Playing politics with power sector by Simon Kolawole

 

In 2006, President Olusegun Obasanjo came up with Vision 20:2020 — an audacious dream to make Nigeria one of the 20 biggest economies in the world by 2020. There were plenty projections that were supposed to combine to make Nigeria attain the goal, but the one that always catches my fancy was that we would be generating 10,000 megawatts of electricity by 2007 and 35,000mw by 2020. When President Umaru Musa Yar’Adua launched the blueprint in 2009, the ambitious projections were re-sized and toned down: installed capacity was to grow from 6,000mw in 2009 to 20,000mw by 2015. President Muhammadu Buhari has now promised us 25,000mw by 2025.

Today’s realities are heartbreaking. It’s good that the power generating companies (GenCos) now have the capacity to produce roughly 13,000mw, but they can only churn out about 7,500mw as things stand and the Transmission Company of Nigeria (TCN) can take only about 4,000mw of the power produced to deliver to the distribution companies (DisCos). The DisCos, in turn, are hardly able to give industries, offices and households the entire 4,000mw because of all kinds of issues — technical, commercial, and what-not. All said and done, then, Nigeria is nowhere near being one of the world’s top 20 economies. Not surprised: no mega economy runs on generators. Fact.

But why are we still here? We can list a million reasons. When we were awarding contracts for the building of power plants in 2005, we did not think of how gas would get to them. We only remembered we needed to build gas pipelines after the turbines had arrived. Even when the turbines arrived, governors forced work to stop, arguing that the funding of power projects from the excess crude account was illegal. The multi-year tariff order (MYTO), designed to gradually phase out electricity subsidy and make the industry commercially viable, was not implemented for political reasons. The TCN does not have the capacity to “wheel” the power generated by GenCos. And so on.

The buck passing in the power sector, aside the fraud, is too political. The national economic council (NEC) recently announced that it was going to embark on a forensic audit of the DisCos. On the surface, that is fine. Audit by the sector regulator, the Nigerian Electricity Regulatory Agency (NERC), is legitimate and legal, fully provided for in the Electric Power Sector Reform Act of 2005. If the DisCos are guilty of malpractices, why should we not be happy about that? But the undertone, as I understand it, is that the government wants to reverse the privatisation of DisCos or dilute the ownership and take control of the entities. It can be good or bad; we can argue over the merits.

 

However, there is something that doesn’t sit right when the entire Nigeria electricity supply industry is in a mess and the only participants you want to “audit” are the DisCos. The policy making is faulty and rickety; the regulator is politically manipulated and far from independent; some power purchase agreements (PPAs) with the GenCos were designed to bankrupt Nigeria; the transmission company is perpetually stagnant and hurting both GenCos and DisCos and the entire country; and the Nigerian Bulk Electricity Trading Company (NBET) — the company that buys power from GenCos and sells to DisCos — has become a study in intrigues. To cap it all, Mr Sale Mamman is the minister of power.

There are plenty questions to ask. Why did we enter into PPAs with GenCos, some of which obligate us to pay millions of dollars monthly to one company, when we knew very well that the TCN did not, does not, and will not, have the capacity to take power from these companies in the life of the contracts? Even if we produce 100,000mw today, TCN can only take 4,000mw, otherwise their system will collapse and the entire country will be in darkness. Who authorised this kind of contracts? How did we box ourselves into this horrible corner that will see us lose money every month while Nigerians continue to groan and moan in darkness? Who will pay for this?

As I write this, the PPA the federal government signed with Azura Power Plant in Edo state is on the verge of getting Nigeria into a serious financial mess. The Jonathan administration was reluctant to grant Azura the sovereign guarantee to secure a $237 million loan for the 450mw plant. According to reports, Mr Mohammed Bello Adoke, then the attorney-general of the federation, opposed the guarantee based on a decision by the federal executive council (FEC) that Nigeria must be indemnified in such agreements. All the terms were skewed against the country. We were to pay Azura about $30 million monthly for power generated under the “take-or-pay” condition.

Technically, there was nothing wrong with this. Azura needed super assurance of recouping its investment, and the government gave it. You cannot accuse Azura of any wrong doing. However, when the Buhari administration decided to set aside the indemnity clause and go headlong into singing the World Bank partial risk guarantee (PRG) for the loan in 2015, those who pushed the deal knew very well that TCN would not be able to take all the power to be produced by Azura. On top of that, we agreed to pay Azura $1.2 billion as compensation if we decide to terminate the contract. Who authorised this kind of agreement, for goodness sake? Now we are in trouble.

 

Another sticky deal, from the bunch of suicidal agreements, is the gas supply agreement (GSA) between the Niger Delta Power Holding Company (NDPHC) Ltd and Accugas Ltd. Under the deal, we must pay Accugas over $10 million monthly for supply gas to the Calabar Electricity Generation Company (CEGC) Ltd, owned by NDPHC. It is a take-or-pay agreement — so we must pay whether or not Calabar takes the gas. Unfortunately, Calabar cannot take all the gas because when it produces power, TCN does not have the capacity to take it on the grid! Those who signed the agreement knew this lack of capacity before committing Nigeria to it. Who did this to our country?

In 2015, before the Accugas agreement was concluded with the involvement of the World Bank, issues were raised by Dr Marilyn Amobi, the outgoing MD of NBET, and the NDPHC itself. According to media reports, enormous pressure was exerted on Amobi to sign off on the deal but she maintained her ground, stating, in a memo, that the NBET was worried about the “sustainability of the transaction” and pointing out “the near insolvency situation of the electricity market [and] the absent immediate market liquidity solution”. She said the transaction was only sustainable if the DisCos were fully settling their invoices. We went ahead with the deal and here we are.

From 2015 till date, we have paid about N255 billion to five GenCos under the PPAs for power not delivered — principally because TCN does not have the capacity to take it. Azura alone has received over N42 billion out of this in the last two years. Let me repeat: because of the kind of agreements we signed, we have paid over N255 billion for power that Nigerians DID NOT get. To make it simpler, you have eaten only six plates of rice but you have been made to pay for 10! And you know what? We don’t even have the money. We are borrowing to service these invoices. It is a bottomless pit! The Buhari administration has paid over N1.3 trillion since 2015 to keep the supply industry going.

Let me be clear: I am not saying the GenCos did anything wrong. It is their luck that government entered into agreements that were going to bankrupt Nigeria. I don’t believe it was only after the agreements had been signed that we realised the TCN was incapable of taking the power we agreed to pay for. I also want to be clear on this: I am not saying there should be no audit of DisCos. I am for anything that will clean up the system and take Nigerians out of this darkness. But what I cannot understand is how making the DisCos the scapegoat will address the decay in the power supply industry. It can only mask the choking odour of the buccaneering going on at our expense.

If we are sincere about addressing the power issue and stopping our treasury from continuing to service the pot bellies of the buccaneers, let us conduct a wholesale forensic and technical audit of the entire industry. We need to identify whatever is responsible for this shocking state of the sector, re-negotiate the suicidal deals we signed (the coronavirus pandemic will, hopefully, provide a force majeure), align the necessary elements, and take the critical steps to help Buhari’s renewed power initiative achieve the outlined goals and objectives. Renationalising the DisCos through the backdoor does not look like the magic formula to me. Let us not frog-jump from frying pan to fire.

I’d be honest and confess that I am enjoying stable power supply where I live. Our estate has an agreement with Ikeja Electric which is going very well despite a few hitches — caused mostly by you-know-who: the TCN. We are not under MYTO, so we pay double the regulated tariff, and we are guaranteed at least 20 hours of power supply daily. Faults are attended to as a matter of priority. I only buy diesel once in a long while. The noise pollution is close to zero most of the month. But my joy is not full: this should be the story all over the country, not in my little residential area. Until this becomes the rule rather than the exception, Nigerians will keep groping in the dark. Literally.

AND FOUR OTHER THINGS…

APC ROULETTE

President Buhari effectively took charge of the flailing All Progressives Congress (APC) on Thursday, chairing a meeting of the national executive committee (NEC) to dissolve the national working committee (NWC) led by Comrade Adams Oshiomhole. The ruling party was going down the drain on a free fall and the president appeared not concerned about the fortune of the platform that brought him to power. He finally acted. It would appear the dissolution of NWC would hurt one faction and favour another, but I would rather see this as an opportunity for the party to reconcile and rebuild. How the party handles the next few months and contending forces will determine its future. Tricky.

ATTORNEY-GENERAL OF APC

Am I the only one wondering why Mallam Abubakar Malami, the attorney-general of the federation, would be the one to swear in the APC caretaker chairman? Is he the attorney-general of APC or the attorney-general of Nigeria? Who swears in the national officers of other political parties? Article 29 of the APC constitution expressly states that every officer elected or appointed as an officer of the party shall subscribe to the oath of office as provided in Schedule II to this constitution “before an appropriate Principal Officer of the Party as may be approved by the National Working Committee”.  Malami has been ridiculing the office of the attorney-general since 2015. Preposterous.

AJIMOBI FABLE

Are you one of those who say Senator Abiola Ajimobi died long ago but the news was only broken after the APC leadership tussle was resolved on Thursday? If Ajimobi had died before the APC NEC meeting, what purpose would it have served to delay the announcement? Did Ajimobi have any power to stop President Buhari from convening the NEC meeting? Did he have any power to stop the dissolution of the NWC? What exactly was his being alive or dead going to the APC? Well, since we love conspiracy theories, let me add my own: Ajimobi is actually not dead. He is somewhere in Jamaica under a new identity. It is a log of wood that will be buried in Ibadan today. Satisfied?

SO TYPICAL

The demolition of a building in the compound of the Nigerian high commission in Accra, Ghana, sent shock waves through the diplomatic community, but both countries have managed the aftermath with maturity. Ghana has promised to rebuild the structure as well as punish the culprits. This is very good and encouraging. But there is something we might have missed: the Nigeria high commission, according to the Ghanaian authorities, did not respond to a request to produce its documents for the land since July 2019! That was how the land was re-allocated to a third party. The demolition was reckless, agreed, but when shall we begin to do things the right way too? Embarrassing.