day
as the discos slam consumers with outrageous bills in the guise that they lack
meters, even when they have failed to provide the component to get the
legitimate revenue.
N6.52trn
power investment since 1999
Meanwhile,
available records show that the country spent $29.635 billion or N6.52 trillion
on power in the last 16 years but with little or nothing to show for it. While
the administration of former President Olusegun Obasanjo reportedly spent $16
billion (N3.52 trn), his successor, late President Umaru Musa Yar’Adua, expended
$5.375 billion or N1.183 trillion while immediate past President Goodluck
Jonathan’s administration spent $8.26bn (N1.817 trn). Piqued by the poor power
situation, late President Yar’Adua, on assuming power in 2007 said that “the
government under President Olusegun Obasanjo wasted $10 billion on the
National Independent Power Project, NIPP with little or nothing to show for
it.”
Similarly,
former House of Representatives Speaker, Dimeji Bankole, had put his own figure
at $16 billion and proceeded to set up a committee headed by Ndudi Elumelu to
probe the billions of dollars spent on the independent power projects. The
Ndudi Elumelu-led committee concluded its investigations and submitted the
report, but nobody was ready to account for how the $16 billion spent on the
sector failed to “commensurate result”. It was also discovered that about
2,500 containers of imported power equipment worth about $5 billion were abandoned
at Lagos ports with demurrage generated by the abandoned equipment put at over
N4 billion. Investigations revealed that the equipment formed part of the $16
billion allegedly expended within Obasanjo’s eight years. Following the 2007
change in administration that brought in Yar’Adua as president, the funding
arrangements for NIPP were subjected to intensive legal, political and financial
scrutiny, resulting in over two-year interruption in funding for the projects.
But after a
protracted and intensive debate on the way forward, however, the National
Economic Council (NEC) under Yar’Adua agreed later in 2008 to set aside an
additional $5.375 billion from the ECOA as a Power Emergency Fund to complete
NIPP subject to the approvals of all the state legislative houses. Going by
the Niger Delta Power Holding Company Limited (NDPHC) figures, at the time of
the suspension, $2.8 billion was already invested in NIPP, including $1.78
billion in funded letters of credits which allowed some of the projects to
continue despite the funding interruption. Contracted commitments totalled
$7.385 billion.
While
campaigning in 2011, President Muhammadu Buhari, who was then the presidential
candidate of the Congress for Progressive Change (CPC), said that both
President Goodluck Jonathan and former President Olusegun Obasanjo have questions
to answer, if he was voted into power. But those questions are yet to be asked
or answered since May 29, 2015 when Buhari was swore in.
Meanwhile
the National Integrated Power Project (‘NIPP’) which is an integral part of
Federal Government’s efforts to combat the power shortages in the country has
not helped to alleviate the challenges. It was conceived in 2004 as a
fast-track public sector funded initiative to add significant new generation
capacity to Nigeria’s electricity supply system along with the electricity
transmission and distribution and natural gas supply infrastructure required to
deliver the additional capacity to consumers throughout the country.
The Federal
Government had in 2005 incorporated Niger Delta Power Holding Company Limited (‘NDPHC’)
to serve as the legal vehicle to contract for, hold, manage and operate the
assets developed and built under the NIPP using private sector best practices.
CBN N213bn
Intervention Fund for power firms
As part of
efforts to get the private owners of power to hit the ground running, the
Federal Government, through the Central Bank of Nigeria provided N213 billion
funding for the privatised power firms in the country to help pay off inherited
debts incurred from gas supply and to stabilise their operations.
Also, the
facility is tailored to address the three key challenges facing the power
sector, including inadequate gas supply for power generation; misalignment
between electricity tariff and the true cost of running electricity business;
and the inability of generation companies to reliably produce electricity with
reduced volumes of gas.
The fund
will be used to settle the legacy gas debts which stand at N36 billion, execute
agreed metering programmes; procure transformers by distribution companies;
execute maintenance programmes; and procure equipment by generation companies.
The beneficiary companies are expected to repay loans obtained from the fund
with a first-line charge on their revenues over a 10-year period.
Though,the
CBN has suspended further disbursement of the fund, but only recently said it
would resume funding the scheme.
Stakeholders/Experts
react
A power
expert with Banwo Ighodalo and Associates, Mr. Ayodele Oni,had told Odogwu
Media Communication recently that, government did not think it through while
there have also been issues such as insincerity and vested interest, adding
that there is also a misalignment between the gas subsector and the power
sector.
‘‘Furthermore
there has been the culture of just throwing money at problems and not planning
and thinking things through. The power sector is a value chain and once there
is a problem with an aspect, there would be serious challenges and failure
ultimately. Regarding the NIPP, the grid challenge has been a problem.
Historically,
PHCN owed the gas producers money, so there was no way they would continue to
sell gas to the sector more so, to government owed facilities like the NIPP.
Power sector in indeterminate state
Reviewed by Sommy Advertisement Agency
on
Monday, May 09, 2016
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