BusinessDay

Obi, Atiku, Tinubu’s electricity plans fail to impress stakeholders

Nigeria’s frontline presidential candidates have issued manifestos outlining goals to double or triple current electricity output but without properly diagnosing the problems, threatening their plans’ chances of success, industry operators have said.

At this year’s edition of the PwC Nigeria Annual Power and Utilities Roundtable, which held in Lagos on Thursday, themed ‘Setting a new power agenda post 2023 elections’, industry operators who spoke did not sound optimistic that the ills of Nigeria’s power sector would go away soon.

Sam Amadi, a former chairman of the Nigerian Electricity Regulatory Commission (NERC), commended the top contenders – Peter Obi of the Labour Party, Bola Tinubu of the All Progressives Congress and Atiku Abubakar of the Peoples Democratic Party – for sticking with the privatisation programmes.

He said it is encouraging that all of the candidates identified power as a major impediment to national development and none of them seeks to reverse the 2013 power sector privatisation programme that unbundled the Power Holding Company of Nigeria into distribution, generation and transmission companies.

“Nobody is thinking about reversing any of the major policies; so we can say that as a country we have done well in one sense,” he said.

The former NERC boss said that going through the manifestos, “I did not see a rigorous diagnosis of the problems, they did not seek to understand why the well-intended policies fail to result in improvement in a significant sense.”

“There is a sense of poor diagnosis and with poor diagnosis, you may not be proposing the right intervention, or even the right intervention at the right doses,” he said.

The key highlights of Obi’s power plan is to reform and restructure the Nigerian electricity supply industry (NESI) to deliver adequate, accessible, reliable and affordable power for Nigerians, release financing of new power generation to 25,000 megawatts (MW) by 2030, including an additional 5,000MW of new power generation by the end of 2024.

He also seeks to achieve a revamped, upgraded and stable national grid working with Siemens by the end of 2023, ensuring financially stable, capable and customer service delivery-oriented distribution companies (DisCos).

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The plan is to support local manufacturing capacity of power technologies, encourage and expand local research and development in universities, training centres, and workshops, and deliver 5,000 direct jobs and 100,000 indirect jobs in the NESI.

Tinubu’s Renewed Hope manifesto says this government would work to ensure generated power reaches Nigerian homes, end estimated billing, support local manufacturing of prepaid meters and ensure that the country meets its renewable energy targets outlined in the government’s energy transition plan by 2060.

Non-profit Civic Hive, founded by BudgIT said in its analysis that Tinubu’s plan does not commit to any generation, transmission or generation target. Neither does this proposition show how many households are projected to be connected to renewable mini-grids.

The document also does not situate its power sector ambitions in context of the Siemens Power Initiative currently being led by the governing party. There is a bit of incoherence in the power sector without core measurable targets.

The policy recognises Nigeria’s abundant gas reserves and wants a full deregulation within six months. This would have significant cost implications for the domestic industry and power sector. This was not properly analysed, the report said.

Amadi said while Obi and Tinubu have the most robust manifestos with extensive focus on the power sector, they agree with commercialisation and liberalisation and privatisation.

“But I think Peter has a more developed policy plan because it mixes continuity with some degree of disruption, and goes on to further deepen reforms in the sector,” he said.

Atiku’s plan also hinges on deepening privatisation in the power sector and locating power plants closer to the sources of power and areas of comparative advantage.

Analysts said that generally all the plans sound nice but they are not linked to current challenges. Few take into account the peculiar challenges involved in the Nigerian system to achieve their plans.

Usman Mohammed, former managing director of Transmission Company of Nigeria, said he battled for two years to compel some state governments to grant a right of way for transmission lines.

He said therefore a plan to engage a technical partner or private sector operator to extend transmission lines would meet the serious challenges with state governments and other interest groups who could frustrate the plans.

Edu Okeke, managing director of Azura, said a heavily indebted Nigeria government with dwindling revenue cannot even afford to deliver some of the grand plans in the manifestos he has seen.

“There’s a basic principle of economics, demand and supply, but it’s like when some get into government, they think it no longer applies,” he said. “The very first question none of them has answered is: what is a DisCo? Are DisCos’ businesses or cash collection points? Because that’s the fundamental problem.

“Government decides the tariff, then DisCos remit; as rational business people, they remit what they think they should, and the government continues to throw money as intervention. But if they are businesses, I don’t think someone needs to tell Ikeja DisCo that they need to meter their customers in Ijora,” Okeke said.

The argument is that the government has failed to allow the DisCos, of which they have a 40 percent stake, run as a business, deciding tariffs and offering inconsistent policies that end with the government providing bailouts when they fail.

The reading of the manifestos does not seem to indicate that this approach will fundamentally change.

While there is something redeeming about these plans, the key challenge in Nigeria’s power sector is a dysfunctional electricity market. The inability to recoup investments into the power sector is a critical issue requiring attention and rather than more government, as the manifestos proposed, operators say less government is required.

Operators say one way to achieve this is a tariff that generates commercial returns. A liberalised power market that will buy gas used to generate power at market rate, removing subsidies and ordering the power sector to run as a fully functional market governed by contracts.