Update 1: World Bank lists conditions to release $1bn funding for Nigeria’s power sector  

Nigeria would need to enforce corporate governance from power sector operators, make a definite policy statement on tariff, see to market discipline and develop a coherent strategy to resolve militancy, to secure the $1 billion  funding it seeks for the power sector from the World Bank.

These conditions, among others, form the basis of the action plan developed by the Federal Ministry of Power, Works and Housing (FMoPWH) in the Power Sector Recovery Implementation Programme (PSRIP) recently approved by the Federal Government, seen by BusinessDay.

In an earlier report, BusinessDay stated that the Federal Government plans to raise $7.6 billion through the sale of NIPPs ($2.1 billion), World Bank ($1 billion) and AfDB ($1 billion) loans. The Federal Government would also make budgetary allocations for $3.5 billion within five years, to pay its share in the cost required to fix power.

The World Bank Group says the boards of the Nigerian Bulk Electricity Trader (NBET), Transmission Commission of Nigeria (TCN), Nigeria Electricity Liability Management Company (NELMCO), Niger Delta Power Holding Company Limited (NDPHC), Rural Electrification Agency (REA) and Bureau of Public Enterprises (BPE) must be appointed. They also demand the appointment of BPE professional directors on electricity distribution companies (DisCo) boards.

On tariffs, the lenders demand that the Federal Ministry of Power issue  a policy statement on cost-reflective tariff, or subsidy path endorsed by the Federal Ministry of Finance, (FMoF). They are also calling on the government to update Multi-Year Tariff Order (MYTO) methodology and make it consistent with policy, as well as carry out a review, in line with the MYTO review schedule.

Other conditions listed, are that the budget contain provision for approved MDA debts, put in place institutional arrangements for oversight, implementation and monitoring of the PSRIP, implement approved actions to reduce gas pipeline vandalism and communicate strategy appropriately.

Others are the conduct of legal review of sector contracts including Performance Agreements, Vesting Contracts and PPAs, to facilitate hitch-free contract activation, review by BPE/NERC of Disco investment/performance improvement plans, as well as the timing of projects in preparation, and issuance of policy for competitive procurement.

The World Bank funding would be applied in support of loss reduction, procurement of meters, rural electrification initiatives, financing programmes for TCN priority programmes, solar projects and investments in electricity generation.

According to the PSRIP, the government has commenced action on some of these conditions, after developing an action plan with clearly defined roles and responsibilities, action items and target dates for delivery for operators, regulators, government ministries, departments and agencies and the Office of the Vice President.

The Federal Government is carrying out a financial analysis of DisCos and GenCos, working on DisCo recapitalisation plan, verifying MDA’s debts and quantifying potential private sector investments.

The FG is also developing and implementing measures to enforce market discipline, mapping out infrastructure gap analysis among operators across the value chain, legal review of market contracts  and privatisation agreements, developing a standard template for reporting and monitoring MDA PSRIP tasks and creating a communications strategy.

The action plan seen by BusinessDay, runs from March 22 to July 31, 2017 and ongoing activities indicate that the FMoPWH is trying to tackle the core issues while working on the quick wins.

“Gas production has increased 30% since the VP’s visit to the region in November 2016. The VP’s visit was the first of  the FGN’s five-pronged strategy of active engagement in the Niger Delta to curb gas pipeline vandalism,” says the PSRIP.

However, some analysts have expressed concern that merely funding , without an institutional framework to prevent bad behaviour by operators in the electricity market will not solve Nigeria’s power challenges.

Okafor Akachukwu, a University of Sussex trained Energy Policy, Innovation and Sustainability expert, says his preliminary analysis indicates the plan is not feasible  in the medium and long term.

“The measures are designed as interventions to stabilise the collapsing power sector, rather than help it recover. These measures sound brilliant in theory, how they will be effectively operationalised remains to be seen or made public.”

 

ISAAC ANYAOGU