Commercialising power sector for better results

The Nigerian Power Sector as it is today cannot be said to be properly organized as a viable industry to provide uninterrupted electricity supply to all consumers nationwide 24/7.

The lack of these organizational conditions have badly affected the performance of the sector in areas of generation, transmission, distribution and billing. It is also because of this that it fails to achieve maximum value from the huge resources injected since the advent of democracy.

One of the big problems hindering progress in the power sector was the premature privatization of the GENCOs and DISCOs that were rather hastily carried out by the Jonathan government in 2013, when the power sector was still in a poor state and in need of institutional design, reengineering, revamping and staff development.

This clearly led to the present situation where we have a haphazardly set-up privatized electricity supply industry incapable of generation and supply of steady and cheap electricity to the consumers.

The State and the World Bank provided money to fund a disciplined privatization scheme. We of the defunct Independent Policy Group IPG (Former consultative Group of Nigeria), a Policy think tank of the Obasanjo government, were commissioned to draw up the scheme as the foundation of the process of the privatization which we covered into Phase 1 (1 – 2 Years) during which all the existing power facilities were to be rehabilitated/overhauled or serviced while electrical meters must be provided to all existing consumers. New Management System such as Materials Management, Maintenance Management, skills Development, etc, with Manuals must be put in place and test run to ensure that the supply chain: generation – transmission – distribution and the billing system were working properly.

Under the second phase (3 – 5 Years) the Power Sector was to ensure that all its new power plants, transmission power-lines, distribution network and voltage substations are brought on stream while under Phase three (5 Years), the industry would have had established a reliable Transmission system and must have set-up an efficient Electricity Supply Market. The GENCOs and DISCOs at this stage should be offered for privatization, while the TRANSCO remains in government ownership.

These steps were very critical to the success of the whole privatization process. But this was not followed through according to the original plan. Instead, the process was contravened by the Jonathan government in 2013 in order to satisfy some primordial sentiments or political agenda.

Clearly, no amount of damage control or stop-gap measures now being applied by the Buhari government such as hike in the electricity tariff or giving huge subventions to the GENCOs and DISCOs could really turn-around the power sector, without first reversing the shoddy privatization to lay a firm foundation for the exercise to succeed.

There was a provision in the privatisation agreement that require the review of the exercise after five years, that is, due in 2018. This has not been done. There is therefore the need for the Buhari administration to invoke this provision to reverse the privatization.

The GENCOs and DISCOs have proved beyond doubt that they are incapable of generation and supply of reliable electricity to the consumers nationwide, even though the installed generation capacity in the country as at today is over 13,000MW which is a multiple of that needed to serve actual peak demand (2470MW).

On the other hand, electricity tariff has skyrocketed, without commensurate improvement in the power supply to the consumers. This led to consumers’ complains, disappointments and sullen resentments.

Again, matters were compounded further by the fact that the GENCOs and DISCOs were in serious financial distress. Just barely, a year after privatization, they asked for and were given a huge financial bail-out fund of N213 billion by the Jonathan government (2014).

Again, the core investors of the GENCOs and DISCOs neither have the requisite technical and managerial qualifications nor the financial muscles to run them efficiently and effectively as is required by Law under the electricity Privatization Act 2005. This is a real disaster and should be a good enough reason to declare the exercise null and void.

Would the Buhari administration, with its reputations for fighting corruption and illegality allow this glaring injustice to society to stand? Certainly what took place in the power sector in 2013 under the Jonathan government was not privatization in the real sense, but was a stagemanaged auction of a public utility to achieve a desired outcome. This was why no single foreign core investor came to invest in the Nigerian Power Sector, except some foreign staff.

To say the least, until and unless, urgent steps are taken to correct these anomalies and reverse the privatization process, the situations in the GENCOs and DISCOs will culminate into serious danger to the entire power sector, threaten Nigeria’s electricity development and disrupt the country’s National Economic Development Programme to diversify the economy.

The true position is that the Nigerian electricity tariff is amongst the highest in the world; relatively speaking; when we compare economic indices. There is therefore, absolutely no basis for further increase in the electricity tariff at this critical time when the economy is in perilous state and consumers are struggling to pay through the nose.

Certainly if the power sector is properly structured and organized there is no reason why it should not provide cheap and stable electricity supply to the economy 24/7, at the current country’s installed generation capacity. It could also undertake other complementary businesses to electricity generation and supply such as retail activities in electrical/household appliances to boost their revenue profile and for the consumers to enjoy reduction in the tariff.

It is, therefore, very necessary and clear that there is need for Buhari’s administration to urgently and in national interest act decisively by reversing the shoddy privatization of the GENCOs and DISCOs, take them back into state ownership and permit them to run on full commercial lines for a short period.

This will reshape and place them on a sound commercial footing, lay a firm foundation for the future and build a clean balance sheet for future privatization. A commercialized power sector can pay dividends to the government that owns it and the dividends use to provide other services to the society, with positive multiple effects.

Failure to tread this path may plunge us into utter desolation and poverty. The earlier this privatization is reversed, the better for the country.

Dr. Buba Mohammed Ing.P.Eur is a former Policy Adviser/Analyst to the President and a

Member of the Presidential think tank IPG