FG set to clear backlog of power contractor debts

Nigeria is set to clear a backlog of debt owed to power contractors from the previous administration which had led to the abandonment of over 900 containers of transmission equipment at the ports.

Government has further resolved some land and contractor disputes slowing down power sector projects and is working on others, said Babatunde Fashola, minister of power, works and housing, in an exclusive interview with BusinessDay.

Fashola said these moves were with a view to clearing the obstacles slowing down the build up of power supply and make for progress.

He said that in one case, government had mediated in the matter of three Chinese firms tussling over one contract  and convinced them to sheath their swords and come together as a joint venture to execute the job .

On the containers stranded at the ports, the minister said,“Negotiations are on-going, and we are now at the point of payment, so that they can release the first 400 containers of transmission equipment.”

Analysts say the move would further propel power transmission towards achieving the projected 11,500 megawatts by the year 2019, even as it softens the hurdles thrown at businesses operating in Africa’s most populous nation.

“This should solve a lot of economic problems, as the productivity of micro, small, medium and large scale businesses improves,” said Tajudeen Ibrahim, head of macro-economic research at investment firm, Chapel Hill Denham, in response to questions.

“A lot of entrepreneurs would have been encouraged if they could constantly have power or have it for the most part of their operational period in a day.”

Ibrahim, who thinks “the Minister of Power is on track to achieve the desired results,” also observed that “Nigeria needs a more efficient co-ordination of the segments in the power sector and a sustainable strategy around power supply.”

The previous government had asked the power contractors to pay for the transmission equipment, promising to reimburse them, but failed to do so.

“They were not reimbursed,” Fashola said, “We had to appeal to them because for some of the contractors, the business didn’t make sense anymore.”
Ideally, projects and activities of state owned Transmission Company of Nigeria (TCN) are funded through the statutory budgets from the government. Purchasing equipment for service delivery is one of such activities.

“But there was no budget to get it out of the port, or to pay the contractors. We just got that in the budget this year,” Fashola said, in reference to the trapped equipment at the port.
“I have had to meet with the Comptroller -General of Customs who has been very helpful and he said they should release the goods. So it is not a customs issue anymore. It is now debt owed to shipping companies and those who run the container terminals where storage and demurrage has been incurred,” he added.

Abubakar Atiku, the Managing Director of Transmission Company of Nigeria (TCN), was not readily available to give his comment on how clearing the backlog would aid his ambitious target to expand electricity transmission capacity to 11,500 megawatts by 2019.

Other players in the power value chain however  say it would have a trickle-down effect on the entire chain.

“Anytime there is an upgrade in transmission, it is a boost to our service delivery. So this is a positive step,” said Felix Ofolue of Ikeja Electricity Distribution Company, by phone.
Fourteen TCN projects were completed between 2011 and 2014, and there are 28 on- going projects at advanced stages of implementation, as deduced from latest data on the Federal Ministry of Power’s website.

The on-going projects are at a cost of N48.4 billion and their status of implementation is at an average of 69.3 percent.
Most of the projects have been suspended due to delayed payment, BusinessDay gathered.

“Contractors have left site because they were not being paid. Projects like the one in Anambra, the contractor wasn’t paid and so he left site. But that has been resolved and they are back now, we just paid them N299 million,”  Fashola said.

Nigeria’s power conundrum is “man-made” as Fashola puts it. Spiralling government debt has kept electricity supply at an abysmal level for many years, jerking up the cost of doing business in Africa’s largest consumer market.

Despite being three times the size of South Africa, Nigeria has only 20 percent of the generation capacity of that country.

Power generation touched a peak of 5,074MW, Feb. 2, 2016; only to slump by almost half, weeks later, in the wake of militant attacks on gas installations.

“When you look at the degree of neglect and the time frame within which we allowed the neglect to linger, it casts doubt on the possibility of economic restoration,” said Bala Zaka, an Energy analyst.

“You can’t have a functional economy without power because power is basically the denominator upon which everything about the economy is thrust,” Zaka added.