By Peter Adebiyi Adeniran.
The second prescription made by Asiwaju under national infrastructure plan is “achieving reliable electrical power”
In his word “We must overcome the economic, political and bureaucratic bottlenecks preventing us from achieving reliable electrical power. This is perhaps the single greatest impediment to economic advancement. The lack of power inflates costs, undercuts productivity, causing havoc to overall economic activity and job creation. Our economic situation is literally and figuratively in the dark. The hurdles we face are not technical in nature. We must convince those political and economic factors currently impeding our quest for reliable power to step aside that we may obtain this critical ingredient to economic vitality.”
It will be a miracle to grow productivity and fix Nigerian economy without regular supply of electricity. However, electrical power market in Nigeria is very active with a wide range of investment opportunities. One expects the government to engage the investment community to help build a mutual understanding of financing requirement and investor appetite.
Government is expected to identify the nation’s long term electrical power needs and ensure that these are translated into a successful delivery.
There must be the right framework for a comprehensive approach to energy sector. Nigeria claimed to have reached 7001 megawatts electricity generation, and plan to increase it to 10,000 megawatt by 2020 (3 years interval).
I believe there should be five years priority plan and twenty years plan for energy in Nigeria.
These Plans will cover electricity networks and generation, amount required, funding pattern and financing methods in form of public, public/private and private.
In the case of South Africa Plan, it was stated that “Eskam’s new power stations, Medupi and Kinsile, are expected to start producing electricity in 2014 and 2015 respectively”. Eskam is a private owned company and not government.
South Africa stated clearly in its energy plan, “Support sustainable green energy initiatives on a national scale through a diverse range of clean energy options as envisaged in the Integrated Resource Plan (2010) and support bio-fuel production facilities.” It stated further, “Accelerate the construction of new electricity generation capacity to meet the needs of the economy and address the historical imbalances. Monitor implementation of major projects such as new power station”. Moreover, the government of South Africa planned to “Expand the transmission and distribution network to address the historical imbalance, provide access to electricity for all and support economic development”.
South Africa planned to fund its energy sector through accessing retirement funding, bringing on board development finance institutions, reassessing the model of PPPs that have been used in the past to ensure equitable transfer of risk to private sector.
South Africa constructed 675km electricity transmission lines in 2013, which it described as the largest level in more than 20 years.
United Kingdom Infrastructure Plan stated that public would provide £18b, public/private, £12b and private, £177b for its energy plan investment from 2016 to 2021.
United Kingdom total planned investment in 2020/21 and beyond on electricity distribution is £16b while it is £15b on electricity transmission. It is a regulated sector. Its regulatory framework is tailored to protect consumers, reward efficiency and innovation and to maintain investors’ confidence.
Under United Kingdom Guarantees Scheme, the government provided a £48m guarantees in bonds issued by Speyside Renewable Energy in 2014.
The biomass power station started generating electricity in 2016 to power more than 20,000 homes. It is not a magic.
It is no gainsaying power sector in Nigeria is the key consideration to economic development. World Bank ranked Nigeria in 2015 as 187 out 189 countries in terms of ease of getting electricity. A survey reported average power outages to be equivalent of eight hours per day. World Bank reported that average firms lost more than 4% of sales to power outage and that ‘no peer country experiences such severe business losses related to the power supply’.
The enactment of Electricity Power Sector Reform Act (EPSTRA 2005) provided for “a phased implementation of the power sector reforms to strategically guide the current market into a competitive market based on clear regulatory framework”.
The question is how competitive has this arrangement led us?
Moreover, Nigerian Electricity Supply Industry (NESI) was designed along four stages of pre-transition, medium term and long term. The question is which stage is Nigeria? Is electricity market fully privatised?
We were told that transition stage electricity market started on May 2015. The stage was expected to be characterised by “contract based arrangement for electricity trading and the introduction of competition for entry into the market”. But all that interest government and Discos at this stage is “full cost reflective tariff designed to ensure full cost recovery for investors as well as to enforce confidence for financing and investment in the sector”. Therefore Discos turned tariff to levy. Government could not enforce policy on metering so it set consumers against operators. Discos became more powerful than the government. This tells us how clear the regulatory framework.
Nigerian electric power generation options are transmission based on grid, embedded, off-grid and captive. With the exception of captive generation, other power generation options have to be evacuated through a distribution system/grid. This is the reason for off-grid production capacity of only 305mw in 2015. If there is energy surplus in off-grid generation this cannot be traded to energy negative. I wish government looks at this arrangement.
The question is how sincere is Nigerian government to provide electrical power? Electricity remains catalytic projects that can fast track development and growth.
There is no sense in transforming government monopoly to private monopoly. Do I suggest that government should take back Discos? I will say No. But government must break the monopoly power and enhance its regulatory functions.
Nigerian electricity market is what serious minded investors will want to be players in if we do what is right. What is right does not necessarily mean increase in tariff as often argued .
We were told that government would want to sell its shares in Discos to private investors as part of solutions to present problems in the sector. Hope government will tell us the percentage of its holding to be sold to private investors in Discos. I hope government will also answer these questions sincerely: Will such private investor arrangement translate to controlling shares in the firms? If yes, why has government not been able to control the firms with such shareholdings? What constrains the government from doing what the government wants the private investors to come and do?
We hope that government is not just divesting to have funds and wash its hand off the business. Meanwhile, this approach cannot be a sufficient condition to improve the sector.
One will be interested in the achievement of Energy Commission of Nigeria (ECN). ECN is “charged with the responsibility for the strategic planning and coordination of national policies in the field of energy in all its ramifications”.
One will also request for answers to these questions: What happens to the ECN’s renewable energy Master Plan? Is the Renewable and Conventional Energy Technology Department still alive to its focus on nuclear, renewable and alternative energy sources? What happens to our goals with respect to Nigeria’s renewable energy resource as highlighted in vision 20-2020? What are we doing with various dams capable of being retrofitted with hydropower plants?
I therefore align myself with the thought of Asiwaju Tinubu that “We must overcome the economic, political and bureaucratic bottlenecks preventing us from achieving reliable electrical power. This is perhaps the single greatest impediment to economic advancement”.
“Let those who have ears to hear” hear what Asiwaju Tinubu is saying to the nation.
Adeniran, a Lagos-based Chartered Accountant, an Insurer also holds B.Sc and MSc In Economics.