The
Minister’s Cave: Nigeria - Disappointing Year Of Failed
Promises And Financial Rascality
29 December 2009By 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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