June 22, 2024

Adelabu; can he fix the power sector?

By Our Reporter

Many believe that for a new minister and a new government to be mouthing a worn out excuses for a relapse in power supply is a red flag of gross incompetence.
Last week, Adebayo Adelabu, the former deputy governor of Central Bank was quoted as saying that low gas supply
Is the main cause of poor power supply in the country.

The minister disclosed this in a statement posted on his X handle on Friday.

“Yesterday, I had crucial discussions with power Generating companies (GenCos) and Distribution companies (DisCos) to address the ongoing issue of blackouts in parts of our country.

“Power supply during the yuletide improved, but unfortunately, we’ve experienced setbacks in the new year. After investigations, it’s clear that the main cause of poor power supply is the low supply of gas to GenCos,” Mr Adelabu said.

According to the minister, he paid a visit to facilities in Olorunshogo, Ogun State, and Omotosho, Ondo State, to understand the challenges firsthand while noting that resolving the gas supply issue is a top priority.

“During our meeting, we also addressed the indebtedness to GenCos by Nigeria Bulk Electricity Trading Company (NBET). While acknowledging the sector’s liquidity challenge, we are working on validating the debt and determining a fair resolution.
“I emphasized the importance of GenCos establishing contractual arrangements with gas suppliers to ensure a steady gas supply. Recognizing concessions may be needed, I assure you that we are committed to working on this to stabilize the power sector,” he added.

To face headlong the gas supply and liquidity challenges, the minister stated that he has decided to form a committee involving all stakeholders.

“Together, we will work on recommendations to resolve these issues and ensure a more reliable and consistent power supply for our citizens,” he said.

He explained that a plan has also been established to initiate discussions with the minister of state for petroleum resources regarding collaboration and to emphasise to the ministry the importance of prioritising gas to power.

“Our commitment is unwavering in addressing the challenges affecting power supply. We understand the impact on citizens, and our goal is to swiftly resolve the issues of gas supply, indebtedness, and overall sector stability.

“Your patience is appreciated as we work collaboratively towards a brighter, more reliable energy future for Nigeria,” he said.

The Transmission Company of Nigeria (TCN) had in January said that there has been a gradual decrease in available generation into the grid due to gas constraints.

But the power issue is not a straw matter, it’s a much more serious business that requires less excuses and more action if Adelabu is to make a difference, which many stakeholders doubt considering the false start.

For many insiders who spoke with EnergyDay Adelabu, seems to lack the attribute and proper understanding of the key challenges.

But why is this the case? We are won’t to know, do his critics have anything valid to present as to why the minister cannot focus on the obligations of his office, and tackle the challenges?

Adelabu, in charge of the power sector, is not getting as much visibility or acclaim. Perhaps it is because the power sector shares close boundaries with every other sector, making it difficult to fix the problems in the shortest time.

This is the most moderate opinion of Adelabu’s work in the power ministry. It is also the view held by his supporters, although some of them launched into the extreme to claim that the power sector has changed under Adelabu. Except that they are arguing these things while using a power bank device or a generator.

There are also those committed to showing what they consider the ‘true colours’ of the power man. According to these people, Adelabu is still nursing governorship ambitions for Oyo State. Unconvinced of his loss to Seyi Makinde of the Peoples Democratic Party (PDP), Adelabu is allegedly hoping to find a way to take out Makinde or at least undermine the latter’s governance.

There is also the argument that Adelabu is banking on his relationship with power players like Zacch Adedeji, the Chairman of the Federal Inland Revenue Service (FIRS) to pull strings to achieve his governorship ambitions in this wise managing power ministry may not be the real McCoy for him at the moment but fixing his binoculars on 2027.

But Adelabu should know that to whom much is given much is expected of and from him. He should understand that in recent years, the power sector has experienced many broad challenges related to electricity policy enforcement, regulatory uncertainty, gas supply, transmission system constraints, and major power sector planning shortfalls.

Mr Adelabu is a former deputy governor of the Central Bank of Nigeria (CBN) in charge of operations, having been appointed to that role by former President Goodluck Jonathan in February 2014. In May 2018, he resigned from the CBN to contest unsuccessfully the 2019 governorship election in Oyo State.

He had his professional training with PricewaterhouseCoopers (PwC) and managed various audit and consultancy engagements for large banks and non-bank financial institutions in and outside Nigeria.

He was also on secondment to the CBN for one year (in 1999) when he led the Finance team on the CBN re-engineering and corporate renewal project and later left the firm in 2000 as an Audit Manager and Senior Consultant to join First Atlantic Bank as the Financial Controller and Group Head of Risk Management and Controls.

Mr Adelabu has also held various other positions while in First Atlantic Bank, including the Chief Inspector of the Bank (2002) and Group Head of National Public Sector Business (2003).

Upon assuming his new office, Mr Adelabu assured that the federal government will empower Nigerians through stable and accessible electricity. To achieve the feat, he said the ministry would leverage the Nigerian Electricity Act 2023 to boost power supply in the country.

In 2015, former President Muhammadu Buhari appointed former Lagos State governor, Babatunde Fashola, as Minister of Power, Works and Housing.

Mr Fashola promised improved power supply and came up with an incremental, stable and uninterrupted electricity roadmap, but there was no remarkable shift from the usual power experience Nigerians are used to.

In 2019, Mr Buhari appointed Saleh Mamman, who holds a higher national diploma in electrical electronics from Kaduna Polytechnic, as minister. But in September 2021, Mr Buhari sacked Mr Mamman and appointed Abubakar Aliyu as the power minister. This newspaper reported at the time that Mr Mamman’s time in office was marked by poor power supply.

In his address upon assuming official duties as Minister, Mr Aliyu said his mandate was to ensure that a “steady power supply is delivered to Nigeria”. Mr Aliyu’s reign as minister, however, recorded little or no improvement in the power sector as the power situation in the country remained without any significant improvement.

So, the nation expected Adelabu to make a difference. In recent years, the sector has experienced many broad challenges related to electricity policy enforcement, regulatory uncertainty, gas supply, transmission system constraints, and major power sector planning shortfalls.

According to statistics provided by GET.invest, a European programme focused on renewable energy projects, only 3,500 MW to 5,000 MW is typically available for onward transmission to the final consumers in Nigeria.

This is essentially because of the country’s poor transmission network and incessant collapse of the national grid amongst other factors.

This is happening despite the privatisation of 11 electricity distribution companies (DISCOs) and six generating companies (GENCOs) with the federal government retaining 100 per cent ownership of the Transmission Company of Nigeria (TCN). Despite the poor supply, electricity tariff has also continued to be on the rise in the country.

Poor supply
Nigeria has struggled with poor power supply for decades, a challenge that is estimated to cost businesses about $29 billion yearly, according to the World Bank.

The country has the lowest access to electricity globally, with about 92 million persons out of the country’s 200 million population lacking access to power, according to the Energy Progress Report 2022 released by Tracking SDG 7.

A World Bank report in 2021 also explained that a total of 74 per cent of power users in the country are dissatisfied with the supply of electricity across the country while 93 per cent of metered power users paid their bills regularly, 78 per cent of electricity consumers in the country received less than 12 hours of power supply daily.

Also, the lack of power supply has increased production costs for many businesses forced to provide their electricity, mostly using diesel-run generators as alternative sources of electricity.

In June 2015, Nigerian manufacturers said they spent as much as N3.5 trillion annually to generate alternative power for their production operations due to the collapse of the public electricity supply.

In 2018, former President Muhammadu Buhari claimed Nigerians depend less on generators in their homes and businesses. However, analysts disagreed with the position as many Nigerians continue to suffer from the ripple effect of poor power supply.

In March, the Abuja Electricity Distribution Company (AEDC) said insufficient power allocation to the company by generation stations was responsible for the unstable electricity supply in the region.
In June, the Manufacturers Association of Nigeria (MAN) said it loses N10.1 trillion annually to power crisis, just as the World Bank said that Nigeria will need about $100 billion in the next 10 years to tackle the challenges in its energy sector.

For many Nigerians, Mr Adelabu’s success as the new minister will depend mainly on his ability to meet the expectations of the country’s power supply and also work towards improving the situation.

Low generating capacity
Successive governments have promised but failed to turn around the country’s power sector which on average produces about 4,000 megawatts for a population of 200 million.

The Buhari administration in July 2019 signed a deal with Germany’s Siemens to overhaul the sector. The plan has three phases, ultimately targeting 25,000 MW of operational capacity long term from 7,000 MW and 11,000 to be achieved by 2021 and 2023, respectively, through the first two phases.

The country also plans to generate 30,000MW by 2030 with 3,000MW coming from renewables and 27,000MW from its power plants to serve its over 200 million people.

However, power generation still hovers just below 5,000 years after the sector was privatised. The country’s 4,000MW daily generation is barely adequate to serve Lagos, its commercial capital of over 20 million people, according to the Nigerian Association for Energy Economics.

Poor electricity has become a barrier to economic prosperity and development in the country, a challenge the minister is expected to address.

Power system maintenance/Vandalism
Over the years, poor maintenance of electricity infrastructure has been one of the major causes of poor supply in the country. The vandalism of the transmission infrastructures and distribution equipment has also been a common occurrence.

In March 2022, a 330kv Sapele to Benin transmission line tripped off after serial vandalisation of the facility affected some towers under it. Again in March, the country suffered extensive power outages when 18 plants accounting for most of the electricity the country generates faced operational problems.

The then Minister of Power, Abubakar Aliyu, blamed the constant collapse on poor maintenance and shortage of gas. He, however, said the government had upgraded four power plants as part of efforts to improve the sector.

On 8 April 2022, Several Nigerian cities including the Federal Capital Territory were thrown into darkness after the national grid collapsed again.

At the time, the federal government said the collapse of the national grid was caused by “vandalism” on a transmission tower on the Odukpani Ikot Ekpene 330kV double circuit transmission line, leading to a loss of about 400 MW of generation.

Last July, the Enugu Electricity Distribution Company (EEDC) said more than 20 transformers had been attacked by vandals across the company’s franchise network within the South-East in three weeks.

In 2022 alone, the country’s national grid reportedly collapsed eight times, partly due to vandalism, and many Nigerians expect the power minister to address the concern.

Estimated billing /Metering
Nigeria has been struggling with power distribution, limited distribution networks, limited transmission line capacity, a huge metering gap, and a fall in gas supply, despite the privatisation of the power sector which produced six generation companies and eleven DisCos.

In March 2018, the Nigerian government commenced the mass metering programme (MAP), but the distribution of metres started in 2019.

Its objective is to end the estimated billing system and attract private investment in the provision of metering services.

It also seeks to enhance revenue assurance in the Nigerian Electricity Supply Industry (NESI) and promote local meter manufacturing in Nigeria.

With these objectives yet to be achieved, the government in 2020 approved the National Mass Metering Programme (NMMP).

The key objectives of the NMMP include increasing Nigeria’s metering rate and eliminating arbitrary estimated billing. It is also aimed at strengthening the meter value chain by increasing local manufacturing, assembly and deployment capacity.

The programme seeks to support Nigeria’s economic recovery by creating jobs in the local metre value chain, reducing collection losses and increasing financial flows to achieve 100 per cent market remittance obligations of the electricity distribution companies (DisCos).

It will further improve network monitoring capability and availability of data for market administration and investment decision-making.

Early in 2020, before the COVID-19 pandemic disrupted the economy, the power ministry said it was focusing on ending estimated and arbitrary billing for electricity through a nationwide mass-metering programme.

“Metering Nigerians is at the top of our Agenda and we hope to have some exciting news on that front soon,” Saleh Mamman, the then-minister said while marking his one year in office in 2020.

The Nigerian Electricity Regulatory Commission (NERC) directed the Distribution Companies (DisCos) to ensure that all electricity consumers were metered by April 30, 2020. The order said all other customers on higher tariffs shall be metered by April 30 otherwise they shall remain connected to supply, but without further payment to the DISCos until a meter was installed for them.

The order directed that any customer whose current estimated bill was below the capped price shall remain so without upward review until the installation of a meter by the DISCos.

The deadline elapsed yet many households remained without prepaid meters and continued to pay exorbitant tariffs.

In September 2020, electricity distribution companies (DisCos) began implementation of their proposed hike in tariff which was greeted by outrage among Nigerians, including labour unions.

The government thereafter suspended the hike to hold talks.

In November, the tariff was eventually implemented while discounts were given for sundry categories of customers. Two months later in January 2021, the Nigerian government yet again approved an increase in electricity tariff payable by electricity consumers.

At the time, the government approved over a 50 per cent hike in electricity tariff payable by customers of the 11 Distribution Companies, DisCos.

Again in May 2022, the Nigerian government approved electricity tariff increases without informing Nigerians. The government claimed its decision was necessary considering the increase in performance of improvement plans of the DISCOs.

On 25 June, Daily Trust reported that DisCos, in a note to their customers, informed them of an increase in electricity tariff effective 1 July.

The DisCos statement suggested that the tariff increase is a response to the floating of the naira and aims to ensure that the electricity industry remains financially viable and sustainable in the face of currency challenges.

Speaking,. the former chairman of, the Nigerian Electricity Regulatory Commission (NERC), Sam Amadi, said the minister’s background in financial management doesn’t matter.

“His background in financial management doesn’t matter; he doesn’t have to be an engineer to solve electricity problems, You just have to have smart intelligence to appreciate the problems, take time to study what the problem is and have the right kind of support in terms of your team, your ability to manage the system and in terms of the president who appoints you,” Mr Amadi said.

He explained that the challenge requires changing culture, modelling and reconsidering what the sector needs to do.

“So the strategy starts with diagnosis: what’s the problem? Many of the people who talk about the power sector, including Nasir El-Rufai, don’t identify the diagnosis well.

“They say, diagnosis has shown that people are not privatization enough, or people are not allowing the market rules to work, Disco increase tariffs or remove government participation. That’s not the problem,” he said.

“It is a problem of how do you create a model that will allow you to move efficiency faster in terms of both the generation, transmission and distribution and move it in a way that you understand the cultural content and the public sector content of the country. So… the challenges are challenges that do not require one technical solution,” he added.

“The only advice I can give is that the minister has three things to do,” he said.

“Firstly, focus on short-term, meaning ‘now’… what can we do to ensure that even as things are now, we have fewer outages, blackouts and more power? So, let’s assume you have capacity for only 300 MW, don’t drop it to 280 MW because of a small error.

“Keep that 300 MW optimal by creating a good task team that is focusing aggressively on what needs to be done, who is not doing it well, talk to the people and move things to higher levels of performance. Those kinds of things can happen in the short term,” he said.

In the medium to long term, he said the minister should go back and rethink, and put up a small team to revise the problem of the sector.

“It has been over twenty-one years since we had our first national electric power policy. It is now time to create, adapt and look at what has happened and, the mistakes we made. I have argued that there are so many presumptions about market liberalism, among others. Having done that, it is now time to rethink them, accept what we’ve done well in the past, remove the wrong ones, and bring in new things.

“When you have done that, then you will start a new process, that’s for medium to long-term which will move this sector into an easy direction where there will be more accountability to customers, government and where the Discos, Gencos and everybody is delivering on industry established benchmarks.

“So, if they are not performing well, there will be another approach to exit those who have failed repeatedly and bring in new people,” he added.

Basically, he said the minister needs to re-engineer the sector and that re-engineering requires financial understanding, commercial, legal and regulatory.

Kelvin Emmanuel, chief executive officer of Dairy Hills, noted that Nigeria cannot increase electricity generation without addressing three things.

“You cannot increase electricity generation without addressing three things: Increasing the high-pressure transmission pipes for gas from 2k km to 7k km; declaring a state of emergency on pre-paid meter adoption to raise it from 5.6m to 12m users, as a means to reduce impairment in revenue collections; and investing in transmission infrastructure to ensure the load delivered to transmission company if Nigeria (TCN) is fully offtaken by the DisCos.

“This is why you need a strategy and implementation retreat between ministers of petroleum, gas resources, and power to ensure the KPIs are met,” he said in a tweet.

Also Speaking, the executive director of the Centre for Journalism Innovation and Development (CJID), Tobi Oluwatola, said the minister needs to provide accountability and transparency in the sector to solve some of the challenges affecting the sector.

Mr Oluwatola, who is an energy professional, said there are about four things that are important about the power sector.

Firstly, he said in the current Nigeria Electricity Supply Industry (NESI) structure, the distribution companies are the collection agencies that collect money on behalf of all the entities in the sector, adding that whatever the distribution companies report that they collect is the money that the industry collects.

“That’s the money that gets to the Transmission Company of Nigeria (TCN), generators and everybody. So, if the distribution companies for some reason underreport what they are collecting, then there isn’t enough money in the sector.

“So, we call this inequality crisis that the sector is facing, the biggest crisis that the sector is facing. So people will tell you that the reason why that crisis is there is because tariffs are not cost-reflective, that’s not entirely true.

“The reason that crisis exists is that there is a giant opacity with what DisCos actually collect or what they ought to collect and there is a lot of inefficiency in what they report,” he said.

So , Adelabu needs to refocus, stop making excuses and do the needful.

( With additional information from Premium Times)