President Muhammadu Buhari on Thursday released a 62-page document highlighting his achievements in office within the past five years, but the section on power was as brief as his government’s footprints in the sector.
According to data from the National Electricity System Operator, an arm of the Transmission Company of Nigeria (TCN), Nigeria’s energy generation on Thursday hovered at around 3,400MW, the same average generation in the past 10 years.
The Federal Government touted its Energising Economies Programme, a public-private partnership led by the Rural Electrification Agency (REA) to deliver stable power supply to markets and economic clusters across the country, as its key accomplishment.
“The initial phase is ongoing in Ariaria Market in Aba, Abia State (32,000 shops), Sura Shopping Complex in Lagos (1,000 shops), Shomolu Printing Community in Lagos (4,000 shops) and the Sabon Gari Market in Kano (12,000 shops) ,” the presidency said. “The 21 Sura Shopping Complex project was completed in August 2018, and commissioned by Vice President Yemi Osinbajo in October 2018.”
The Energising Economies Programme, it must be noted, is an intervention to allow private operators deliver power to clusters within the franchise areas of the distribution companies. The government had to browbeat the DisCos into submission to carve out these spaces from their franchise areas.
The beneficiaries in Ariaria, Sura, Sabon Gari and Iponri markets where these projects are sited pay market rates for power, something the Nigerian Electricity Regulatory Commission (NERC) has denied DisCos from charging consumers, thus creating the conditions that allow the Federal Government waste trillions of naira on bailouts to operators.
Yet, in a country of over 200 million, where irregular power supply is costing the economy over $29.3 billion yearly, according to a World Bank study, touting this programme which benefits less than 1 percent of the population and adds insignificant value to the economy as accomplishment by a government that spends billions on power yearly is evidence of a poverty of ambition.
The Federal Government also said it has launched a N1.3 trillion Payment Assurance Programme designed to resolve the liquidity challenges in the power sector by guaranteeing payments to generating companies and gas suppliers.
Considering that the power sector has been privatised since 2013, it actually ranks as a misnomer to shell out over N1 trillion to bail out private businesses in an economy where hospitals lack aspirins and schools have no running water.
Worse still, this bailout has not significantly improved the electricity market. In 2017, the government paid over N701 billion as assurance to the power sector and in 2019 was forced to pay another N600 billion in intervention fund because the market does not recover the costs involved in generating and distributing power.
Nigeria’s electricity market is still grossly illiquid. The 11 DisCos recorded cumulative losses of N787 billion in their 2018 financials, a 10 percent increase from the previous year.
DisCos collect only about 60 percent of the value of the electricity generated and sent to them even when consumers do not pay a cost that reflects the price of generating it. They also keep over a quarter of what they collect.
The Nigeria Bulk Electricity Trader (NBET) which pays market operators worsens the situation, some operators say, by prioritising payment to the TCN, owned by the government, and the Market Operator (MO), which sometimes get the full value of their invoice at the detriment of GenCos.
Gas producers who generate the critical feedstock required to produce over 75 percent of Nigeria’s electricity are being owed billions of naira by GenCos. GenCos in turn only get a quarter of their invoices settled by the Nigerian Bulk Electricity Trading Company. This leaves the Federal Government with the responsibility of settling the shortfall.
This has led to a situation where the power sector is privately owned but nationally financed.
Analysts say this pattern of bailout poses system risk to the economy because it excludes other critical sectors where funds can be better deployed to achieve measurable impact.
“Giving out these bailouts without evaluating the impact they are having is like pouring water into a bottomless pit,” Chinwendu Enechi, senior manager, oil, gas and power at Anderson Tax, told BusinessDay earlier.
Enechi said that unless Nigeria wakes up to the real issue which is fixing the electricity market by having a cost-reflective tariff in place, these bailout funds would halt efforts to diversify the economy and reduce funding for critical sectors including agriculture.
In a privatised market, the government’s role is limited to providing effective regulation, but operators accuse NERC of being ineffectual and easily amenable to government’s control.
Many Nigerians want to see their homes metered so that electricity bills are accurate. The Buhari government came up with a pragmatic Meter Asset Provider (MAPs) programme, where private investors provide meters to consumers at a cost, but the same government scuttled the programme when the Ministry of Finance introduced over 35 percent tariff on meters imported into the country shortly after the policy took off.
Though the government claims as an achievement the issuance of an order by NERC to DisCos capping estimated billing, customers still report being issued crazy bills. It would seem a mere declaration of intent is being passed off as an achievement.
The Federal Government is also touting as accomplishment the implementation of a ‘Willing Buyer, Willing Seller Policy’ for the power sector, which it claimed has “opened up opportunities for increased delivery of electricity to homes and industries”.
Taking advantage of this policy, a DisCo like Ikeja Electric is offering some customers such as those in Magodo, an estate in a Lagos suburb, at least 20 hours of power daily a higher cost. But it raises the concern that they could be short-changing others. Besides, some DisCos are selling contracted power at discriminatory rates for preferential access without a legal basis in the Electric Power Sector Act, according to some analysts.
Yet, the government has ignored a related policy, the Eligible Customer, declared in 2017, which is included in the Electric Sector Act and provides more value to the economy as it allows GenCos to sell power directly to users, especially industry, bypassing DisCos who reject at least 2,000MW of power sent to them because they cannot guarantee the payment.
Under the new minister of power, analysts say some of the modest gains achieved by Babatunde Fashola, the former minister, have been reversed. The recent firing of the managing director of NBET against extant laws (which the president reversed) questions the thinking behind handing one of the most important government ministries to a man with a diploma in electrical electronics, who started out as a teacher, joined the civil service and was recalled from trading to run a government ministry.
The Federal Government also said that more than 90 transmission projects have been completed or ongoing since 2016. The government recorded remarkable success in negotiating the release of hundreds of containers carrying its transmission assets stranded in the ports for over a decade.
In reality, though, technical challenges still bedevil the sector. This year alone, the grid has collapsed at least half a dozen times.
There is often inadequate gas supply to power the turbines which generate electricity. Pipelines that move gas from the Niger Delta to plants outside the region are often inadequate and prone to attacks by militants.
Worse still, the Federal Government fixes gas prices sold to power plants, making the venture commercially unviable. Gas plants in Nigeria require at least 3bcf/d of gas to operate at full capacity but they often get around 900MSCFD or about a third.
Power generation companies could produce over 12,000MW but the most they can generate is around 5,000MW due to difficulties getting gas supply. The TCN claims its transmission lines are capable of wheeling 8,000MW but the most it does, in reality, is less than 5,000MW.
“The current distribution network is no longer applicable in this modern age as many are over 70 years,” said Edward Ajagbe, a former engineer with the PHCN, in an article in BusinessDay.
If the government were truly reaching for concrete achievements rather than trafficking self-flattery, the power sector has enough challenges to keep it occupied.
