Successive governments in Nigeria have not been able to fix the power sector challenges. Before the 2015 general elections, the present administration pledged to deliver 7,000MW by December 2016, but realities on ground proved that to be a daunting task for the administration. In this report, OLATUNDE DODONDAWA examines the possible options that may save the power sector from total collapse.
Economic development is a function of stable power supply. Experts have argued that no nation develop its economy without guaranteed stable power supply. Lack of stable power supply in Nigeria has resulted into having an import-dependent economy whereby virtually all commodities, including toothpicks, were imported from other economies with stable power supply.
Nigeria’s power sector went into state of coma between 1993 and 1999 when no single investment was made to boost power generation, transmission and distribution capacity.
In 1999, democratic government of Olusegun Obasanjo attempted to revamp the moribund power sector by introducing some reforms which included transformation of National Electric Power Authority (NEPA) into Power Holding Company of Nigeria (PHCN).
Between 1999 and 2003 when Obasanjo handed over to late President Umaru Musa Yar’Adua after his third term bid, over $16billion had been ‘invested’ in power sector without achieving additional megawatts of power.
This compelled the late Yar’Adua’s government to declare state of emergency in power sector in 2007, yet without any solution.
In 2010, former President Goodluck Jonathan launched Roadmap to Power Sector with the intention to liberalise the sector and attract the much needed investment. However, President Jonathan eventually sold PHCN successive companies, except Transmission Company of Nigeria (TCN), to private ‘investors’ at $2.5 billion (N500 billion) at exchange rate of N200 in September 2013.
Unfortunately, the Federal Government uses about N460 billion out of N500 billion to settle the entire workers of old PHCN successor companies who were laid off pre-privatisation.
After the takeover by the private investors, the much needed investment was lacking due to what they termed ‘non cost-reflective’ tariff and inability to adequately recover their investment.
Nigerians continued to pay for power they did not consume while spending trillions to generate their own power via use of generating sets by both private and commercial residents.
The cost of doing business for DisCos has clearly doubled in the last two years. They said they are unable to recover their expenses, much less make profits. They said price of gas has risen while unit cost of power generation has also risen. The tariffs cannot be increased at a time Nigerians are groaning under economic stagnation and inflation.
The power sector reform law allows investors to recover their cost and make reasonable return, stating specifically that tariffs should provide “incentives for the continuous improvement of the technical and economic efficiency with which the services are provided”.
According to industry sources, GenCos invoice DisCos based on market rates at about N68 per kwh of electricity while DisCos sell to consumers at averagely N25. That is a loss of N38 per kwh.
The major component of power generation, which is gas, is priced in dollars. It is practically impossible for Nigeria’s energy supply industry to recoup the basic costs of generation and distribution.
The multi-year tariff order (MYTO) was developed as part of the power sector reform to address the issue of pricing in a scientific manner. The model projected inflation rate, exchange rate, power generation, estimated energy allocation, and cost of generation and transmission to arrive at tariffs that would enable investors recoup their investment over a 10-year period. The basic idea behind MYTO was economic viability. But as it stands, MYTO is long due for a comprehensive review in line with current realities, but for political reasons, this might not come anytime soon.
Common slogan from government to government in 16years
There seems to be a common slogan among government officials in the last 16 years. The slogan is ‘gas pipeline vandalism’.
For instance, the former Governor of Lagos State, who is the present Super Minister who supervises Ministry of Works, Power and Housing, Babatunde Raji Fashola, built at least four power plants in Lagos State to power Lagos State infrastructures. The independent power plants built by Fashola included Marina, Ajah, Akute and Alausa power plants.
Many have thought that he would drive the power sector with the passion and initiative he used to build power plants to power government infrastructures in Lagos State without recourse to the national grid and stable power supply at those facilities.
During the marking of his 2600 days in office as governor, he specifically urged Nigerians to vote out the ruling party, People’s Democratic Party (PDP) at that time, if they wanted to enjoy stable power supply.
He said the law only permits the Federal Government to be solely responsible for power in Nigeria and that it was illegal for Lagos State to distribute power for citizens but to power its own infrastructure. But as Minister of Power, little can he do to review the law that put all powers relating to power sector in the hands of the Federal Government.
The way forward
Issues relating to energy in Nigeria rest solely in the hands of the Federal Government. In Nigeria, power falls on the Exclusive List Powers of the Federal Government, no state can take decision on power supply as it relates with its citizens. Other issues on the Exclusive List Powers of the government include defence, foreign affairs, currency extradition, passports, immigration, emigration, international trade and census.
If energy can be moved to the Concurrent List, Lagos State can generate power and sell power to the entire southwestern region. The south-south can generate for the south east and south and south-south.
The 19 northern states can leverage on their massive land mass and the desert to build solar panels for solar energy and sell power to neighbouring countries like Niger, Cameroun, and Chad etc. The existing hydro plants mostly located in the north will continue to supplement whatever we can generate from solar panel in the north.
It is a wrong policy for power stations in Lagos (Egbin), Ondo (Omotosho) to rely on gas supply from the south-south region to fire its gas plant.
These should have been the right model for solving power sector challenges confronting the country rather than the brisk privatisation of the power sector which only succeeded in increasing the tariff, increase revenue generation base of the discos and decreasing the power supply due to poor power infrastructures across the country.
and then