- N6.52trn wasted as darkness persists
By AdewaleSanyaolu
WHEN the Federal Government on November 1, 2013 handed the successor companies of the Power Holding Company of Nigeria (PHCN), Nigeria electricity consumers were upbeat that the long years of ‘Never Expect Power Always (NEPA) were ended for good.
But little did they know that the future of the power sector under the management of private investor would be darker than they ever imagined.
However, nearly three years after the power assets were handed over to the new owners, the situation has gone from bad to worse, with government expending over N6.52 trillion on the sector from 1999 till date with very little to show for it.
Regrettably, despite the injection of these huge resources from the government and the private sector, darkness has continued to envelop every nook and cranny of the country.
Background
The Journey to the country’s power privatisation process started in 2005 when the Nigerian government signed into law the Electric Power Sector Reform Act (EPSRA) with the aim of eventually privatising power supply which had been marred by several years of corruption, lack of transparency, and the lack of required investment to move the sector forward.
Prior to the enactment of the EPSRA, the Federal Government was responsible for policy formulation, regulation, operation and investment in the Nigerian power sector. Regulation of the sector was done through the Federal Ministry of Power with operations through the National Electric Power Authority (NEPA), a wholly owned parastatal responsible for power generation, transmission and distribution.
EPSRA 2005 provided the legal framework for the unbundling of NEPA, the formation of successor companies and the privatisation of the latter. EPSRA also provided for the development of a competitive electricity market, the establishment of a dedicated regulatory body and the selling up of a rural electrification agency.
On that count, the Federal Government established the Power Holding Company of Nigeria (PHCN) which served as the initial holding company that was subsequently unbundled into 18 successor companies. The 18 successor companies include Abuja Electricity Distribution Company (Abuja Disco), Jos Disco, Ibadan Disco, Benin Disco, Enugu Disco, Eko Disco, Ikeja Disco, Yola Disco, Kaduna Disco, Port Harcourt Disco and Yola Disco. Others are Afam Power, Sapele Power, Ugheli Power, Geregu Power, Egbin Power and Kainji Hydro Power.
Privatisation of power
From November 1,2013, when the Federal Government handed over the assets of the PHCN successor companies to the new owners; the mandate was to turn around the fortunes of the defunct PHCN,increase power generation, replace obsolete equipment, meter all customers and improve on customer service. The shares in the 11 distribution companies and five generating companies came to an aggregate price of approximately $2.5 billion.
Notwithstanding the privatisation process took longer than expected because of labor issues that needed to be resolved, especially with workers who threatened to strike if their severance benefits were not met. The Nigerian government eventually set aside up to 50 percent of proceeds from sale of the distribution and generating companies for payment of workers emoluments.
Post privatisation
But, since taking over the assets, Nigerians have continued to lament the sale to private investors as the new owners claimed they met a huge problem that prevented them from delivering on their mandate. They have argued that their inability to gain access into the premises of the discos and gencos denied them the opportunity of taking inventory and knowing exactly where the problems are. Three years after take over, some of the problems that they met on ground have worsened.
As at the time they took over, power generation hovered between 2,700 mega watts to 3,000 mega watts. Today, and very unfortunately, the country generates a paltry 2,800 mega watts,a development that has led to the closure of several small scale businesses and the relocation of some factories to other West African countries.
Beyond the challenge of poor electricity generation and distribution, most of the discos have failed to meter customers while the few that have done so,are moving at a very slow pace.
Indeed, the immediate past Minister of Power, Prof. Chinedu Nebo, had said that over 10 million households were yet to be metered, a development that has pitched consumers against the respective discos.
While consumers are not metered, estimated billing has become the order of the day as the discos slam consumers with outrageous bills in the guise that they lack meters, even when they have failed to provide the component to get the legitimate revenue.
N6.52trn power investment since 1999
Meanwhile, available records show that the country spent $29.635 billion or N6.52 trillion on power in the last 16 years but with little or nothing to show for it. While the administration of former President Olusegun Obasanjo reportedly spent $16 billion (N3.52 trn), his successor, late President Umaru Musa Yar’Adua, expended $5.375 billion or N1.183 trillion while immediate past President Goodluck Jonathan’s administration spent $8.26bn (N1.817 trn). Piqued by the poor power situation, late President Yar’Adua, on assuming power in 2007 said that “the government under President Olusegun Obasanjo wasted $10 billion on the National Independent Power Project, NIPP with little or nothing to show for it.”
Similarly, former House of Representatives Speaker, Dimeji Bankole, had put his own figure at $16 billion and proceeded to set up a committee headed by Ndudi Elumelu to probe the billions of dollars spent on the independent power projects. The Ndudi Elumelu-led committee concluded its investigations and submitted the report, but nobody was ready to account for how the $16 billion spent on the sector failed to “commensurate result”. It was also discovered that about 2,500 containers of imported power equipment worth about $5 billion were abandoned at Lagos ports with demurrage generated by the abandoned equipment put at over N4 billion. Investigations revealed that the equipment formed part of the $16 billion allegedly expended within Obasanjo’s eight years. Following the 2007 change in administration that brought in Yar’Adua as president, the funding arrangements for NIPP were subjected to intensive legal, political and financial scrutiny, resulting in over two-year interruption in funding for the projects.
But after a protracted and intensive debate on the way forward, however, the National Economic Council (NEC) under Yar’Adua agreed later in 2008 to set aside an additional $5.375 billion from the ECOA as a Power Emergency Fund to complete NIPP subject to the approvals of all the state legislative houses. Going by the Niger Delta Power Holding Company Limited (NDPHC) figures, at the time of the suspension, $2.8 billion was already invested in NIPP, including $1.78 billion in funded letters of credits which allowed some of the projects to continue despite the funding interruption. Contracted commitments totalled $7.385 billion.
While campaigning in 2011, President Muhammadu Buhari, who was then the presidential candidate of the Congress for Progressive Change (CPC), said that both President Goodluck Jonathan and former President Olusegun Obasanjo have questions to answer, if he was voted into power. But those questions are yet to be asked or answered since May 29, 2015 when Buhari was swore in.
Meanwhile the National Integrated Power Project (‘NIPP’) which is an integral part of Federal Government’s efforts to combat the power shortages in the country has not helped to alleviate the challenges. It was conceived in 2004 as a fast-track public sector funded initiative to add significant new generation capacity to Nigeria’s electricity supply system along with the electricity transmission and distribution and natural gas supply infrastructure required to deliver the additional capacity to consumers throughout the country.
The Federal Government had in 2005 incorporated Niger Delta Power Holding Company Limited (‘NDPHC’) to serve as the legal vehicle to contract for, hold, manage and operate the assets developed and built under the NIPP using private sector best practices.
CBN N213bn Intervention Fund for power firms
As part of efforts to get the private owners of power to hit the ground running, the Federal Government, through the Central Bank of Nigeria provided N213 billion funding for the privatised power firms in the country to help pay off inherited debts incurred from gas supply and to stabilise their operations.
Also, the facility is tailored to address the three key challenges facing the power sector, including inadequate gas supply for power generation; misalignment between electricity tariff and the true cost of running electricity business; and the inability of generation companies to reliably produce electricity with reduced volumes of gas.
The fund will be used to settle the legacy gas debts which stand at N36 billion, execute agreed metering programmes; procure transformers by distribution companies; execute maintenance programmes; and procure equipment by generation companies. The beneficiary companies are expected to repay loans obtained from the fund with a first-line charge on their revenues over a 10-year period.
Though,the CBN has suspended further disbursement of the fund, but only recently said it would resume funding the scheme.
Stakeholders/Experts react
A power expert with Banwo Ighodalo and Associates, Mr. Ayodele Oni,had told Daily Sun recently that, government did not think it through while there have also been issues such as insincerity and vested interest, adding that there is also a misalignment between the gas subsector and the power sector.
‘‘Furthermore there has been the culture of just throwing money at problems and not planning and thinking things through. The power sector is a value chain and once there is a problem with an aspect, there would be serious challenges and failure ultimately. Regarding the NIPP, the grid challenge has been a problem.
Historically, PHCN owed the gas producers money, so there was no way they would continue to sell gas to the sector more so, to government owed facilities like the NIPP.