Five Years Of Power Privatization: Still A Litany Of Woes

Trapped in the morass of a toxic privatisation, the Nigerian power sector is in dire need of a reversal of fortunes. Five years into the ownership swap deal, the promised gains of a massive injection of funds, increased productivity and efficient service delivery remain a mirage; the economy is hobbled, while hapless electricity consumers continue to grope in the dark.

As the largest economy in Africa, boasting a population estimated at close to 200 million, Nigeria deserves a vibrant power sector to drive industrialisation, boost the real sector growth and create jobs for the teeming millions swarming the labour market. However, with an economy still in dalliance with the recession, only a sprightly power sector, with constant electricity supply, can attract the volume of Foreign Direct Investment needed to ignite a spark in the limping economy.

At privatisation on November 1, 2013, the power situation in the country was melancholic. Five years after, virtually nothing has changed. Then, available electricity for distribution to about 170 million Nigerians hovered at 4,000 megawatts. Today, the Federal Government says generating capacity has reached 7,000MW, but the quantity available is hardly different. Occasional fluctuations due to system failure sometimes reduce power to less than 1,000MW. How can that power homes and factories? How can an economy grow on that?

Notably, with a limited transmission capacity, operators have had to cope with system collapse anytime there is an increase in load beyond what the transmission facilities can handle. This happens quite often, throwing the entire country into darkness. It is, therefore, a great worry when officials claim generation has improved and the customers cannot enjoy the benefit of the so-called improvement.

Worse still, the Distribution Companies sometimes reject supplies for onward distribution to electricity consumers. For instance, reports have it that 11 DisCos rejected 18,648.66MW of electricity in the first two weeks of this year. That is preposterous, an unimaginable profligacy in a country that has fallen far behind in the provision of power infrastructure.

This level of incompetence can no longer be tolerated in a country planning to record some meaningful development. If Nigeria is the largest economy in Africa and has achieved that status based on less than 5,000MW of an erratic power supply, it can only be imagined what could have been if the country could get its power sector right. Perhaps, many companies that have folded up as a result of the electricity challenge would have survived. South Africa, with a population of 57 million, enjoys 50,000MW of electricity, which has helped the country to become the most industrialised economy in Africa and also a member of BRICS, a group of five major emerging economies of the world, comprising Brazil, Russia, India, China and South Africa.

Nigeria can no longer afford to slumber. Since the current privatisation has failed to inject new life into the power sector, then it has to be reviewed. The Minister of Power, Works and Housing, Babatunde Fashola, should realise by now that he can no longer treat the power issue with kid gloves. He should accept the reality that this administration has failed woefully on power, just like its predecessors.

The minister spent the better part of this administration’s tenure defending the incompetent power firms, who never had the wherewithal to function. It should be obvious to him now that they can never be relied upon to come up with the goods. The firms, especially the DisCos, should not be allowed to continue to hold the country to ransom.

As a lawyer, he has been concerned about the implications of breaching contractual agreements. He said, “I know first that cancellation of contracts is not a good signal to send to investors; even if it grabs the headlines, it will be for the wrong reasons.” But whatever agreement exists between the government and the power investors can be amicably settled for the sake of traumatised Nigerians and the troubled economy.

It is interesting that the power sector operators themselves have come to realise their shortcomings and are ready to quit. In apparent resignation, Tukur Modibbo, an investor in the Jos Electricity Distribution Company, challenged the minister to refund $72 million out of the $82 million he purportedly invested and he would quit in 24 hours. What it demonstrates is that the DisCos are at their wits’ end, and are just going through the motions now.

What is needed, therefore, is to find a way of easing them out, like a bull in the china shop, so that investors with experience and resources can take over. It is time to acknowledge the abject failure of the power privatisation. The government should invite foreign investors to participate in a fresh round of privatisation by persuading the current ones, who have so far shown that they cannot cope, to sell part of their equity. This should not be too much of a problem, as Fashola was quoted in April as saying, “If there is one sector of the economy that investment appetite is high, it is the power sector, and the potential is very high.” The Federal Government should also be ready to unload some of its equity to new core investors.

There is a surfeit of foreign companies which specialise in running power firms that could be targeted by the government. They include State Grid Corporation of China, Enel in Italy, EDF in France and Korea Electric Power Corporation. Unlike the previously failed privatisation, where incompetent investors scoured Nigerian banks for investible funds, this time, the focus should be on using privatisation to bring the much needed foreign direct investment into the country.

 

Source: Punch

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