The Minister’s Cave: Nigeria - Disappointing Year Of Failed Promises And Financial Rascality

29 December 2009

By Sufuyan Abubakar

With just two weeks left to go before the end of the year, it can be stated categorically that there is absolutely no chance that the government will meet its stated target of supplying 6,000MW of electricity. Everybody in PHCN knows it. The Minister of Power knows it. Even uninitiated folk in the streets know it. And yet, the government and its friends in PDP continue to stake their reputations and credibility on this chimerical target, suggesting somehow that not only will this target be achieved, but that, once achieved, the problems in the power sector will miraculously be resolved. This is curious behaviour indeed.

In reality, come December 31st, we are likely to still be generating under 4,000MW. The excuse for falling far short of the target will no doubt be that we were not able to source sufficient gas. Indeed, it would appear that the excuse of ‘lack of gas’ has taken the place of the ‘lack of rain’ excuse we used to hear from NEPA when the lights went out. However, the issue of insufficient gas supply was known about long before the Minister came up with the 6,000MW target. It has little to do with Niger Delta militancy or the actual availability of gas, and more to do with the insane hallucination that potential gas providers can be begged or bullied into providing gas at a tenth of international gas prices. They never have and they never will. And no amount of delusional thinking is going to alter that basic economic reality.

So, why then are we being kept in the dark? Why then, almost seven years since we celebrated Senator (now Governor) Liyel Imoke’s achievement of meeting the target of 4,000MW are we still in the same position, after spending an additional N1trillion that cannot seem to be accounted for? When, in February 2008, President Yar’Adua said that “there is no better evidence of our narrow focus than our nation’s dismal power sector, even with our prodigious gas reserves”, as he inaugurated the “Committee for the Accelerated Expansion of Nigeria’s Power Infrastructure”, many thought he was being serious.

Let us, for a moment, give our friends in the Presidency the benefit of the doubt. Let us assume that they are well-meaning but are simply not sufficiently competent to understand what is required to solve the problems in the sector. Let us assume that even the Minister of Power, who must have learnt a thing or two about reform in his erstwhile incarnation as a technocrat in the Bureau of Public Enterprises, might be aware of the steps necessary for development in the sector but has either been ‘captured’ or is significantly compromised. Either way, clearly the temptation to spend billions of dollars recklessly, without scrutiny, from the Excess Crude Account may perhaps be simply so overwhelming that finding a real and sustainable solution to the power sector crisis has taken a back seat to the usual business of government business we all know too well.

If Rilwan Babalola were, for a moment, to take his job seriously, he would know that simply throwing money at the problem has not been and never will be will be the right way to solve these problems. If we are to achieve the government’s stated target of generating 40,000MW in the next ten years in order to meet the Vision 2020 target, the government would need to spend about N9 trillion, or about N900bn a year. Only a fool would suggest that such monies could be made available or that even the monies currently being enjoyed from the Excess Crude Account will result in more than a negligible increase in our capacity to generate, transmit and distribute the electricity required to meet the target. As we have learnt from the reforms in the telecoms sector, and has been stated time and again by the government itself (via the FGN Power Sector Policy and the Power Sector Reform Act), the only solution must be to see the significant entry into the market of private sector players and private sector financing.

But, getting the private sector to participate in the sector requires, more than anything else, a significant increase in the electricity tariff – perhaps to somewhere in the region of N26 per kilowatt hour. At this level, independent power producers will have confidence that the revenues coming into the industry are likely to be sufficient to allow them to recover their costs and provide a reasonable return for the electricity they generate. At the moment, the tariff is in the region of N7, together with a subsidy that currently appears somewhat difficult to trace. Yet, for those of us who can afford to run generators, we are already paying the equivalent of about N50 per kilowatt hour, while the price paid by manufacturers and industrial customers is even higher. And, of course, the highest unit prices (in excess of N100 per kilowatt hour) are paid by the poorest sections of our society who must resort to burning candles, firewood and using kerosene lamps just to get by. It is clear then that even if we were to increase tariffs significantly, we would still end up paying much less for much of the power that we consume today. But yet again, the government has continued to drag its feet over the issue of tariffs and all we get is silence on the matter.

The absence from the scene of the sector regulator, that should really be the entity pushing for this increase in tariffs, has made matters much worse. Since the removal of the Commissioners of the Nigerian Electricity Regulatory Commission earlier this year, the clear signal to the market has been that FGN appears to have changed its mind on the reform programme as set out in the legislation and has not entirely been sincere in its adherence to the principle of the Rule of Law. Whatever the circumstances that led to the removal of the Commissioners, potential financial investors in IPP projects have simply looked on in despair as the government has been unwilling to make a clear statement on the future of NERC, providing a very uncertain future for the industry. This is yet another reason why private sector players will simply not be interested in entering the market.

And what happened to the planned privatisation of the PHCN successor companies? In yet another example of policy drift, the Bureau of Public Enterprises seems to have gone completely quiet on this since 2007, when several of the generating and distribution companies were advertised for sale and we were told that the Transmission Company of Nigeria had been concessioned. This again has sent less than encouraging signals to the market about the seriousness of the reforms.

The lack of movement on issues of reform point to a disturbing trend that has characterised the actions of this administration since it took office in 2007. With the exception of some of the financial sector re-engineering, not a single one of the reform initiatives inherited by FGN, and for which Nigeria gained some semblance of credibility in the eyes of the international community, has been advanced. Rather, we have seen an increase in government spending with little or no result. The extent to which we continue to be kept in the dark is epitomised by the statements of the Minister of Power and talk of a 6,000MW target. A target that will not achieved. A target whose only conceivable purpose is to mask the government’s abject failure to to pursue the reforms that are critical for the power sector.

As we pray for the safe and healthy return to work of the President, and as a disappointing year of failed promises and financial rascality comes to a close, we also pray that we see a renewed sense of responsibility and a recognition, on the part of this administration that, as it heads to the polls, it will most surely be held to account.



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