. . .Fashola still unable to explain liquidity gap in tariff – Abaribe, Sen C’tee Chair
. . . indigenous companies shortchanged in billion-dollar loan projects – Effiong, House C’tee Chair
. . . system collapse imminent unless FG changes privatisation model – Makoju
The Chairman, Senate Committee on Power, Sen, Enyinaya Abaribe and his counterpart in the House of Representatives, Daniel Effiong agree that all is not well with the Nigerian power sector just as a former Managing Director of the Power Holding Company of Nigeria (PHCN), Engr Joseph Makoju warns that system collapse is imminent in the power sector unless urgent steps are taken to avert it.
It is pertinent to note that the privatisation of the Nigerian power sector is although the largest that has happened in recent time in the world, and was understood as a solution to the country’s power problems because it worked in other countries. Ten years after, critical stakeholders told The TRUTH in separate interviews that the very promising handover of the power sector to private hands yielded very disappointing results, as they agree that the sector is headed toward imminent system collapse, while urging government to quickly convene a stakeholders’ dialogue to retrace steps.
The lawmakers and stakeholder are united in opinion against the confidence and optimism of the Minister of Power, Works and Housing, Babatude Fashola who insists that the administration’s roadmap for power sector development is making good progress, and that the increase in tariffs is in order to ensure that customers get quality services.
Makoju, who appointed Special Adviser on Electric Power to three consecutive presidents of Nigeria after his tenure as Managing Director of Power Holding Company of Nigeria disagreed with Fashola when he said: “I hate to sound pessimistic, but I am a professional, and I assure you that system collapse is imminent in the power sector unless we change our approach to privatisation.”
Makoju, Abaribe and Effiong agree that although privatising the power sector is a step in the right direction, the trio in separate interviews negated government’s current ‘approach to privatisation,’ and individually called for review, not of privatisation of the sector, but of the model adopted by government for the country’s power sector.
Makoju who is also the Chairman of West African Power Pool Executive Board said: “More than ten years ago, we expected that if the power sector is privatised, systems will work efficiently even though tariff may rise. Now it’s already ten years since Nigeria privatisatised her power sector, sadly privatisation has not solved the problems of power supply in Nigeria.
Asked for a professional solution, Makoju said: I reaffirm that irrespective of the failures currently being recorded, privatisation remains the best step to take in the power sector.
“I don’t think we should entertain any thought of reversing privatisation, yes, there should be no argument about that, but government must necessarily and urgently revisit the privatisation model adopted, and determine why it has failed.
“It is obvious that the model has failed, it has not delivered the promises we thought it had for Nigerians.
Makoju went further to state that the factor that led to the determination of government to privatise the power sector was because government was not in a position to provide the liquidity needed to run the power business in a sustainable way, adding that “unfortunately, the problem persists even after power provision has been committed to private hands.”
For Makoju, privatisation has not been able to deliver the promises it holds for the country.
“The problem is still with us, the power sector is still illiquid,” he added.
Factors responsible for failure
When asked what factors are responsible for the failure, Makoju identified Distribution Companies (DISCOS) as “the major problems” although he was quick to add that their failures should be understood within the context of enormous task heaped on them.
Makoju said: The DISCOS are not entirely responsible for their own failures. DISCOS have very difficult jobs of collecting revenues needed to run the entire power chain, so all the attention is on them. So we have to be judge them fairly, he added.
Asked for solution to what he perceived as an endangered power sector set to collapse, Makoju said: “We have to go back to the drawing board and sit round the table and revisit where we went wrong. Let not the government or anybody think he or she has all the solutions. It is only when we go back to the drawing board that we can retrace our steps as a team and find a way out.
“All the players will sit around the table and if we are sincere in the articulated objective of serving national interest, not vested interest, then we will succeed,” he said.
According to the highly accomplished power sector expert, “what worries me most is that in terms of power infrastructure, Nigeria never had it so good. Unfortunately, the state of the art power infrastructure has failed to deliver the purposes for which they were installed.”
“In our history, Nigeria has the best power infrastructure; we have the best transmission infrastructure, and the best distribution infrastructure. So this is when the sector ought to flourish more than it ever did, but the contrary is the case.
Engr Makoju further explained that the setback has a ripple effect on other industrial sectors noting that it retards a country’s industrialisation plan: “No nation can industrialise unless it has a flouring power sector,” he said.
Discussing the root of the challenge, Makoju said: “In Nigeria, there is greed, the system is full of hasty decisions and as a matter of fact, wrong people are in very sensitive places and they don’t have the correct model to manage situations. The implication of this is that it creates a time bomb that will certainly explode if things continue to go wrong.
“If you do not get this sector to be viable financially, we will continue to destroy our most prized national assets until the system finally collapses,” he warned.
“Let me give you important information about the power sector: If you don’t generate enough every day to pay for the gas, to repair the generator and to maintain the plants and for the transmission to maintain its network, you are running down the assets and it has a terribly costly repercussion.”
“When you have gas and the power stabilises and everybody sees the lights are on and they think the problem is solved, it is not solved, it is not solved and I am telling you as a professional that the fact that lights are on does not mean that there is no problem.
“There is problem because we are just taking the power, the distribution companies are not collecting money for it and so we are eating up our assets.
Makoju tasked stakeholders on the urgency of the situation saying “time is not on our side, the earlier government convenes a stakeholders meeting, the better for the sector else a systems collapse will occour.”
Chairman, Senate Committee of Steel, Sen Enyinaya Abaribe admitted the sad state of the sector saying “yes, the Senate is aware of the challenges and happenings in the power sector and it has reached the point of legislative intervention in order to specifically address the challenges.”
According to Abaribe, the intervention of the Senate aims to find urgent solutions in order to prevent system collapse. “The Senate knows that if there is no quick intervention, there could be a general power sector crisis,” he said.
He said the Senate is currently identifying the bottlenecks hindering the progress of the various parts of the value chain along the sector while also trying to rectify the anomalies.
Asked what the root of the problem is, Abaribe said, “I think finance is the major problem.”
Abaribe pitched his tent with Makoju when he made an analogy saying: “You cannot purportedly generate power at 70 naira and sell it at 30 naira and expect that the devil would take the rest of the 40 naira.”
“Somebody needs to pay for that and we must address that problem.
“The question that the Minister of Power has not answered is: “Who pays for the 40 naira? The fact that nobody is paying for the 40 naira has continued to add to what has come to be known as ‘liquidity gap.’”
He said the National Assembly is trying to eliminate frictions between power sector agencies in order to be able to harmonise their respective roles in terms of seamless operations in order to ensure operational efficiency.
Obviously, when u break-up PHCN into different areas, you will have differences that will cause frictions that will lead to problems in the system. “NASS has done specific interventions to ensure that institutional stakeholders work together to provide permanent electricity supply nationwide.
“We have also asked Fashola not to unduly tax Nigerians to pay for power. We have even asked the minister to come up with laws that will aid efficiency of the system. Or we can promulgate new laws to ensure that the country has power.
“Senate will promote increase in power generation and transmission and ensure regular and stable electricity service delivery by the DisCos so that consumers will be willing to pay tariffs,” he added.
Like Makoju, Abaribe said there is no going back on privatisation stating that “it is not out of place to expect problems although government must be able to know how best to solve the problems.”
In an interview with the Chairman, House Committee on Power, Asuquo Daniel Effiong, he also admitted the failures of service delivery but was particularly interested in the “need for local content in the power sector.”
The House Committee Chairman recalled that during oversight visitations of the committee, “we discovered that there are too many importations of readily available expertise in power sector construction. Government did not need to import what we have in abundance.
“We need to know what accounted for the very costly importation of expertise that was readily available domestically. In my option, that regrettable action encouraged huge capital flight, in terms of quantum of resources that was taken out.
“It is sad that there is presumption that Nigeria doesn’t have capable hands to handle some of the strategic and important power sector projects.
“Shamefully, Nigeria is now a borrowing nation that begs for money to fund all kinds of projects. The loans when granted, come with a lot of sad conditions that gag our freedom to employ our engineers and develop our own systems. When the money is not free, it comes with conditions that make it unable for our indigenous companies to compete for the jobs.
Effiong expressed the concern that only companies that are foreign qualify to get the contracts financed with foreign loans adding that in the end, the money goes back to where it came from without adding value to Nigerian engineers, and to our economy.
“Sadly, it is we and our children yet unborn that continues to service the age long debts which was borrowed but which went back to where it came from.
Effiong called on government to do more to ensure that conditions attached to the loans must be cancelled else the loans are not worth it adding that the billion dollars loans are at best killer-loans since local engineers are excluded from participating in emanating projects.
“We have a power sector that is believed to be ‘not working’ and it is obvious. However, it is workable and we will need to improve on what we have, and we have to block leakages and inject new ideas into the privatised power infrastructure, he added.