The recent equivocation on the flawed power sector privatisation process by the industry regulator presents the incoming administration of President-elect, Muhammadu Buhari, with a challenge that will require decisiveness and strong will. Confronted with hard questions on the abject failure of the privatised power generating and distribution companies to reverse four decades of epileptic power supply, the Chairman of the Nigerian Electricity Regulatory Commission, Sam Amadi, vacillated. In one breath, he said privatisation was not the main problem, and, in another, he admitted the prerogative of every government to make, reverse or amend policies.
But with the nation enveloped in darkness and many of the generation and distribution companies clearly incompetent, Buhari has no choice but to urgently review the privatisation process as a first step to clearing the mess in the power sector. Nigeria’s electric power situation is doubly pathetic. Although access to electric power is acknowledged to be a major facilitator of economic growth and poverty reduction, its inadequacy is often cited by the World Bank and other agencies as a major impediment to Nigeria’s growth. UNIDO cites improved access to electric power as vital components in the economic transformation of South Asian economies – Taiwan, South Korea, Singapore, Indonesia and Malaysia.
Nigeria also rightly identified the problem, but in opting for a private sector-led power sector, a previous government unbundled the state-owned power monopoly, PHCN, into 18 successor companies, preparatory to their sale, only for the Goodluck Jonathan administration to place the six generating and 11 distribution units into mostly wrong hands through a rigged auction that effectively kept the world’s major players away. Instead of transparency, cronyism marked the auction. The result has been disastrous. According to the Minister of Power, Chinedu Nebo, power supply was around 3,461 megawatts in early April; it had fallen in the previous months to below 3,000MW due, partly, to inadequate gas supply to the thermal power plants arising from vandalism of gas pipelines. That is true – up to a point.
Most of the hastily-formed companies and consortia that emerged as preferred bidders for the GenCos and DisCos lack the financial, technical, human and managerial capacity to run power companies. A research and consulting firm, Mckinsey & Company, estimates that Nigeria needs $350 billion to provide uninterrupted power supply by 2030. How will these poorly capitalised Nigerian power firms mobilise such funds? Beyond that, electricity consumers are now made to buy equipment, including meters, transformers and wires, that credible distribution firms should ordinarily supply. Most of the DisCos are nothing but tariff collectors, adding virtually no value to the electricity distribution chain. They have refused to provide pre-paid meters, preferring the extortionist “estimated bills.” This is most fraudulent.
Unlike the prevaricating Amadi, who cites gas supply among other problems bedevilling the sector, we insist that the incoming government invoke the necessary laws, revoke some of the licences of the incompetent operators and immediately re-sell them to competent, technically and financially capable multinational operators. Without adequate power supply, Nigeria is stuck in underdevelopment. To facilitate start-ups and small and medium enterprises that can mop up the 23.9 per cent of the workforce unemployed, boost exports and diversify public revenue, Nigeria requires at least 15,000MW by 2020, according to the UNDP. For the World Bank, annual investment of $10 billion per annum for 10 years is the minimum required to bring generating and distribution output to 20,000MW by 2020. Privatisation was expected to attract Foreign Direct Investment much as liberalisation enabled the telecommunications sector to become the second highest recipient of FDI for a decade after 2001. The emergency power firms that cornered our GenCos and DisCos have instead turned to local banks and are said to be under pressure to service the loans they took to purchase the assets.
The uncomfortable truth is that the Buhari government cannot succeed in reversing unemployment and factory closures unless it quickly dismantles and resells the power assets. Nigerians have suffered for too long. Only 48 per cent of Nigerians had access to electricity in 2013 according to a National Population Commission survey, compared to 85 per cent of South Africans. The CIA Factbook (2012) estimates electricity consumption per capita in Nigeria to be 106.63 kilowatt hour. This is well below United Arab Emirates’ 13,281.1kwh, Qatar’s 9,628.04kwh, Singapore’s 7,695.91kwh, South Africa’s 4,347.43kwh and even bankrupt Zimbabawe’s 988.15kwh. Our Presidential Task Force on Power admitted that while national demand in 2014 was 12,800MW, only 3,399MW was available. Comparatively, demand in South Africa was 33,604 MW in the same period, while supply was 36,000MW. For a country that aspires to join emerging markets championship groups like BRICS – Brazil, Russia, India, China and South Africa – this is beyond dispiriting.
There can be no alternative to private capital. The incoming government should utilise the relevant clauses in the privatisation laws to recover the assets from the charlatans who cornered them. Besides re-ordering the privatisation plan, Nigeria needs to harness all other power sources – coal, wind, solar – to close the electricity supply deficit. The government should overhaul the Bureau of Public Enterprises, appoint incorruptible professionals to run it and grant it a free hand.
Along with reviewing the assets already sold, the scheduled auction of the Nigerian Independent Power Plants should be transparently done. We re-affirm our stance that Western, Japanese and South-East Asian firms have the best track records in power plant operations and the BPE and the National Council on Privatisation should, if necessary, utilise the direct negotiation option to attract them. The new thinking should be how to inject efficiency into our power sector by engaging the best global operators. Never again should we allow phoney firms put together by corrupt public figures, their allies and dodgy businessmen to corner state-owned assets.
The government should never lose sight of the ultimate objectives of privatisation – to free government from commercial ventures and waste, stimulate SMEs, production and infrastructure development, attract local and foreign investment, diversify and promote exports and create jobs. Only competent core investors can facilitate these things, not rent seekers.
