on October 30, 2015 @shegxygott
Every well-informed
Nigerian living in the country since the second coming of the military in
December 1983 knows that very little investment was made in the power sector
until the Olusegun Obasanjo administration came on board on May 29, 1999.
For
many, this is a misconception. Another misconception was the one peddled by the
late political orator and former Minister of Power, and later Attorney General
and Minister of Justice, Chief Bola Ige, that the sector could be fixed within
six months.
Those two misconceptions drove the thinking in the power sector.
There were also very fundamental structural problems. Public utilities were run
as a monopoly. Not just a monopoly, but also very top heavy and centralised in
its administration, in the case of the power sector. And so, there were a
number of things that had to be done. There were the reforms, for instance, the
2005 Act, which provides for the unbundling of the utility into different
entities which happened during the Obasanjo administration when Senator Liyel
Imoke was minister.
I think, Imoke worked closely with the Bureau of Public
Enterprises, BPE, to make sure that the law was passed. In fact, the Power
Reform Act was one of the most difficult laws to be passed in the National
Assembly for obvious reasons. But it was passed, and that was the beginning of
the reforms in earnest. With the passage of the law, Nigerians started seeing
the unbundling of the utilities into smaller entities and this, in turn, saw
them independently managed and being run more like business entities. This, of
course, was a step in the right direction heading towards ultimately what we
now see as the privatisation of these utilities.
All the structural amendments that needed to happen started
during the Obasanjo administration. There was an attempt to re-bundle the
utilities during the Umaru Musa Yar’Adua administration. This delayed for over
two years the reforms and progress that had been made. Yet, the fact that the
Goodluck Jonathan administration came back to that same blueprint of the
Obasanjo era has led to some of the improvements we see in the sector today.
We now see that the Federal Government budget for the power
sector was very huge. Now, with the private sector buying in and taking some
ownership through the privatisation process, we are now seeing the Federal
Government spending less and the private sector taking more responsibilities
for investment in power supply. One of the crucial things that you will observe
is that even the National Integrated Power Projects, NIPPs and the investments
that were made there from the sale of utilities, the Federal Government has
been able to recover a substantial portion of those investments. When those
investments are paid for by their new owners, the Federal Government will also recover
from the power plants and the distribution network. The only place that the
Federal Government may not recover from is the transmission networks because
those ones were not privatised, the managements were outsourced. This means
that with that outsourcing arrangement, the assets still belong to the Federal
and state governments.
Another thing that was also very critical with the reform in the
power sector by the Obasanjo administration was that, beyond the passage of the
bill and its implementation, Nigerians saw that the greatest challenge of power
which some people have continuously failed to appreciate is the availability of
gas. Most Nigerians fail to appreciate that gas, which belongs to another
ministry, is a completely separate investment being made by another entity.
Even efforts were made right from the Obasanjo administration to make sure that
everybody worked together to ensure the availability of gas for the new power
plants. Ultimately, there was a disconnect. The power plants were often ready
with the MDAs responsible for gas not being able to deliver gas to the power
plants.
The price of gas was also a big issue. Indeed, the pricing of
gas is so low that the oil majors have refused to drill and supply gas to the
power companies. Many also do not know that what we have now with the reform in
the sector is new gas pricing which is inevitable. With the new gas pricing,
maybe more people will invest in gas and we can now have enough gas to run the
power plants. What this means is that there is a lot of factors that need to be
addressed for you to have power.
Which is why it is extremely hazardous when over the years, you
find in the reform programmes , the power probe which went on, people began to
bandy imaginary figures- $16b, $10b, and so forth, without any evidence of any
records that such amount was spent in actual figures. The NIPP had about two
point something billion dollars allocated to it at the time.
Up until today, nobody has been able to establish where the
sixteen billion and ten billion being dropped here and there came about. But
the truth is that what the Obasanjo administration started in terms of reform,
which was interrupted at a point, is the same blueprint which is being
implemented and is yielding tremendous results. It all started with a technical
committee under the Obasanjo administration before NIPP. That technical
committee was responsible for delivering the first ever 4,000 megawatts. At the
time the technical committee resumed, power generation was down to 1,600 Megawatts,
and that technical committee had about twenty months to deliver the 4,000
Megawatts.
It was the difficulty to sustain it afterwards that necessitated
the investment in NIPP.
Today, we are going about some 5,000 Mw because a lot of what
the technical committee did was to maintain old plants that were already down
and had been used beyond their life span. Those plants the technical committee
rehabilitated were installed in the sixties, seventies and eighties, and none
in the nineties. We must note that the NIPP was about adding capacity with a
view to selling or privatizing it. But private sector was not going to add that
new capacity because the reform in the sector had not kicked in.
There is no way that private sector would build generator plants
when they did not have gas supply and when gas was heavily subsidized. There is
no way that the private sector would build generator plants when clearly they
did not have laws and regulations that would guarantee them a return for their
money. So the Obasanjo government at the time decided that the NIPP investments
should be made and at the end, privatize. Now, the privatization that came at
the back end under the Jonathan administration is what we see today.
But if you did a study, you would see that there is a decline in
investment in generators by the Federal Government; there is also a decline in
investment in distribution network because of the investments that were made
earlier. Now, if the administration of President Muhammadu Buhari sustains the
reforms, it is just a matter of time for all that had happened over the years
to begin to yield very visible fruits in spite of interruptions by various
probes and allegations.
In spite of the near reversal of the policies under the Yar’Adua
administration; in spite of the challenges of the bureaucracy of government,
the reforms have kicked in and they are sustained. A lot of people are now
talking about power being available and attributing it to the President’s body
language. I think it goes beyond body language, especially if you understand
how the power sector works. There are long lead times for these investments to
be made and there are long lead times for equipment to be ordered. There are
long construction periods within which all these will happen. They just don’t
happen within a few months of an administration coming into the office.
In fact, there is a need for some credit to be given for the
vision of the Obasanjo administration. Someone that must also be given credit
is His Excellency Nasir el-Rufai, the current governor of Kaduna State, who was
the Director General of Bureau of Public Enterprises. It was he who led the
process of reforms, including the drafting of the law at the time the Ministry
of Power and Steel was under the watch of Senator Imoke who worked with the BPE
and the National Council on Privatization to make sure that everything that was
needed was put in place. It is hoped, therefore, that the present
administration of President Buhari will sustain those reforms and create a
conducive environment for the private sector to invest in power.
The problem with power is that a lot of it is social service. It
is not a very profitable venture per se, but it is an area that there is
significant demand; and if the private sector meet that demand, it would
certainly make a return on investment. But if the public sector wants to meet
that demand, it is very unlikely that we are going to meet the expectations of
our people. Yet, for the private sector to meet that demand, it will need
support from government in terms of regulatory environment and making the
business attractive.
The Federal Government can continue to subsidize tariffs to the
down trodden but the tariffs must be cost reflective if power must be
delivered. Private investors, on the other hand, must also work in a regulated
environment so that their inefficiencies are not transferred to the consumers.
Above all, the gas sub-sector must be revitalized to feed the power sector.
Mr Desmond Orjiakor, a public affairs commentator, wrote from
Abuja.
Comments
Post a Comment