Amidst the plethora of promises made by presidential candidates of the major political parties in preparation for the forthcoming general election in 2023, including the promise to increase the quantum of power supply across the country, experts in the Nigerian power sector have revealed that the aspirants and their economic teams have no clue of what it takes to address the country’s critical electricity challenges.
The experts and operators made this known at the recent PwC Nigeria’s 13th annual power and utility roundtable with the theme: Setting A New Power Agenda: Post 2023 Elections, held in Lagos.
Having conducted a clinical diagnosis of the manifestos of the Presidential candidates of the Peoples Democratic Party, PDP, Alhaji Atiku Abubakar, All Progressives Congress, APC, Asiwaju Bola Tinubu, Labour Party, Peter Obi, and others, the panelists suggested an urgent stakeholders’ forum between major operators and players and the aspirants, for insights and critical understanding of what is needed to guide their electoral promises.
Dr. Sam Amadi, former CEO of the Nigerian Electricity Regulatory Commission revealed that the power sector has been faced with bad financial liabilities, very low debt recovery mechanism, more public sector financing instead of less, and DisCos’ lack of transparency with customers.
He also revealed that the manifestos of the major presidential candidates in the 2023 election showed that most of the candidates have not done a thorough and rigorous diagnosis of the power sector, before coming up with solutions.
The former NERC Chairman said, ” The candidates of all the major political parties haven’t interrogated the reasons for the failure of well-intended privatisation of the power sector.
”There is a poor diagnosis of the real issues and it is clear that the aspirants won’t be able to make the informed decision and right intervention in the power sector. They do not have the right perspective about how to deal with the pathology identified. Their plans are not sound enough,” Amadi noted.
According to him, the two critical challenges are the modeling and poor project management problems. He said that the power sector is not commercially viable even after many years of being privatised.
“After many years, the power sector has borrowed more than enough from the commercial banks, this has affected the stability of the banking sector. In August 2022, the power sector debt owed to banks rose by 11.85 percent to N819 billion.
”So far an estimated N2 trillion has been spent by the Federal Government on the power sector in terms of infrastructural needs to the sector. Nigeria has recorded more public sector financing of the private sector post-privatisation than before.
“This was the evidence of the failure of the privatisations of the power sector, since it was unbundled almost ten years ago.
“In the last nine years, only 45 percent of customers have been metered out of the 8,881,443 registered active electricity customers. There are also no reliable customer data banks to support the current market.
“This is responsible for the increase in DisCos’ revenue shortfall. Most of the customers have found it difficult to offset money due to consumption, it has further incentive customers’ propensity to steal power, thereby affecting the sustainability of the sector.
“Some of these superficial structures of the reforms show that we did not think through how to adopt the universal principle of the market to deal with the real constraint in the power sector. That is what I called wrong modeling.
”Funding into the TCN was done without the right regulatory process. Critical customer data was not available when we privatised. We did not establish a mature regulatory environment as at the period of pre-privatisation,” ,” Amadi said.
Speaking on bad project management of the sector, he revealed that Nigeria has failed to implement some of the critical power sector interventions including the Power Sector Recovery Programme (PSRP), Presidential Power Initiative (IPP), popularly known as the Nigeria-Siemens power project , and National Integrated Power Project (NIPP) because of corruption and the way most of the projects were awarded to contractors
The solution, according to him, is for the Presidential aspirants to focus on restructuring the electricity supply market model to ensure competition
He charged them to be innovative enough to get efficiency right and drive up the capacity of all the successor companies.
The former NERC Chairman also charged the next administration to prepare to deal with compromised policy-makers and public sector managers.
Amadi said, “We have to resuscitate transmission and management consultancy in investment project financing. Since about 83% of the energy used to generate power in Nigeria is currently derived from gas, we, therefore, need to redesign the domestic gas supply obligation model for efficient gas supply to the power plants across Nigeria.
“We need to provide the right policy that prioritises the interest of the embedded generation operators in the power sector. We also need to make the gas company sign domestic obligations.
”We need to reintroduce the presidential task force, to provide the day-to-day actionable plans of the Nigerian power sector with achievable targets, especially concerning the areas of power generation, transmission, distribution, gas to power.
”NERC should also be made to deploy incentive regulations to re-benchmark the DisCos, instead of threatening to take over the assets from them. We can develop a regulatory framework to ensure the efficiency of the DisCos management, without creating political risk or disrupting the privatisation process,” Amadi suggested.
He said the next administration should be prepared to invest more in metering by completely taking over the duty from the DisCos.
The former NERC Chairman said, “The government should socialise the risk and allow them to run a more efficient system, benchmark, and accountability, by initiating innovative financial models to enable more funding to the DisCos using all kinds of models to make it more competitive.”
Mr. Usman Mohammed, Former Managing Director(MD) of Transmission Company of Nigeria (TCN) on his part, charged the aspirants to seek ways to collaborate with the sub-nationals in order to secure their commitment to the effective implementation of the right of ways for transmission lines and tower connecting different parts of the country to make the system work.
He said, “The next Nigerian President should appoint people who are incorruptible to head the relevant Ministries, agencies, and departments in the power sector.
“We need people who would do the right thing because the power sector is different from every other sector, there is no shortcut. Any attempt to do shoddy work will undermine the entire power network.
“It is unfortunate that over the years, the Nigerian Government has embarked on transmission expansion without carrying out the necessary study of all the power projects.
“Most time we failed to establish the study of those on the right of way and how to compensate them before going ahead with the projects.”
“The next government must put the policy in place to get all electricity Generation Companies(GenCos) to deploy free governor control mechanisms in their plants. This is the ideal thing to do if we want to stabilize the grid.
“ The free governor is a device that automatically adjusts the rotational speed of the turbine and the power generation output. It is an important controller in the power plant as it regulates the turbine speed and power movement in the grid frequency regulation.
”The Government must invest in the secondary frequency control, spinning reserve, and functional SCADA to prevent a repeat of the nationwide blackout experienced across the country. This, according to him, would reduce multiple tripping on its substation,” the former TCN boss said.
Mohammed also noted that most of the DisCos have poor networks because of a lack of investment in protection standards. He added that about 99 percent of DisCos’ networks are not consistent with protection standards.
The former TCN MD/CEO, therefore, urged the next administration to ensure that all DisCos are fully capitalised to meet their estimated $4.262 billion funding for new transformers and injection substations.
Mr. Alex Okoh, Director General Bureau of Public Enterprise, who joined the session virtually, revealed that the Nigerian power sector is in serious crisis, suggesting two broad frameworks for the power sector.
The first, according to him, has to be based on the development and investment in power infrastructure. The second is resetting the commercial viability of the sector, especially for the DisCos.
He said, “These two broad pillars should be the fulcrum upon which the agenda of the political class must be focused to revitalise the sector.
He, therefore, charged the aspirants to re-evaluate the power sector and focus more on the concept of continuity with some level of disruption. The disruption, according to him, needs to happen at the transmission segment of the value chain.
He described the TCN as a big heart pumping blood through a constricted and narrow artery.
He noted that if the transmission system is allowed to continue the way it is presently constituted, the entire system could break down with serious consequences.
Okoh however suggested the privatisation or complete unbundling of the system operators, while retaining the national management of the TCN.
He said, “But the minimum requirement is the need to first unbundle TCN, we have to isolate or separate the system and market operator from the grid operators to establish some level of independence in the management of the transmission of the power.
He also blamed the failure of the power distribution segment of the industry on the faulty design of the DisCos model, this according to him, is the reason for the private sector’s inability to deliver on the mandate of the privatisation process in terms of power distribution.
He said, “Apart from the failure of design or model, Nigeria has failed to set the right commercial framework for the commodity that is no longer regarded as a social commodity but a commercial commodity.
“DisCos, in particular, perhaps the concept of incentivizing the private sector from the perspective of revenue generation may have been a wrong approach.
”The DisCos have been struggling to crowd in investment and raise the needed capital to improve investment in their networks, because of issues of commercial viability, and adequate tariff.
”We then have to rethink the various forms of support that can be provided for the DisCos to build their network infrastructure and that is why we have initiatives such as the PPI i.e SIEMEN project and Power Sector Recovery Programme and CBN’s intervention which currently stand at about N562billion in terms of OPEX and CAPEX in particular to the DisCos.
“The DisCos would have to interface more with the various state legislatures to enact the appropriate law to criminalise and prosecute meter-bypass and energy theft. Collaboration with the state legislature is needed to expedite legal actions against anyone involved in the criminal act, irrespective of the status of the individual.
” We need to wrap up metering by at least 60 percent of un-metered customers to guarantee revenue assurance and appropriate payment.
”The next agenda should focus more on network infrastructure and development in terms of transmission and distribution. Generation is fairly comfortable and even if you want to improve generations, we need to incentive investment in the GenCos.
”Government has to be responsible in the manner it regulates the provision of electricity and how it supports the transition stage of the reform. This would enable the private sector to effectively deliver.
The BPE boss charged the next administration to be responsive to policy issues, by also looking for more creative ways to attract investment that would improve the infrastructure of the transmission and distribution structure. He suggested that the Central Bank of Nigeria(CBN) and the World Bank should provide more concessionary funds to address the N30 billion market shortfalls.
Chiedu Ugbo, Managing Director/Chief Executive Officer, Niger Delta Power Holding Company, in an intervention during the panel session, disclosed that gas to power is a significant challenge facing the power sector, adding that the gas molecules are not enough to cater for the requirement of the power plants, while the gas infrastructure is not adequate.
He said, “It is sad that despite Nigeria’s acclaimed status as a gas economy, we do not have the gas molecules and infrastructure to transport the available gas molecules to the plants from the Niger Delta region.
”He noted that the NDPHC has sealed the gas supply contract with gas manufacturers but there is no infrastructure to move the gas molecule to all our plants across the country.
Chinedu, therefore, charged presidential candidates to diagnose all the critical issues facing the power sector, by restructuring their manifestos to capture the core issues that would address the power challenge in Nigeria.
He also called on the presidential aspirants to organise a stakeholders forum with the operators in the sectors to analyse the real issue.
The NDPHC Chairman said, “The DisCos must also work out a robust work relationship with the Independent Power Producers(IPPs) through a concessional model to guarantee power supply. ”
He also revealed the era of a single buyer model that gives power to the Nigerian Bulk Electricity Trading Company to buy power. and sell to the players is over.
He added that there are provisions for generation companies to be able to sell to the distribution companies and eligible buyers, through partial activation of contracts for phased bilateral contracting for power between generation companies (GenCos) and distribution companies (DisCos).
Pedro Omontuemhen, Partner and Energy, Utilities & Resources Leader, PwC Nigeria, in his comment revealed that going by the comment of the operators and the regulators, it is however clear that the Nigerian power sector requires an emergency approach to solving all the issues facing the sector.
According to him, we need to galvanise all the energies that we can mobilise in the short, medium, and long term to address power and gas challenges.
He said, “Moving forward the Federal Government should merge the power and gas ministry to address all the issues within the energy industry.
“The stakeholders and all the players have a well-structured approach to fixing the power sector’s critical challenges. We know what to do, therefore politicians should stop promising to increase generation by a particular amount. That would not happen, because they don’t understand how to make that work.
PwC Nigeria, Energy, Utilities & Resources Leader, therefore charged the Presidential aspirants to be creative in initiating financial models to jump-start critical investment in the power sector.
According to him, the person that will take over from President Muhammadu Buhari must be ready to bring industry players together, this will open the window of opportunities to attract foreign investors into the power sector.