In a fresh bid to breathe life into a listless power sector, the Federal Government recently announced its readiness to divest its 40 per cent stake in the country’s floundering electricity distribution companies. This may well be the right step to take, for those who believe in a private sector-driven economy; but, for the sceptics, it is a desperate measure to avoid a complete review of the entire ownership structure of the troubled power firms, which is what the situation rightly demands.
Coming just days to the fourth anniversary of the rigged privatisation of the successor companies of the defunct Power Holding Company of Nigeria, the news of government’s intended divestment is an open admission of the failure of the power privatisation; it has fallen short of its desired goal. The Minister of Power, Works and Housing, Babatunde Fashola, was quoted as saying that all he was waiting for was “an offer on the table” and the government would let go of its 40 per cent interest in the DisCos.
But what the country needs in the power sector is a massive injection of foreign investment, which was however overlooked by the Goodluck Jonathan administration in giving out the power firms to some hurriedly-assembled consortia with practically neither antecedents in the business, nor the wherewithal to run an enterprise of that magnitude. Having raided the local banks for funds to buy over the firms, the current investors are left with nothing to invest and improve the quality of electricity services in the country.
The power privatisation was a missed opportunity to attract foreign direct investment and technical know-how to the country. What Nigeria has missed by that action is the solid foundation for its industrial take-off and economic growth which cannot be achieved without an efficient power sector. Nigeria has also been denied the concomitant boost in job creation. Since November 1, 2013 when the privatisation was consummated, Nigerians are yet to witness significant improvement in the power sector, and it is doubtful if there would be any for as long as the sector continues to be run by those currently in charge.
Since 2013, electricity in Nigeria has been trapped in a cycle of accelerated motion but without any perceptible movement. While the generation companies were credited with a miserable capacity of 6,900 megawatts of electricity as of last month, according to Fashola, the transmission company, a wholly government-owned firm, can hardly wheel 5,000 MW without triggering a systems collapse.
On the other hand, the DisCos are also getting bogged down with indebtedness, which Fashola put at N500 billion. They cannot also meter over 50 per cent of their customers, which should have enabled them to effectively collect their tariff. Even as customers are yearning for regular electricity, the DisCos are routinely rejecting power allocated to them as they have failed to invest in new equipment. At the same time, both the GenCos and DisCos have been at daggers drawn over growing indebtedness, which could further hinder effective service delivery.
As the GenCos allege that they are being owed over N300 billion by the DisCos, the latter are also accusing their customers of owing them over N100 billion, much of which, at best, should be subject to verification. No serious country with an agenda for economic prosperity and technological development allows itself to get bogged down in this kind of mess. The Muhammadu Buhari government has to dig the country out of this hole.
Perhaps, if Nigeria had learnt from what happened with power privatisation in Australia, there would have been more due diligence before farming out the power firms to the present operators. In that country, after two decades of privatisation, what the people got in return were poor services delivered at high costs and requiring government subsidies. A prominent Australian economist, John Quiggin, described it three years ago as “a dismal failure”.
After the fiasco of 2013, any attempt to privatise government’s remaining stake in the power sector should be done with deliberate target of attracting capable and proven foreign investors. But this may not be easy as there is no company worth its salt that would want to take up 40 per cent stake in a concern where the controlling shares are in the hands of clueless operators who are unwilling to subject their books to any scrutiny; the Central Bank of Nigeria, which volunteered to give them bailout has a story to tell in this regard. It is imperative for the government to persuade some of the firms to relinquish substantial part of their interest to new investors.
Although Fashola said that cancellation of the sales – which is what many are clamouring for – was not on the cards, as it “sends a negative business message about us that we do not respect contracts,” there should be a way to persuade those that cannot cope to relinquish part of their holding. For instance, he was quoted as saying that DisCos that could not cope should look “for options, either to raise capital or get more strategic partners” to get the job done within the framework of the extant contracts.
For the Buhari administration, chasing away Boko Haram and fighting corruption may be its cardinal programmes, but failure to fix electricity will amount to a monumental failure. It is not as if there is much time left to do so; with two and a half years gone, the government has just a few months to accomplish this task, as most of the remaining period will go into electioneering for the 2019 polls. The government, therefore, needs to be decisive on this matter.
