Based on comments on social media, Nigerians seem to be giving up on the hope that the country will one day overcome its electricity challenges. President Muhammadu Buhari had in his inaugural speech, lamented how the Federal Government between 1999 and May 2015 expended an estimated $20 billion (about N4 trillion) in various power sector investments only to bequeath darkness, misery and frustration to millions of Nigerians. He pledged not to allow this ugly trend to continue under his administration considering its impact in aggravating unemployment and poverty in the country.
During his time as President between 1999 and 2007, Chief Olusegun Obasanjo also blamed the rot and degeneration in the power sector on various regimes from October 1979 to May 1999. He said those administrations failed to do anything in the sector in terms of increasing generation, transmission and distribution capacities till he returned to power in 1999 as elected president. Before his exit in 2007, the former President said his administration’s estimate was that the country needed to increase power generation by an average of 2,000 megawatts (MW) annually to ensure stability in electricity supply.
In a futile bid to improve power supply in the country, successive government have tried to deregulate for the purpose of efficiency. One of the major steps taken by the Federal Government was to remove the monopoly by the National Electric Power Authority (NEPA) in other to encourage private sector participation. Thus the prevailing Electricity and NEPA Acts were repealed and the Power Sector Reform Act of 2005 enacted in its place. This allowed for Federal Government to undertake a holistic, policy, legal and regulatory reforms.
Prior to the enactment of the Electric Power Sector Reform Act (EPSRA) 2005, the Federal Government was responsible for policy formulation, regulation, operation, and investment in the Nigerian power sector. Regulation of the sector was done through the Federal Ministry of Power (FMP) with operations through the National Electricity Power Authority (NEPA), which was solely responsible for power generation, transmission and distribution.
The National Electric Power Policy 2001 specifies the reform agenda, while EPSRA provides the legal basis for the unbundling of NEPA, the formation of successor companies as well as their eventual and the privatisation. EPSRA also provides for the development of a competitive electricity market, the establishment of a dedicated regulatory body and the establishment of a rural electrification agency.
The objective of establishing the Power Holding Company of Nigeria (PHCN) was to transfer the management and financing of successor companies’ operations to the organised private sector. Furthermore, the subsequent unbundling of PHCN was expected to also ensure the establishment of an independent and effective regulatory commission to oversee and monitor the industry. The development was allegedly aimed at focusing the Federal government on policy formulation and long-term development of the industry.
So far, but not so good, the 11 Distribution Companies (DISCOs) created from the unbundling of PHCN, which started since 2010 have apparently not yielded the desired result expected from Nigerians. Although, the Bureau of Public Enterprises (BPE) projected that the successful privatisation of the PHCN would increase electricity generation capacity to 20,000mw by 2018, Nigeria’s decades-long electricity problems have rather worsened in recent years. The situation in the country worsened towards the end of May 2015 due to a disagreement between government and petroleum product importers compounded by strike action called by oil and gas unions, which saw Africa’s largest economy practically shut down.
A lot of the chatter about Africa’s moment of economic lift-off revolved around the mobile revolution happening in the region. But true economic transformation, the kind that will lift all boats, will only happen once the continent solves its power problems. The lack of reliable power is causing huge difficulties for entrepreneurs in the region, raising their costs of doing business and dampening investor confidence.
The World Bank estimates sub-Saharan Africa’s growth this year to stand at 4.0%. However, access to electricity remains a struggle. Data by the International Energy Agency’s World Energy Outlook as at 2014 shows there are 622 million people on the continent without electricity, which is close to half of Africa’s population. While the urban areas have a 68 percent electrification rate, the numbers for rural parts are just 26 percent. Comparing Africa’s power generation rates with the rest of the world, there is a pretty significant gap. Ghana has one of the highest rates of electrification in sub-Saharan Africa but has in the last year been struggling with ongoing power cuts across the country.
But efforts at deregulation and privatisation of the power sector got a setback recently when the Integrated Energy Distribution and Marketing Company (IEDM), core investor in the Yola Electricity Distribution Company applied to the Federal Government for a refund of its invested funds. The company invoked the force majeure clause in the contract agreement citing the activities of the Boko Haram militants as having collapsed its businesses in Borno, Yobe, Adamawa and Taraba states. This was preceded by several complains about poor power supply in the four states. Integrated Energy had complained that out of the 13 Business Units (BUs), only three were able to operate efficiently at the height of the Boko Haram crisis and that a total of 60, 282 customers had been cut off the network which severely impacted on revenue collection resulting to negative cash flow for 11 months. This is despite consumers paying a fixed charge of N750 per month irrespective of whether they got supply or not.
Thus the Bureau of Public Enterprises had no choice than to recommend the payment of $146.8 million (about N29.2 billion) to IEDM in a share buy-back deal to the National Council on Privatization (NCP) for approval. Although the Yola Distribution Company was handed to a new owner, experts in the power industry have seen this development as critical and could portend ill for the much trumpeted successes of the power asset privatisation much touted as one of the most significant achievements of President Goodluck Jonathan.
The seemingly lack of progress by the 11 distribution companies may not be unconnected to non-profitability which is attributed to bad attitude of some Nigerians who are known ‘to deliberately flout laid down rules and violate every operational guidelines in order to satisfy their selfish desires’ according to immediate past Minister of Power, Professor Chinedu Nebo. Nebo explained that actions like deliberately overloading the transformers and over stretching their functional capacities, manipulation of metres to under-read actual consumption, using one phase metre to carry heavy load in homes and offices, using substandard cables to connect electricity to residential premises and offices, without regards to the safety of the buildings and to the power infrastructure have caused extensive damage to the power infrastructure and loss of revenues to investors in the sector.
For instance, Officials of Niger Delta Power Holding Company (NDPHC) alleged that there were about 45 instances of sabotage on its transmission projects on the eastern axis in the form of repeated community and institutional encroachments on transmission’s Rights of Way (RoW) as well as court orders stopping their contractors from going ahead with work. The evidence of sabotage was allegedly discovered during an evaluation tour of its electricity transmission projects in the eastern axis, which was meant to assess the problems behind its initiated efforts to recover more than 800 megawatts (MW) of electricity generated.
The Executive Director for Networks of NDPHC, Dr. Albert Okorogu lamented that government was doing enough to provide electricity but powers much of the power generated are stranded in many generation plants with people frustrating its evacuation and distribution to consumers. “We have a lot of stranded power in the completed stations but we need to evacuate them to the grid through the transmission stations. According to Dr Okorogu, if these facilities are continually hacked down, how then does this power get to Nigerians even if there is over 6,000MW capacity to generate power?”
In what is becoming a blame game, communities are also blaming distribution companies for lack of adequate compensation for the usage of their lands. A resident of one of the affected communities in Amoji Nenwe within Enugu, Mr. Onwe Godwin told reporters that they were not compensated adequately by NDPHC for use of their lands as a transmission RoW. “We had issues with what they wanted to compensate us with which we disagreed but later got something from them,” Godwin said.
Thus there are incidences where new structures were constantly being erected right under transmission lines by communities as basis to demand for compensation from NDPHC despite claims by NDPHC that it had initially made compensation payments to affected communities and individuals before starting the projects. More so, some of the 330kV transmission towers were reportedly hacked down by citizens whom NDPHC officials said were being mobilised by elite members of the communities.
These have been the challenges faced my many other DISCOs and in most cases have lead to litigations, as a result further delay in building transmission facilities. Officials also decried several situations where people go to get court injunctions to stop nearly completed facilities complaining lack of enough compensation or demanding another round of payment. In this vein, some energy experts advise the current administration to examine the entire power asset privatisation with a view to getting the investors to do what they promised in the agreements signed with the Federal Government agencies involved in the privatisation. Regulators should be strengthened, made firm and able to wield the big stick including penalising operators in default of agreements.
The Federal Government has also been advised to look into the possibility of amending the law that limits states to the generation of power only without distributing it to consumers in their respective states. Cheering news might be on the way as the Nigerian Electricity Regulatory Commission (NERC) recently disclosed that it was reviewing the current status of the operational licences it had given to investors to build power generation plants in the country, with the intention to revoking those licences that have remained inoperative since they were granted. Again with the report that the new administration has identified the weak transmission grid, which prevents the wheeling of more than 5,000MW as a gridlock to be removed while also promising to work with the distribution companies to ensure the necessary investment to get electricity to consumers is in place, citizens await to see light at the end of the tunnel.
