Abubakar: Why Power Sector Privatisation Should Not Be Reversed

The Chairman of Kaduna Electricity Distribution Company (Kaduna Electric), Alhaji Yusuf Hamisu Abubakar, has urged the incoming administration of Muhammed Buhari not to reverse the privatisation of the power sector as such a move would have adverse implications on the economy.

The chairman, who spoke at the West Africa Breakfast Meeting at the African Utility and Clean Power Conference held in Cape Town, South Africa recently, said those calling for the reversal were either ignorant of the privatisation process or are being mischievous.

According to him: “We believe there is no alternative because the decision to opt for privatisation was a well thought out policy which started over fifteen years ago by BPE in order to solve the intractable problems in the power sector in Nigeria.”

Abubakar noted that outright reversal of the exercise would create fear and apprehension among both local and foreign investors who have heeded the call by the federal government to invest in critical infrastructure in the country.

He said the privatisation process was approved and commended by multilateral institutions such as the World Bank, IMF, DFID and other international agencies hence a reversal would be a major setback for the country’s development efforts.

The Kaduna Electric chairman highlighted some of the positives of the exercise thus far saying: “there are a lot of savings and improvements within the privatised generating and distribution assets; one is that since the privatisation, government has not been budgeting money for capital and operational costs such as salaries, overheads and other costs. If you look at the appropriation bill, government has not been paying salary to PHCN workers they have been inherited by the Discos and Gencos.

“Also, the Discos have improved their processes a lot as there is a culture of better customer responsiveness than when it was under government control. Engagement with the customer is now far better. We have not reached there but we are hopeful that very soon, the Nigerian power sector will be better.

He said the power sector is a capital intensive sector hence requires huge investments which the private sector is better suited to mobilise.

“Rather, government, with its numerous responsibilities of providing security and other social services, is only expected to provide the enabling environment to ensure the sector has well laid out regulations that are clear and give comfort to those operating in the sector.

“It is only when the government does the needful that we can have stable power in the country”, he said.

He noted that there are few challenges, not with the privatisation but with the operations of the privatised entities, which is caused by some regulatory uncertainties and also becausewearestilleinatransitionperiod within the power sector.

He pointed out that Nigerians are usedtoseeingpowerasasocialservice,” but now we are moving into the era where power is a commercial commodity, He said one of the serious challenges investors are facing the lack of a cost reflective tariff in place which all those whose bids were successful were assured of”.

He also noted that there are challenges of availability of infrastructure such as adequate gas supply. “We don’t have enough and gas has not been fully commercialised. Also, there is problem of reliable pipelines that can deliver gas to generation plants. In addition, vandalism of existing gas pipelines is another major challenge. As at today we have installed capacity of over 7,000mw but in terms of actual generating capacity we have about 4,500mw, that capacity cannot be generated because of lack of gas”, the chairman noted.

The chairman also noted the inability to efficiently transmit power to the Discos as another bottleneck which needs to be addressed by the federal government.

“No matter how you want to provide power to the people, if all this issues are not dealt with, we cannot have stable power in the country. All this are within the limit of what the government can do.

“We are hopeful and optimistic that the direction of the new government is clearly premised on privatisation and securing the financial viability of the sector as a way of improving power supply by sustaining investment.”

“For me, privatisation is not the problem. We are now in a modern, cost-effective world where privatisation or publicprivate-partnership is the way to go. This means that government may not be the sole producers of public goods and services and in many cases should not produce goods and services directly”.

The chairman said he was optimistic that the president-elect, Muhammadu Buhari, is committed to improving the power sector and therefore will deal with all the bottlenecks that have impeded the success of the privatisation exercise.