Despite the fast worsening state of public power supply, it took eight long years after the enactment of the Electric Power Reform Act 2005 before 15 out of the 17 utilities carved out of the erstwhile Power Holding Company of Nigeria (PHCN) were handed over to private sector majority shareholding investors in November 2013. To five generating companies (GENCOs) and 11 distribution companies (DISCOs) was added the Transmission Company of Nigeria (TCN), a new monopoly, which the Federal Government decided to control, although it was possible to create several transmission utilities under Section 65 of the Act.
Prior to or at least concurrently with the scrapping of PHCN, the Ministry of Power was expected to put in place necessary structures and processes set down in the Act for the smooth and efficient function of the 17 (including one yet to be sold DISCO) successor power utilities. It, therefore, leaves much to be desired for the public to learn from Power Minister, Prof. Chinedu Nebo less than one year after the handover (and worst still through a foreign television station) that “people are coming from everywhere” with offers to take over TCN. In a follow-up interview, Nebo said that the possible sale of TCN was “a future thing… that is not foreclosed and not concluded…We want the market to stabilise before we take the action”. At what stage will the market be deemed stabilised?
Proceeding at a less desirable pace than the dire power situation warranted, the Nigerian Electricity Regulatory Commission (NERC) last month concluded the audit of the DISCOs, which should have formed the basis for determining their true worth preparatory to their sale and handover. Expectedly, the subsector was found to be viable. With the release of the audit, other structures such as the Transitional Electricity Market and the appointment of firms to provide technical inspection of the sector should be speedily put in place.
Contrary to widespread expectation that the dawn of privatization would result in the much-awaited improvement in the power sector, electricity output and supply fell significantly after the GENCOs and DISCOs changed hands. Recent revelations have confirmed, firstly, that legacy debts of N36 billion (one report indicated N14 billion) owed as at November 2013 for gas supplied to the defunct PHCN (and not false official imputations to vandalism of gas pipelines) precipitated reduced gas supplies to the GENCOs and resultant decline in power output. Secondly, the standing arrangement requiring full payment for whatever amount of electricity which GENCOs are capable and ready to generate whether or not that amount of power is wheeled out to consumers further raised government’s liability that culminated in the N213 billion 10-year facility given to the power sector last month. The Federal Government was mistaken to have expected gas suppliers to forgo the legacy debts, as its belated action betrays, just as it displayed reprehensible shortsightedness and gross insensitivity by subjecting the people and economy to avoidable and lengthening blackouts for 11 months.
Nebo also said inter alia, firstly, that the present power transmission capacity is 5,500 MW; secondly, that Federal Government wanted the transmission capacity to exceed 6,000MW by 2016; and thirdly, that US$3.5 billion had been spent to reinforce and boost transmission capacity by 50 per cent. Several questions arise: Is the present transmission capacity consequential to the amount spent or the baseline capability expected to be raised by 50 per cent and by what deadline? Has Federal Government planned for transmission capacity needed for the projected generation capacity of 10,000MW in 2015 and 20,000MW in 2020 much earlier promised?
As regards gas transmission, the public also learnt from Nebo that there is at present installed power generation capacity of 8,000MW with five power plants not operating fully owing to lack of gas supply. It is unclear if the take-it-or-pay clause already compels Federal Government to compensate the idle power plants due to government’s failure to provide gas for power generation and inadequate power transmission capacity to evacuate the putative full-capacity operation of the plants. Yes, the plants may have been mis-sited far away from gas fields by politicians. However, gas is currently being piped to more distant power plants in Ghana with plans to pipe gas to Europe via Algeria. In fact, the National Gas Grid is intended to address the present problem. What are the Federal Government’s plans concerning the National Gas Grid? It is necessary to stress that the all-important gas grid, all things considered, most probably will be constructed by Federal Government alone or in association with private sector firms as minority partners. Nigeria is and will remain a mixed economy. The private sector is hobbled by faulty government policies. Capitalising on that fact, foreign investors are wont to seek national sovereignty undermining guarantees that do not exist even in completely free enterprise system. The Federal Government should, therefore, look beyond the N213 billion facility and embark on a comprehensive gas supply solution to various industries.
Fortunately, the country does not have to look beyond its shoulders for the wherewithal to finance the power and gas transmission projects and much more. There is no gainsaying that wrong handling of public sector oil proceeds because of interference by the authorities in Abuja has facilitated the piling up by the CBN, rather unpatriotically, humongous Federal Domestic Debt (FDD), that purely monetary management reasons do not justify. It is long overdue to act in the national interest. Merely cancelling the baseless FDD, which is actually sterilised excess liquidity sewage, will yield annual budgetary savings of over N700 billion that is being poured down the drain as domestic debt service cost. Such savings alone will finance accelerated construction of the sorely needed gas and power transmission grids in record time. Additionally, this newspaper has repeatedly pointed out that by properly implementing the managed exchange rate fixing system, government will be in a position to finance the critical development needs with available resources. In the course of such approach to sustainable self-financed development, multilateral loans are dispensable but grants and spontaneous foreign direct investment are a welcome supplement.
As for the purchase offers for TCN being collated by Nebo, they amount to a pittance because power transmission assets based in Lagos State alone are worth more than $20 billion. More importantly, the TCN is a strategic power subsector monopoly that can and should be run profitably commercially and in which the private sector, if allowed to participate, should not be given the majority stake. It is instructive that a Canadian outfit, that was paid handsomely in order to strengthen TCN operations, actually sent rookies to understudy Nigerian experts. All that is needed is to give Nigerian power transmission experts on ground and in academia the necessary requirements to run TCN efficiently. Those government officials who are obviously scheming to poach the transmission monopoly with the aid of domestic and external fronts, should be told to back off and plough the loot garnered through abuse of their high offices into other sectors of the economy.
