By November 1, 2016, power consumers had endured for three gruesome years the incompetence and poverty of the distribution companies (DisCos) and generating firms (GenCos) that rose from the ruins of the Power Holding Company of Nigeria (PHCN).
That is enough time for the regulators, consumers and even the operators themselves to effect dispassionate assessment of the performance of the industry.
The unanimous verdict is that the privatization of the power sector is a colossal failure. Even the operators know that they have failed. That probably explains the resort to endless buck-passing. The DisCos and GenCos blame everyone from regulator to consumers and government for the eternal darkness they have inflicted on Africa’s largest economy. The only one left out in the blame game is the operators themselves.
However, everyone knows that the operators take 80 per cent of the blame for the darkness in Nigeria. Even the International Monetary Fund (IMF) knows who to blame. It has carefully avoided jumping into the fray by apportioning blame. The Breton Woods institution has rather adopted a financial expert’s way out of the quagmire.
It has intervened by suggesting the way out of the darkness in Nigeria. IMF argues that it would take a yearly investment of $10 billion over a period of 10 years for Nigeria to drive away darkness. It did not say whose responsibility it is to make that huge investment.
However, many see the IMF advice as an implicit indictment of the deplorable liquidity position of the GenCos and DisCos in Nigeria’s power sector. While they are expected to cough out a princely $100 billion (N30.3 trillion at current official rate of N315 to the dollar), the operators of Nigeria’s power sector are practically bankrupt.
The liquidity crisis in the sector is so critical that N400 billion in bank loans to the sector has already become toxic. None of the firms in the industry is credit worthy. So the possibility of the same insolvent firms raising N30.3 trillion to invest in the industry is like asking Robert Mugabe’s Zimbabwe to shell out $3 billion dollars for the 2017 budget of the country. It is practically impossible.
The liquidity squeeze and dearth of management acumen in the power sector is irredeemable if left in the hands of the current operators. They have run out of the funds and experience to drive darkness out of the land. The solution is for government to take a hard and painful decision like it did on fuel subsidy and exchange rate of the naira.
The federal government has not completely dismantled its command and control structure in the economy, but the decisions it has taken on fuel subsidy and exchange rate of the naira has freed resources for infrastructure development. The official exchange rate of the naira is not determined freely by the invisible hand of the forces of demand and supply. However, things would have been worse if the Central Bank of Nigeria (CBN) had not abandoned its fixed exchange rate policy.
The pump price of petrol at N145 per litre is at the moment lower than its open market rate. However, the partial de-regulation of the downstream sector of the oil industry has reduced government’s financial burden, forced down fuel consumption, thus cutting the cost of fuel imports by 30 per cent. Those were painful decisions that the government made despite their political inexpediency.
Government has to make a similar painful decision on the privatization of the power sector. It is now clear that the previous administration sold the generation and distribution arms of PHCN to cash-strapped inexperienced firms. The sale must be revoked no matter the consequences. Babatunde Fashola, the minister of power, works and housing shudders each time he is confronted with suggestions that the way out of the darkness in the land is to revoke the sale of the generating and distribution arms of PHCN to the GenCos and DisCos. His fear is that revoking the sale would send wrong signals about Nigeria to foreign investors.
No one is asking the federal government to return the power sector to civil servants. Privatisation is the most sensible way out of the epileptic power supply bedeviling the land. The truth is that the sector was sold to impoverished and inexperienced investors. They failed to live up to their mandates. The GenCos and DisCos have sacked hundreds of incompetent employees for offences which pale into insignificance when compared to the operators’ colossal failure in the sector. Government should give them the treatment they give to their incompetent workers. They should be sacked and replaced with competent and experienced firms with the financial muscle to develop the industry.
Epileptic power supply has more retarding effect on foreign investment inflow into the country than the revocation of a failed privatization exercise. Foreign investors would scramble to come to Nigeria and exploit the huge market if power supply is regular. They are not bothered about what happened to failed operators in a transaction that went awry.
Regular power supply automatically attracts foreign investments. The current operators of the industry lack the financial muscle and management acumen to guarantee that. They must be replaced with competent firms.
