News from the electricity sector demonstrates just how badly the Nigerian government is managing all aspects of the economy. So badly, for instance, is the power sector managed that output on the national transmission power grid was a mere 3,605 megawatts at its highest for a country of 170 million people in June. As several new power plants come on stream and the authorities battle to overcome severe gas supply challenges, urgent measures should be taken to enhance transmission infrastructure.
All the plans being made for industrial take-off and the automotive sector revolution will falter unless we get the power sector reforms right and fix transmission. As the government works with the generation and distribution companies to sort out the gas supply issues, there is an urgent need for massive investment in transmission infrastructure. Director-General of the Bureau of Public Enterprises, Benjamin Dikki, reminded us in February that the Transmission Company of Nigeria required $2.4 billion to upgrade its capacity from about 4,000MW carrying capacity to 16,843MW by the end of 2018.
This appears at first blush to be an uphill task, given the mess the government has made of its own privatisation programme, endemic corruption, systemic incompetence and the sheer enormity of the infrastructure deficit in the power sector. But it becomes relatively easy if the government can, for once, adopt a winning template that prioritises putting in place a creative and intelligent policy framework in preference to pouring money into its own cesspool of graft and ending up delivering nothing tangible.
Power generation averaged about 3,400MW daily in May and hovered between 2,600MW and 3,605MW in June. For a country that claims to have installed power generating capacity of about 6,000MW and national demand of 15,000MW, this is poor indeed. The Minister of Power, Chinedu Nebo, has cited gas pipelines and power installations vandalism, including terrorist attacks in the North-East region, breakdown of ageing equipment and inadequate carrying capacity by the sole national power grid as causes.
For the private operators who bought majority equity in the six generation and 11 distribution companies detached from the former state-owned power monopoly, the recent increase in the prices of domestic gas ($1.50/1,000Mcf to $2.50/1,000Mcf) and pipeline transportation costs only add to their prohibitive costs. The Minister of Petroleum Resources, Diezani Alison-Madueke, admitted at the weekend that only 750,000Mcf/d was currently available for the gas-fired power stations, just enough for 4,000MW of power and even this suffers supply hiccups.
While the BPE says at least $23.9 billion in capital expenditure would be required by the power sector firms over the next five years, the International Monetary Fund puts minimum investment required at $10 billion each year over 10 years beginning from 2011 to meet the nation’s power needs. Nigerians, however, cannot see much for the $3.5 billion that Nebo said the government had spent on power each year in the 10 years to 2013.
It has been obvious since the first phase of the Power Sector Reform Programme in 2007 that transmission had been neglected while the government exerted resources on generating plants, forgetting that generated power has to be evacuated and transported to DisCos via the transmission power grid. Due to the failure to invest in transmission for over 20 years, when up to 4,000MW of power is loaded onto the grid, it often malfunctions.
To remedy the situation, the President Goodluck Jonathan administration should think outside the box. Since the state retained only Transyco among the 18 firms unbundled from the old Power Holding Company of Nigeria, it should invest massively in its upgrade and give the contract managers, Manitoba Hydro of Canada, a free hand to run the grid efficiently. Ongoing projects appear too little and too slow.
The Nigerian government’s horrific track record in running utilities or commercial entities compels an immediate recourse to privatisation. Our suggestion is that the Federal Government should retain a maximum of 51 per cent equity in Transyco and sell 49 per cent to a foreign technical partner, while licensing a variety of private new ones. We should adopt the templates used effectively in the United States, India and Malaysia, where public and private companies concurrently run the power sector.
In India, creative policies that involve substantial private capital have under its Power For All programme, moved it to the world’s third largest producer of electricity with 233,929MW after China and the United States and ahead of Japan and Russia. It has national and regional power grids with the states and private firms licensed to compete with the national utility. Malaysia’s power privatisation programme, which began in 1988, has raised output to 21,500MW, with TNB, a power firm from the country, now operating in Mauritius, Pakistan, India and Indonesia.
The US segments its market into four with federal, states, regional and private utilities competing and producing a combined 1.2 million MW. Transmission is controlled there by Independent System Operators or Regional Transmission Organisations –non-profit entities that provide a level playing field for all and are strictly regulated by federal laws.
This is the challenge facing Jonathan. Just as the government licensed a private company as the Second National Telecommunications Carrier, as part of the telecoms sector reforms, his government should also license a private operator through a transparent auction to build and operate a second national power grid. This will complement the regional arrangements in the power sector reforms and allow for private sector efficiency, while the government regulates and uses fiscal measures to ensure equitable pricing.
