Dr. David Duke, member, House of Representatives (L.A, 1989 – 1993), had done a documentary, drawing up a nexus between a group that owned the media, politics and finance of the western world, and how you just couldn’t simply criticise them. He quoted Volitaire, who had said that, “To learn who rules over you, find out who you can’t criticise”.
Such is the state of the privatisation of Nigeria’s power sector, as it is a cistern of untouchables who own a failing sector, despite billions of dollars that had been spent on it, more than any other sector of the nation’s economy.
Egypt had increased it’s power generation by 25,000 megawatts, from June 2014 to June 2018, a period of just four years, while we are stuck at a maximum of 5000 megawatts despite a whopping 16 billion dollars and counting. Former Minister of National Planning Dr. Shamsuddeen Usman had dropped many bombshells when he spoke at the October 26, 2018, Lecture of the Nigerian Society of Engineers (NSE).
Dr. Usman said that government officials were guilty of foul play, as they used their positions to leverage their interests in the privatisation exercise of the nation’s power sector in 2013. He said that political considerations jettisoned the economic and technical capabilities of the eventual preferred bidders. He said that it was in contrast to the privatisation exercise of 1988, when he was the first Director General of the TCPC (Technical Committee on Privatisation and Commercialisation).
“Back then, there was a code of conduct that ensured that no member of the board or management was allowed to buy any of the assets we were selling”, the minister said. He said people were just rushing into electricity, believing that it was like telecoms, without properly understanding the industry. The privatisation programme was mired in controversy and under hand dealing.
For instance, back in 2006, the Aluminium Smelter Company of Nigeria, which was built at a cost of 3.2 billion dollars, was sold off at a meagre value of 130 million dollars. Government assets were ‘auctioned off’ at peanut prices to incapable private hands that mostly strip off and sell the assets of the companies sold to them, as the assets are more expensive than the amount they paid for the firms.
There was a recent face off between the former Chairman of the Nigerian Electricity Regulatory Commission, Dr. Sam Amadi, and one of its former commissioners for market competition and rates (MCR), Mr. Eyo Okpo. Though it turned personal and cantankerous as they blamed each other over the poor state of electricity distribution, they inadvertently brought to the fore, some of the causes of the challenges of the power sector of today.
Most of their arguments revolved around tariff reductions which some believe were politically motivated to help the 2015 ambitions of former President Goodluck Jonathan. Clearly, the crux of the matter and the source of the problems of the Distribution Companies (DISCOs), is not the tariff debate or the collection losses claimed by the DISCOs, but their technical and financial capabilities.
Dr. Amadi said that the NERC discovered that the terms of reference of the privatisation exercise were lowered by the Bureau for Public Enterprises such that companies that lacked requisite capacity were sold the DISCOs. Dr. Amadi said, “We did not realise that we sold to straw-men”. He added that “A proper test on all the preferred bidders showed that only one or none has the financial and technical competence to manage the network.
The sleaze in the power sector is brought to the fore by calls to probe the Nigeria Bulk Electricity Trading Company, as top of the management is accused of over payments to two power generating companies, with waivers on gas supply and gas transportation agreements, as well as illegal payments to the eleven DISCOs.
Mr. Kola Ayeye, a former Executive Director of the Assets Management Company of Nigeria (AMCON), recently decried the level of default of electricity generating companies and electricity distributing companies. He stressed that such entities should be re-concessioned. He argued that players should not use the tariff structure as an excuse, as our tariffs are close to international rates. His call for restructuring of the power sector is facing the reality of the capacities of our power players.
The NERC has asked the DISCOs to submit their Performance Improvement Plans (PIP), to pave way for a tariff review in January of 2020. The Transmission Company of Nigeria (TCN) has asked the federal government and investors in DISCOs to raise 4.3 billion dollars to recapitalise the firms and improve their services. The DISCOs are however asking for a cost recovery framework before they can recapitalise. This brings us back to the same discussion table over the viability and financial functionality of the DISCOs from a flawed privatisation process.
Perhaps government under-estimated the maze and sleaze of the power sector when it appointed Fashola as minister of power, works and housing. As a lawyer, Fashola has found complex, the agreements and guidelines, the politics and the corruption in the sector and has been held back from achieving any meaningful progress. Today it is hail Mary and by tomorrow it is candle night.
We have oscillated between 1000MW and 5000 MW of electricity from 2015 to 2019. In real time, the power sector alone needs two ministers, one to handle generation and the other to handle distribution. One a scientist and the other a seasoned administrator to look at the operations of the distribution companies and how best to maximise their output. It is also important that the NERC be run by patriotic persons, who will judiciously sanction erring players and ensure strict compliance to guidelines, as players have been seen to flout NERC’s directives with reckless abandon.
The face-off between the two former executives of the NERC has unveiled the sensitive need for proper and prudent regulators. Investors and share holders of DISCOs have decried the return on investment in the electricity business and have lampooned the tariff rates as the albatross to their productivity levels. Some are said to even favoured a buy back from government, so the decision is government’s to make – whether to recapitalise and fund the DISCOs or take over the DISCOs, then properly “corporatise, commercialise, before privatising them”, as Dr. Amadi puts it.
Tahir is Talban Bauchi.
