Setting the agenda for delivering change  

It is no longer news that three ministries or areas of critical public service of Power, Works and Housing have been merged into one under the superintending authority of myself as substantive minister and Mustapha Baba Shehuri (minister of state) with two new permanent secretaries, Abubabar Magaji, redeployed from the Ministry of Interior to Works and Housing, and Louis Edozien from the private sector to assist us.

Since our inauguration we have spent the last few days getting to know ourselves and our officers, assessing the status of works done in all ministries, meeting with some of our parastatals and corporations, which is still ongoing, and generally trying to understand where things stand, where the problems are, what can be solved, what cannot be solved, what must continue and what must be altered.

Where we are today (roads, power, housing)
We are at a point where the 2015 budget made only a provision of about 16 percent amounting to approximately N557 billion for capital spending out of a total budget of over N5 trillion. The first thing that must change is the capital to recurrent ratio of the budget, and our colleagues in the Ministries of Finance and Budget and Planning are working on this and they will address you at their own time on the changes they have made and what citizens must do to enable them achieve that plan.

We are at a period when oil prices have dropped from where they were a year ago. We spent less on capital when we earned more from oil; today we must spend more on capital even as we earn less. As I have had cause to say before, the budget is the article of faith of every serious nation and government and our resolve to do more capital spending with less resources must be indicative of our seriousness to reflate this economy.

Roads
The records that have been made available from previous budgets show that the last time Nigeria budgeted over N200bn in a year’s budget for roads was in 2002. It seems that as our income from oil prices increased over the last decade, our spending on roads decreased.

As far as status reports go, the Federal Government budgeted N18.132bn in 2015 and the Ministry of Works got N13bn for all roads and highways in 2015, although it has contracts for 206 roads, covering over 6,000km with contract price of over N2trn. Our ability to achieve connectivity of roads depends on capital spending in 2016 to pay contractors and get them back to work.
Our short-term strategy will be to start with roads that have made some progress and can be quickly completed to facilitate connectivity. We will prioritize within this strategy by choosing first the roads that connect states together and from that grouping start with those that bear the heaviest traffic.

As at May 2015, many contractors had stopped work because of payment, and many fathers and wives employed by them have been laid off as a result. Some of the numbers from only four companies that were sampled suggest that at least 5,150 workers had been laid off as at March 11, 2015. And if we realize that there are at least 200 contracts pending, on the basis of one company per contract, if each contractor has only 100 employees at each of the 200 contract sites, it means that at least 20,000 people who lost their jobs can return to work if the right budget is put in place and funded for contractors to get paid. The possibility to return those who have just lost their jobs back to work is the kind of change that we expect to see by this short term-strategy.

In order to make the roads safer, we intend to re-claim the full width and setback of all federal roads, representing 16 percent and about 36,000km of Nigeria’s road network, by immediately asking all those who are infringing on our highways, whether by parking, trading, or erection of any inappropriate structure, to immediately remove, relocate or dismantle such things voluntarily. This will be the biggest contribution that citizens can offer our country as proof that we all want things to change for the better.
For clarity, it is important to say that although the state governments own 18 percent of the total road network of about 200,000km while the local governments own the balance of 66 percent, the 16 percent owned by the Federal Government carries an estimated 70 percent of the total traffic because of their length, width and inter-state connectivity.
For those who seek us to compel them to stop these habits of the past, our resolve to do so will be unyielding, because that resolve represents the will of the majority of Nigerians expressed through 15,424,921 votes of Nigerians who mandated our president to effect change. It seems to us that a social contract is an exchange of promises and actions; so if we seek change, we must give it.

From these, we will move on to construction of biggest highways and bridges, sharing the specifics as we go on, with a view to ultimately updating the National Infrastructure Master Plan if need be, which we intend to retail to all Nigerians down to the schools, so that everybody in every state knows what is coming in terms of infrastructure, where it will be, when it will start and how long it will take.

Power
Let me start by acknowledging the decision of Mr. President to appoint a permanent secretary from the private sector to the Power Ministry in the person of Louis Edozien. I am happy to say that of all the people I have spoken to over the last few days who claim to know him, nobody has a bad word to say about him. I will need his vast knowledge in the industry to guide our choices and decisions.

Let me also acknowledge the work that the vice president and his Power Advisory team have done in advance of our arrival to bring increased transparency to this sector by the daily report of the performance of power installations nationwide which I have found most helpful in getting information about what is happening and where. This is also change in the way things are done. As far as status reports go, it is important that Nigerians must understand where we are, what our role is, and what to expect of us.

Until around November 2013 the government was the owner of all power assets in Nigeria except a few independent power plants and other smaller assets. This control was exercised through the Power Holding Company (PHCN) which (a) produced the power – generation; (b) transported the power – transmission; and (c) sold the power to consumers – distribution. This has changed with the implementation of the Electricity Power Sector Reform Act of 2005. What this means is that our government policy, like in the telecoms sector and the mass media, has also changed in the power sector, from government-operated to private sector-operated and government-enabled.

Today, private companies have the responsibility for generation. Virtually all the generation on the national grid is produced by six of the companies which were previously government-owned, two international oil companies (Shell and Agip), and a company owned by the federal, state and local governments (the Niger Delta Power Holding Company), whose generation assets are in the process of being sold to private investors. These companies are the ones called the generation companies or Gencos for short.

There is one company owned by government, under a management contract with Manitoba of Canada, and it is solely responsible for transporting all the power. It is called Transmission Company of Nigeria or TCN for short.

Eleven distribution companies are now responsible for bringing power to your homes. They are the distribution companies known as Discos for short. They must buy the power from the Gencos, who must buy gas from the gas companies in order to produce power; they must then pay TCN to carry it to their substations and distribute to the houses in their distribution areas, and this is where the tariff issue comes in.

Power is a product, manufactured by raw material inputs of labour, gas and financed by banks loans with interests. To transport it, the TCN much charge for it, and the price is added to the cost of power which the Discos buy. This point is important to note because I will come back to it when I address the problems, especially tariff.

As we all know, we took a bold step like this with NITEL and sold licences to telecommunication companies called telcos. We did this is 2001 and today we have achieved significant telephone coverage even if some people cannot still afford a phone. That was 14 years ago. I believe we would be in a better place if we had implemented the Electricity Reform Act in 2005 or shortly thereafter when it was passed. But we sadly did not do so until 2013 when the privatization was finally completed, which means we lost eight years, and we have progressed only for just about two years since the private companies took ownership.

Of course, this change of policy, which is welcome, comes with its own challenges, human resistance, suspicion, vested interests, learning new things and so on, and all of these are quite normal when things change. It is our responsibility to navigate and overcome these challenges. If it is any comfort, countries like Brazil, South Africa, India and Mexico, to mention a few, have passed this same road before and they are clearly better for it. It is now our turn to do so, and we must resolve to make a success of it. We can do so by relying on our own recent experience.
Now let us think of where we were in 2003, two years after privatization of the telecoms sector and the coming of GSM. How many people could afford a telephone? Remember that we were all being billed per minute even if we spoke for only 10 seconds. We complained that the tariff was high but today, per-minute billing is now history, replaced by per-second billing and all sorts of promo to give customers a choice.

One year after GSM came, cities like Ibadan, Zamfara, Ebonyi, Bayelsa and Zaria were either not connected or struggling to be connected as we are with electricity today. Nobody could do more than talk and text on the phone at the time. Today we send pictures, watch TV and movies on our phone and do banking and other businesses, and the scope is still growing. Some people have “ported” and changed their service providers, and we are all learning to conserve cost because our phones have meters, which are the timers that bill us as we use them, and we get disconnected when there is no credit. Most importantly, many people have become employed selling recharge cards, telephones, working in call centres, maintaining towers for telcos and so much more. This is what will happen on a large scale when (not if) we diligently pursue the privatization of power.

Today, we are at a point when government spending on all aspects of power has been significantly reduced on distribution and generation, except for some projects started under the National Integrated Power Project (NIPP). The spending of government is now largely focused on transmission network and gas supply while Gencos and Discos focus on producing power and distributing it. Government is now a regulator through the National Electricity Regulatory Commission (NERC), which is like the National Communication Commission (NCC) that regulates telcos. We intend to strengthen this part of our responsibility so that we can hold the Gencos and Discos to their contracts with citizens. But before we do that, we must play our own role of providing gas and expanding the transmission network.

More importantly, as a government and consumer of power through our ministries, departments and agencies, we must show example at federal, state and local governments by paying up backlogs of power bills and ensuring from there that we pay for what we use. Our ministry intends to champion this at the federal level and I hope that the state governors, heads of parastatals, National and State Assemblies, the various state and federal courts, LGs, military, police, and other related security agencies will find this a worthy undertaking to join and ensure payment of all their electricity bills. I cannot imagine any government today not paying for airtime for telephone use. The truth is that if we don’t pay, that business will collapse.
Gas

There are a number of issues that beset our gas sector, such as the environmental issue and the availability of gas infrastructure, such as pipelines and the issue of pricing which are all the responsibilities of other ministries. Subject to budgetary approvals and financing, the Ministry of Petroleum indicates its ability to build certain critical pipelines to transport gas to the power plants that will add another 2,000MW to our stock of power within 12-15 months. Of course, the appropriate pricing of gas and its impact on tariff is another matter entirely. If the local market was offering $1.30 per unit of gas (which has been reviewed recently to $3.30, I believe) and the international market is offering about $4.00 and above, your guess is as good as mine where supply will be available and where it will be short.

Transmission network
Today, the amount of power that is available is slightly larger than the capacity which the transmission network can support. Let me again take a little time to explain what the transmission lines are and what TCN does.

The transmission lines are what we locally call “high tension wires” which run on high towers across our country over land and over water. As was stated earlier, they transport power and in that sense they are not different from a bus transporter who has to carry passengers. Where we are today is that the passengers, in this case, the power being generated, are more than the number of seats on the bus, and there are more passengers coming. So we will do what any serious passenger operator must do: get additional buses to carry the waiting passengers and plan to buy bigger buses for the additional passengers that are on the way, that is, the extra power that is coming. That is what TCN has to do.

We have identified a total of 142 projects of which 45 are at 50 percent level of completion and about 22 can be completed within a year. The budget estimates are known and we intend to aggressively pursue completion to increase the carrying capacity from the Gencos to the Discos. From there, we must expand the carrying capacity to run ahead of the generating capacity so that in future there will always be capacity to carry whatever power is generated.

Tariff
By far the most complex challenge is the problem of tariff. It is complex because it is more in the hands of citizens than in the hands of government. The role of government is to set the tariff and in doing so, government has committed to what is called a Multi-Year Tariff Order. This was done in order to attract investors to the market, otherwise we will not have achieved the privatization if the price of the product is not attractive to the investors.

The tariff is the price of producing power. It covers cost of generation, gas purchase, transportation, transformers, staff costs and so on, disaggregated and charged per kilowatt/hour to make the business of power profitable. What government did was to spread it over a number of years so that the impact is not felt at once but over a periodic incremental process. I know that it has been a contentious matter, but I make this fervent appeal to consumers to give us the benefit of doubt, to forbear and accept it. This will help government to maintain its credibility with investors, who will then have confidence in the sector and our economy that we are a government that keeps its words and honours its contracts. We are optimistic that like the per-minute and per-second billing issue in telecommunication, the market will plateau and stabilize.

Let me also state that these policies will also affect those of us who propose it in our different homes because we will need power in our homes, and so will our relations. Therefore, we are not asking Nigerians to do what we will not do. The surest way not to have power is to oppose the implementation of the Tariff Order.

For emphasis and clarity, let me state that the previous administration had actually approved the tariff in January 2015, but what they did not do was to fully implement it. They suspended the implementation of the part that affects residences in the onset of elections. After the elections the operators are now asking for payment because they were producing at current tariff and selling at old tariff. This is akin to another subsidy, part of which government has paid. What we expect to do is to liquidate verifiable and agreed debts that have accrued, approve a market tariff and hold the Discos to a more efficient and fair collection system based on the use of meters, eliminate so that consumers pay for only what they use. The regulator, NERC, has been mandated to work out the fair market tariffs and announce them when they are finalised. We expect this to aggressively energise the local meter production, sale, repair and maintenance industry and create spin-off jobs for our people. We expect to see the growth of meter recharge small businesses like we saw in telecoms recharge cards and telephone handset sales.
One thing citizens can do, and which they must do, is to conserve power. If we switch off light points, air conditioners, and other appliances when they are not in use, the impact of the tariff regime can be contained because we will use less power even if the unit tariff cost goes up. We have done it with our phones when we “flash” to conserve credit, we must find the will and motivation to do it with power because we must pay for what we consume.

Housing
The housing sector presents an enormous opportunity for positively impacting the economy to promote not only growth but inclusion. There have been a couple of national housing policies and we intend to appraise the most current one to make changes only if necessary.

Beyond a policy, what is important is consistency of implementation. Government will lead the aggressive intervention to increase supply, by undertaking construction of public housing and formulate policies that will invariably lead to private sector participation and ownership to reduce our housing deficit. We are mindful of some numbers about the size of housing deficit. Those numbers need to be verified and we will undertake a process of scientific assessment to define the accuracy of that data as well as the actual demand. But what those numbers do for us, no matter how big they are, is that they define our journey for us.

A country as small as Singapore with about 3 million people has consistently implemented a homeownership programme since 1960 and has accommodated 80 percent of 3 million people as at 2013, but not yet all of its people. So for us, consistency is key, annual spending is an imperative. We must change the budget for national housing from N1.8bn in 2015 to something in the hundreds of billions of naira that matches our ambition. We can spend N10bn in each state and the FCT on housing alone every year subject to (a) the capacity to raise the money and (b) the capacity to utilize the funds, having regards to our current construction methods and the time it takes to complete construction, which our ministry intends to change by research and industrialization of housing.

This is where those seminars and conferences will be useful, but not before we at least start doing what we know so that our most vulnerable people can find jobs, before we start trying to improve. If we achieve this, we will move from where we are now, start construction in all 36 states and the FCT and sustain this as we go along.
There has been a continuous debate about whether the houses should be “affordable”, whether they should be “low cost”, whether they should be “social” or whether they should be “mass housing”. To the extent that we assume that “mass housing”is indicative of the need to increase production delivery and supply of housing, we understand what it means and we intend to address it. As for the meaning of “affordable”, “social” or “low cost”, we intend to conduct a national survey and get a feedback from our people as to what they want to pay and whether it is possible. But we must be clear that sustainability is critical to solving the problem.

One component of sustainability is that we must be able to repeat what we do, which means that we must recover the cost of houses, even if there is no profit, so that we can build more. There will be no sustainability if we sell below our cost price. Therefore, we must agree about who is entitled to a house and what type of house their income entitles them to. We must also decide whether those who have no income can legitimately expect to own a home, without abdicating our responsibility as a government to increase the capacity of the economy to employ more people. These are questions to which our national survey will be directed and honest answers will help provide guidance for us to give you what you want, and not what we think you want.

Through construction, we expect to address economic commitments of change by stimulating jobs across the states, especially for low-income people like bricklayers, welders, carpenters, plumbers, vendors who live on the margins of our society. We are also considering the re-design of existing housing roof-types to make them ready to receive solar panels for electricity without damaging the roof or causing leakage during installation. If we are successful, this will open a new vista for local manufacture of solar panels, create jobs at manufacturing, distributorship and installation levels especially for technicians as we have seen with cable TV, which would not have happened without privatisation if all of us were still watching state-owned television.
Of course, if we achieve our goals, by complying with our laws, by transparent procurement process as we intend to, by focusing on good governance and getting value for money in government spending, incidents of corruption will become isolated and scandalous in a regime of law and order; and we will have delivered on the anti-corruption leg of the change agenda.

Being excerpts from the text of the inaugural media briefing of the Federal Ministry of Power, Works and Housing, December 8, 2015.

Babatunde Raji Fashola

Fashola (SAN) is the Honourable Minister of Power, Works & Housing