The hopelessness of Nigeria’s power sector and its negative impact on the economy are being brought home daily. Just how shaky, was repeated by the Managing Director of the Transmission Company of Nigeria, Usman Mohammed, who said the power distribution companies needed up to $4.3 trillion to recapitalise and distribute power effectively. Though this figure appears rather high, nevertheless, the under-funding, inefficiencies and lack of capacity of the power firms are dire enough to compel national emergency measures.
Truth be told, President Muhammadu Buhari and his Power, Works and Housing Minister, Babatunde Fashola, have wasted four years without initiating the massive overhaul that the sector requires. The results have been devastating: power generated in the first 15 days of this year, according to the TCN figures, vacillated between 3,874 megawatts and 4,281MW. For an economy of about $397 billion (World Bank) and Africa’s largest, such a low power output is grossly inadequate, impacting negatively on investments, productivity and poverty rate. Every segment of the sector has problems, but distribution remains the weakest link as this newspaper has pointed out many times. The Vice President, Yemi Osinbajo, has acknowledged “challenges” and promised that the government would “rework and re-engineer” the sector for effective performance.
Mohammed identified the gross inefficiencies in the sector too, saying that while TransyCo had attracted $1.2 billion credit from multilateral agencies and was building infrastructure to raise its wheeling capacity from 8,000MW to 20,000MW by 2021, the DisCos were not investing to improve their capacity to receive and distribute power from the GenCos and the transmission agency.
Under the prevailing circumstances, it is futile to expect the necessary massive investment by the DisCos. They do not have the resources; they lack the managerial and technical expertise or the name recognition that can attract the foreign credit required for the sector. In giving out the 11 distribution firms unbundled from the defunct state-owned monopoly, PHCN (one transmission and six generation firms made them 18), the government of the day junked competence, track record and national interest; instead, they were largely farmed out to insiders and cronies. In the event, the major objectives of attracting the much-needed foreign direct investment, raising output – generation, transmission and distribution – and thereby stimulating productive activities – were lost. Local banks had to extend credit to enable the feeble investors to pay for the 60 per cent equity on offer for the DisCos. Today, they are over-burdened by debt.
Not only are they owing, the major shareholders of some have been accused of diverting revenues, credit and state-provided intervention funds, as well as engaging in contract malpractices. Up to N1.5 trillion has been provided, or is being considered by the government through the Central Bank of Nigeria to the sector operators. The N213 billion CBN Power Sector Intervention Fund and the N701 billion CBN Payment Assurance Fund have not been enough to rescue the system. A proposal for another N600 billion payment assurance intervention is awaiting final approval.
Buhari and Fashola should stop the mess: the power sector needs radical overhaul and decisive action today. Without decent power supply, the economy cannot fly and hopes of transforming the economy, creating jobs, attracting FDI and reversing the prevailing 70 per cent poverty rate will not be realised. Total generating capacity in Singapore was 13,350MW, while demand averaged 7,000MW in 2017, which was more than enough for its 5.6 million people and First World economy. Malaysia’s total power output was 34,000MW in 2018 for a population of 32.04 million and a thriving export-oriented economy.
Government should encourage the dilution of ownership in the DisCos and aggressively seek out and attract the world’s best power sector private firms into the country. To get out of the muddle, the current proprietors of the DisCos, including the government that holds 40 per cent in them, should unload substantial parts of their equities for reputed global operators to take over. Simultaneously, new entrants should be vigorously encouraged, while the states, partnering private firms, should take quick advantage of the federal offer to build generating, distribution and transmission mini-grids. The Federal Government should take the lead by revisiting the privatisation process and prosecuting any official or individual who broke the law.
The game-changer will be massive FDI and the technical and managerial skills that will come with that. The current owners of the DisCos are bereft of these and they should not be allowed to hold the country to ransom any longer. Osinbajo’s statement should not go the way of the unredeemed promises to concession the Lagos and Abuja airports. By liberalising investment policies, India expects Rs 11.56 trillion FDI between 2017 and 2022, according to the Indian Brand Equity Foundation, which said the country recorded $14.18 billion in FDI to the power sector between April 2000 and June 2018.
Deliberate policies should be rolled out to pursue utilisation of energy sources away from fossil fuels to wind, water, solar and waste. A substantial part of South Africa’s 42,000MW however still comes from coal-powered plants just as in the United States. We should meanwhile, utilise our reserves by re-starting coal mining. Increasingly, many countries are opting for such diversification. Our advantage in solar, wind and water should be leveraged with the private sector taking the lead.
What is sorely needed is the strong political will to see reforms through.
