Stakeholders have called for an overhaul of the sale of Nigeria’s ailing power sector assets, which is still depending on government interventions to survive eight years after privatisation.
The stakeholders, who say the electricity sector value chain would have collapsed but for the constant interventions from the federal government and the Central Bank of Nigeria, were in agreement that the private investors who bought the nation’s distribution and generation assets have fallen short of their contributions towards achieving efficiency in the sector.
Records from the Bureau of Public Enterprises (BPE), which coordinated the sale in 2013, show that the government sold 60 per cent shares and retained 40 per cent in the six generation companies (GenCos} and 11 distribution firms (DisCos).
According to the performance agreements, the privatised GenCos and their new owners were to have added 5,000 megawatts (MW) of electricity to the national grid after five years, which was 2018.
The DisCos were to have metered their customers and reduced their Aggregate Technical Commercial and Collection (ATC&C) losses in the first five years when a review would be done on how well the investors managed the firms.
After privatisation, the federal government and the Central Bank of Nigeria (CBN) have continued to sink huge funds into the sector but not much has been achieved in the provision of electricity to consumers.
Despite these interventions, eight years later, power generated and made available on the national grid, which clocked between 3500MW and 3834MW then, has remained stuck at an average of 4089MW despite generation capacity of roughly 13,000MW.
The DisCos on their own have been unable to successfully meter electricity consumers until the CBN intervened.
Former managing director/chief executive officer of defunct National Electric Power Authority (NEPA)/Power Holding Company of Nigeria (PHCN) and President Muhammadu Buhari’s one-time special adviser on electric power, Engr. Joseph O. Makoju insisted that the challenges of the power sector cannot be overcome unless government is bold enough to completely overhaul the system.
“The truth of the matter is that the privatisation of the electricity sector has failed and there is need to go back to the drawing board to identify what can be done to address the root causes of the failure.
“Unless government is ready to bite the bullet and accept the painful truth and be ready to revisit the exercise to take appropriate, bold remedial actions, the sector will sink further into the cycle of recurring failures, followed by periodic bailouts, a process that in the long run is not sustainable and will ultimately lead to catastrophic failure of the sector,” Makoju was quoted as saying, by Engr IfeOluwa Oyedele while delivering the 15th annual lecture of the Nigerian Institute of Electrical and Electronic Engineers, in Abuja, yesterday.
Also speaking, the president of the Nigeria Consumer Protection Network, Kunle Olubiyo, called for an urgent intervention of the federal government, especially to review the terms and conditions of the privatisation.
Olubiyo said taking a holistic look at the general performances of the power sector had become imperative.
“The Federal Government of Nigeria should put in place the necessary machinery to commence the immediate review of the privatisation exercise of the Nigerian power sector haphazardly packaged and wrongly delivered on November 1, 2013,” Olubiyo said.
Stakeholders, however, noted that but for the interventions from the CBN and federal government, the power sector would have collapsed due to liquidity crisis.
LEADERSHIP checks show that over N4 trillion interventions have been pumped into the sector by the federal government and the CBN.
Industry statistics put the financial liquidity in the power sector at around N4 trillion as the apex bank alongside the FG had to initiate a series of interventions to enable the sector avert collapse of the 2013 electricity privatisation exercise.
Commenting on this, Olubiyo noted that given the level of financial liquidity in the sector, support in terms of soft loans would provide leeway for the sector.
He noted that the schemes and financial interventions were praiseworthy but he demanded urgent review, especially with supporting policies that would drive holistic results from the programmes.
An expert at Pricewaterhousecoopers (PwC), Habeeb Jaiyeola, noted that the interventions by government to keep the sector afloat remained necessary, saying the move had yielded necessary benefits.
According to him, the interventions are not unexpected for an industry that is still growing, adding that the situation was the same in most developed countries.
However, Jaiyeola said there was the need for the industry to outgrow consistent support, stressing that the earlier that happens the better it is for government to pump resources into other critical sectors of the economy.
“With the intervention, we are seeing more progress; there is expansion and Nigerians are getting to better understand what the intricacies are,” Jaiyeola said.
The CBN had launched the Power and Aviation Intervention Fund (PAIF) of about N300 billion, Nigerian Electricity Market Stabilisation Facility (NEMSF) at about N213 billion, N140 billion Solar Connection Intervention Facility, over N600 billion tariff shortfall intervention as well as a recent N120 billion intervention designed for mass metering among others.
The federal government had similarly released N600 billion for the power sector to bridge the shortfall in the payment of monthly invoices by key stakeholders in the sector. Another N701 billion CBN facility was deployed in March 2017 as Power Assurance Guarantee.
The CBN had also intervened to bridge the metering gap in the sector.
According to the CBN, these power interventions has led to the recovery of power generation capacity of about 1,200 megawatts and allowed DisCos to carry out projected capex through issuance of letters of credit (LCs) for the purchase of over 704,928 meters; rehabilitation of over 332 kilometres (km) of 11 kilovolt (kV) lines and 130km of 0.45KV lines; 511 transformers purchased and installed and construction of 56 new distribution substations as well as acquisition of a mobile injection substation.
Former chairman of Nigerian Electricity Regulatory Commission (NERC), Sam Amadi, who said the intervention remained critical, noted that the commission was relevant to the success of the financial intervention.
“We are not hearing about all the monies from the regulator and that is worrisome. It is the regulator who should be speaking about funding for the sector because it has the capacity to regulate expenditure and ensure it goes to what is relevant and prudent,” Amadi said.
Speaking specifically on the intervention for metering, Amadi said: “I support the funding for meters but I doubt if it will solve the problem because the DisCos will use the fund to largely replace bad meters and control revenue loss, but the rebate of unmetered customers will remain high and undermine any movement to cost reflective tariff.”
Some stakeholders however warned that there was a need to measure growth and determine if the sector must continue to rely on funding from government, insisting that government must not allow the sector to solely rely on aid instead making efforts to remain viable.
Madaki Ameh, an energy lawyer, noted that continuous interventions could make it impossible for the privatisation of the power sector to take off effectively.
“The real issue is that the new owners of the GenCos and DisCos have little or no experience in running the power sector and they have also not invested sufficiently in the sector to warrant being handed the companies to run. And because they are aware of the critical nature of power to the Nigerian economy, they are obviously blackmailing the government into providing them subsidies where none is required,” Madaki said.