Banning generator importation without improving efficiency in power sector is misplacement of priority —Folawewo
A proposed law currently before the Senate canvasses 10 years jail term for importers of generating set and also seeks the ban of the product, all in efforts to improve efficiency in the power sector. A lecturer at the Department of Economics, University of Ibadan, Professor Abiodun Folawewo, whose specialty is in Macroeconomics, Labour and Development Economics, discusses the implications of the bill, what should be the focus of the Federal Government on the power sector, among others, with DARE ADEKANMBI.
THERE is a bill before the Senate seeking 10 years jail term for importers of generating sets and prohibiting the importation of the equipment. As a notable economist, do you consider that effort in the right direction towards solving the myriad of problems bedeviling the country’s power sector?
Let me start by saying that for every policy, there are costs and benefits. If you look at the two reasons given by the sponsor of the bill, you will see that one is to curb environmental pollution. We are all aware of the fact that there is global warming and one of the major contributors to this is pollution/emission. If you look at it from that angle and following the objectives of Sustainable Development Goals (SDGs), one of which is to pave the way for the development of environmental friendliness, we may say there is a justification for the proposed bill because it will engender sustainable development in such a way that it will lessen the impact o global warming.
The second reason adduced by the sponsor of the bill has to do with the development of the power sector. This is a good reason, but the sponsor is only looking at the supply side. For every supply, there must be what is called a demand. Why are people demanding generators? If there is no demand for it, there won’t be a supply. It means the real energy supply is not available to Nigerians and that is why people go for generating sets. If generators are banned, what will be the implication to production activities? You will agree with me that majority of the artisans are out on the streets using their okada and Marwa to make ends meet. Of them have been put out of work because of lack of electricity and those that are still in business rely heavily on generating set. If we ban generating set and the local power supply has not been properly developed, it is going to further complicate the unemployment problem and lack of productivity issue. In the immediate, the proposal is going to impose more cost on the economy than benefits.
But in the long run, if the bill becomes a law and the sector is properly developed, then the costs will begin to fizzle out and the gains be felt. When you don’t supply a good and you ban its importation, it is going to increase the cost of the good and lead to smuggling and hoarding of the good. Either you like it or not, people will still want to have electricity in their houses and run their businesses with generators. Now that they are proposing to ban it, they are going to create what is called rent for those in the business of bringing in generators. What they are selling at the rate of N10 before will now become N100 because they will have to pass through illegal means, bribing their way and the rest to bring in generator and those that need the product will pay more. So, it is a very good idea, but also a delicate issue. I would have suggested since we have the distribution and the power generation companies (the DisCos and the GenCos) in the power sector, let us provide incentives for them to perform very well. There is a lot of inefficiency in the sector. Why don’t we deal with that and particularly the issue of generation and distribution of electricity? When these partitions in the sectors [generation, transmission and distribution] function effectively, there will be a lot of improvement. If this happens, automatically people will not have need for generators. In fact, if electricity supply is stable, the issue of generators will fizzle out. We don’t have to legislate it.
I want to believe that the sector is bedeviled with problems because there are possibly saboteurs. But for a country that is governed by rules and regulations, there should be sanctions for those who break the rules. Nobody should be so powerful as to disturb or sabotage government efforts at making things better. Government is supposed to be above all economic agents in the country. The small businesses will suffer most if government goes ahead to ban generators without providing adequate power for the citizens.
A Federal Government delegation is scheduled to go to Germany to meet with Siemens officials to sign an agreement on power transmission. Concerns are being raised as to why the Chief of Staff, who is not an expert, will be heading such delegation. Again, the issue of PI&D judgment debt readily comes to mind. What is your take on this?
The fact is, in policy negotiation, anybody can lead a country’s delegation. But then, the most important thing is the think-tank behind the negotiation. Although we don’t have the details, the question we should ask is: who are those that prepare the technical notes upon which the agreement will be based? If the notes are prepared by the lawyers, the engineers and so on, I don’t have issue with that. Where we will have problem is if the Chief of Staff is going there without any knowledge of the workings of the power sector. Any political leader can be asked to lead any delegation. In a normal clime, what you find is that those providing the technical advice will be at the background, such that whatever the leader of the delegation is saying, he will only be using the mouths of the technical people. We need to know the details. But if he is just going on his own without any technical knowledge, there will be issues.
Do you see Siemens as having the requisite capacity to solve our power transmission problem?
If I will be frank with you, I will say yes and no. yes, based on the records of Siemens in terms of what it does and the rest. I will say no because it is a political decision. I will take you back to Ajaokuta Steel Company. The Russians were brought in because they have the expertise. But we are we on that agreement as a country? When you are going to all these countries to seek technical assistance, you must be sure of what you need. If not so, what we call internal political power play will set in. At the end of the day, they will collect your money and you don’t get what you need. The most important thing is that any country should know what it wants at every particularly point in time. If you know what you want, whatever pranks Siemens wants to play, the experts will have guided on the right way to follow. The experts will tell you, if you see this sign, this is what it means. Those international companies also play international politics too. It is not the issue of Siemens alone, it can be so with other companies.
Even in one of the past governments, there was an issue with Siemens over alleged bribery involving some former ministers…
That was why I said earlier that is not about Siemens but about us as a country. Are we saying other countries are not doing business with Siemens and the business become successful? The question is: why is it that we did it and it was not successful? It means that those who enter into contracts with these companies on behalf of the country do so not for the interest of the country. This is why we are not getting any result. It is not just Siemens.
It is funny that the problems in the power sector continue even after it was privatised and things are getting worse rather than improve…
Before you even get to the Goodluck Jonathan government that privatised Power Holding Company of Nigeria (PHCN) and others, the country spent billions of dollars on power during the Olusegun Obasanjo era. That is what I said at the beginning about saboteurs somewhere that the country needs to deal with. Everything boils down to integrity and sincerity of government. Why is it that those things that have been done in the past are not yielding results? If you look at the issue critically, you will see that the problems are caused by human factors. And it is those factors that we need to deal with as a country.