Tinubu: Tackling Nigeria’s power crisis

Nigeria’s power crisis is hydra headed requiring some sober reflection on how to rescue it from its precipice and rekindle its potential to drive the country’s industrial capabilities. Without improving power generation, the strive by the incoming administration of Asiwaju Bola Ahmed Tinubu to transform the economy may be a mirage. Miles off from its need estimated at about 60,000 megawatts, the country has a problem even distributing the meager 7000 megawatts it currently generates. While the country reels from inadequate power generation, it virtually struggles to distribute a paltry 4000 megawatts with its old and antiquated equipments and power lines.

The power sector reforms of the administration of President Goodluck Jonathan in 2013 which saw the privatization of erstwhile state owned Power Holding Company of Nigerian (PHCN) and the birth of private distribution companies (DISCOS) owned by shadowy individuals, have not provided any respites. The power generation companies (GENCOS) have not done well either. Unlike the telecom sector reform began by the administration of President Olusegun Obasanjo which has democratized the ownership of phones and reduced the cost of calls and data, the power sector reform has hardly provided any relief. The problem of acute power outage appears to have quadrupled,leaving many of our cities and communities in the countryside without power for days and even months.

Absence of power is the bane of the country’s ailing economy which has translated into prohibitive cost of production, leading to frequent shutdown by many companies and their relocation to Ghana where the environment for business is more clement. The extensive Agbara-Ota industrial axis in Ogun State for instance used to boasts of over 500 companies specializing on different products. Today many of them have relocated to Ghana and other countries in the West African region. The same can be said of many industrial complexes across the country which have become a shadow of their former self.

With a largely vibrant, entrepreneurial and highly productive youthful population, many would have been manufacturing varied crafts from the back of their homes with regular power.

The small scale businesses which ought to be the mainstay of the Nigerian economy is worse hit by a combination of the power crisis and the high cost of fuel. A Premium Times report titled, “Power Outage: How Nigeria’s electricity problem cripples small businesses” captures the problems of small businesses as they struggle to survive under acute power crisis. The report highlighted the case of an embroidery maker, Mr Kareem, a resident of Igando in Lagos, who explained that the generating set provided an alternative source of power for his embroidery business but at a huge cost.

“The use of ‘generator’ was a fair alternative but it affected our overall earning,” he said. “Usually, for a single embroidery job, I charge my clients between N1,500 and N3,000. Yet, to complete this job, I have to power my generator with fuel of about N500, depending on the design. Some designs can be very problematic and time-consuming, which means I have to run my generator for a longer period, sometimes with as high as N1,000. If you burn fuel of N1,000 on a job of N1,500, how do you survive as a business and pay (other) bills?”

The World Bank Board of Directors on June 23, 2020 approved the Power Sector Recovery Operation (PSRO) of $750 million in International Development Association (IDA)* credit to improve the reliability of electricity supply, achieve financial and fiscal sustainability, and enhance accountability in the power sector in Nigeria.

The bank says about 47% of Nigerians do not have access to grid electricity estimated at around $28 billion – equivalent to 2% of its Gross Domestic Product (GDP). Getting access to electricity ranks as one of the major constraints for the private sector according to the 2020 Doing Business report. Hence, improving power sector performance, particularly in the non-oil sectors of manufacturing and services, will be central to unlocking economic growth post COVID-19.

“The lack of reliable power has stifled economic activity and private investment and job creation, which is ultimately what is needed to lift 100 million Nigerians out of poverty,” says Shubham Chaudhuri, World Bank Country Director for Nigeria. “The objective of this operation is to help turn around the power sector and set it on a fiscally sustainable path. This is particularly urgent at a time when the government needs all the fiscal resources it can marshal to help protect lives and livelihoods amidst the COVID-19 pandemic.”

The PSRO provides results-based financing to support the implementation of the Government’s Power Sector Recovery Program (PSRP). The PSRP is a comprehensive program to restore the power sector’s financial viability, improve service delivery and reduce its fiscal burden. The PSRO is expected to increase annual electricity supplied to the distribution grid, enhance power sector financial viability while reducing annual tariff shortfalls and protecting the poor from the impact of tariff adjustments. This will enable the turaround of the power sector while helping the Federal Government to redirect large fiscal resources from highly regressive tariff shortfall financing towards critical crisis-responsive and pro-poor expenditures. It will also increase public awareness about ongoing power sector reforms and performance.

But thanks to the newly signed law by President Muhammadu Buhari which has made power generation, transmission and distribution legal for states and local governments to venture into this sector. The Tinubu government should massively encourage the states to generate their own electricity so as to free the National Grid to take care of other areas. Prior to the review, the 1999 Constitution of the Federal Republic of Nigeria in articles 13 and 14 though put electric power in the concurrent legislative list for federal and state governments to legislate on, but restrained the powers. The states then were only permitted to interfere in areas not covered by the national grid system within that state.

The recent amendment reviewed Article 14(b) and liberally expands the powers of states to generate, transmit and distribute electricity to areas covered by the national grid unlike pre-reform regimes. The liberalisation of the states to generate, transmit and distribute electricity has subtly de-monopolised the long-existing monopoly of the value chain making way for free competition in the market through states. With many states following the path of Edo and others that are already generating powerfor the use of government establishments and the expansion to take care of other areas, the road to regular and stable power in Nigeria has been kickstarted.

According to a Vanguard report, experts and analysts have predicted that more than $10 billion additional investment would be attracted into the power sector, following the signing of Nigeria’s Electricity Act by President Muhammadu Buhari. The report says figures obtained from the Energy System Operator, an autonomous unit in the Transmission Company of Nigeria, TCN, put Nigeria’s electricity generation at a miserable 4,742 megawatts, MW, indicating a drop of 4.2 per cent, from 4,950MW recorded two weeks previously. It also showed that a little over 4,000 MW was transmitted and distributed to consumers, apparently too meager, considering the nation’s more than 200 million population.

But with the latest amendment, investment experts and analysts say states would be empowered to invest in the sector as well as put adequate institutions, structures, and systems in place to attract and retain local and foreign investors interested in their domains. The stage is therefore set for the transformation of the country’s economy under a Tinubu presidency.

With the country spending 96.3 per cent of its generated revenue in 2022 on debt service according to the World Bank, there’s no doubt that the economy must be expanded by the Tinubu government to generate greater revenue so that Nigeria can meet the demands of infrastructure and other social services.