In his New year day letter to Nigerians, President Muhammadu Buhari said significant improvement in electricity service supply is expected in the next 12 months banking on new public and private investments into the sector but seven years into the sector privatisation, throwing money at problems has not led to better outcomes.
Analysts blame the challenges in the sector to an inability to create an efficient electricity market, fix regulatory gaps that compel the regulator to kowtow to government intervention and allow indiscipline by market operators as some challenges that could upend the president’s expectations.
“Power has been a problem for a generation. We know we need to pick up the pace of progress. We have solutions to help separate parts of the value chain to work better together,” the president said.
However, the electricity sector value chain has been separated into generation, transmission and distribution. The Nigerian Bulk Electricity Trading Company (NBET) runs the market, the Nigerian Electricity Regulatory Commission (NERC) regulates the sector and a standard organisation was created. While the parts of the value chain have already been separated; trouble is getting them to work together.
In Nigeria’s power reforms, NBET buys electricity from the Generating Companies through Power Purchase Agreements (PPAs) and sells to the Distribution Companies through Vesting Contracts. The Transmission Company of Nigeria (TCN) wheels this power to the eleven distribution companies across Nigeria who then distributes to homes and businesses.
In reality, this chain is fraught with teething challenges. GenCos who sell power to NBET barely get 30 percent of their market invoice which constrains their ability to buy gas from gas companies, fix faulty turbines and make additional investments.
DisCos who buy the power from NBET and sell to end users include residential buildings and factories, remit less far less than the collect.
“The level of collection efficiency during the quarter under review indicates that as much as ₦3.09 out of every ₦10 worth of energy sold during the second quarter of 2019 still remained uncollected as and when due,” NERC said in its 2019 second quarter report released in December 2019.
The Commission further said, “Similarly, during the second quarter of 2019, out of the total invoice of ₦180.08billion issued to the eleven (11) DisCos for energy received from NBET and for service charge by MO, the sum of ₦55.10billion of the total invoice was settled, representing 30.60% remittance performance.”
Buhari also referenced the deal with Siemens signed on July 22, 2019 which will see the German company upgrade transmission and distribution network to double Nigeria’s electricity generation and raise distribution capacity three-fold to 11,000 MW by 2023.
Investigations show that little headway has since been made on the deal in which financial close was expected in November 2019. NERC agreed to a tariff adjustment to take effect this month which is only part of the conditions for the deal to proceed.
The president said that the government in the past few months, have engaged extensively with stakeholders to develop a series of comprehensive solutions to improve the reliability and availability of electricity across the country.
“These solutions include ensuring fiscal sustainability for the sector, increasing both government and private sector investments in the power transmission and distribution segments, improving payment transparency through the deployment of smart meters and ensuring regulatory actions (to) maximise service delivery,” Buhari wrote.
In the past weeks, key officials of government agencies including Marilyn Amobi, former managing director of NBET, and Damilola Ogunbiyi, former managing director of the Rural Electrification Agency (REA) have been suspended, a decision potent enough to roil the sector as they signal undue government interference which pisses off the investors government banks to fund its plans.
“As I see it, it is very doubtful that the suspensions would bring the much needed stability in the power space, on the contrary, it could darken the cloud of uncertainty currently hanging over the sector,” says Wolemi Esan, energy lawyer and partner at Olaniwun Ajayi LP, a leading Nigerian law firm.
In an apparent gibe at the former Minister Babatunde Fashola’s era as Minister of Power, the president said the projects that will be implemented this year, will be under close scrutiny and transparency and there will be no more extravagant claims that end only in waste, theft and mismanagement.
In his January 1, 2018 speech, the president, borrowing a page by Fashola, said more Nigerians across the country are now experiencing improved power supply to their homes and businesses. He claimed that generation has now reached 7,000MW and DisCos can now deliver 5,155MW even when power supply on the day the speech was read hovered around 3500MW.
Fashola’s tenure as minister of power was marked by fantastic claims that maintain a tenuous relationship with reality and using a fluke occurrence to represent reality as demonstrated in the claim that TCN can wheel 7,000MW of power when any generation close to 5000MW triggers a system collapse.
“A landmark project, Mambilla Hydroelectric Power Project is at last taking off. This project has been on the drawing Board for 40 years, but now the engineering, procurement and construction contract for the 3,050MW project has been agreed with a Chinese joint venture Company with a financing commitment from the government of China. Completion is targeted for 2023,” Buhari said in his January 1, 2018 speech.
Two years later, the president said “Commencement of the construction of the Mambilla Power project by the first half of 2020…” is to begin, an apparent contradiction from what was reported in 2018.
ISAAC ANYAOGU
