Cheta Nwanze, Lead Partner, SBM Intelligence
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Subjects of Interest
- Fiscal Policy
- Geopolitical Analysis
Fashola's attempt to abdicate power responsibility 14 Jan 2019
In the first three weeks of December 2018, power supply in the estate where I live in Lagos deteriorated from very bad to simply abysmal. Unfortunately, this happened at a time when the batteries in the inverter at my home were damaged. This meant my solar-generated electricity could only be available during the day. At night, the generator had to kick in to preserve food in the freezer and fridge.
I took note of my expenses during this period. I was spending an average of ₦2,200 each night on fuelling the two generators, which sometimes had to be turned on in succession. Based on my calculations, I projected I would spend ₦66,000 per month for power from sundown to sunrise.
According to a report by Punch newspaper published on December 27, the national grid collapsed 12 times in 2018 – 11 of which were incidents of total collapse and one was partial. A total grid collapse results in total blackout nationwide. The last recorded incident happened on December 21. In January last year alone, the grid collapsed five times.
But on December 12, 2018, the Minister of Works, Power and Housing, Babatunde Raji Fashola, made a declaration that baffled everyone. Speaking at a power dialogue that Wednesday, Fashola said if Nigerians don't have electricity, the government should not be held responsible. "The people who are operating the power sector, generation and distribution, are now privately-owned companies,” said the Minister who went on to state that his role was that of providing regulation, oversight and policy.
The fact of the matter is that much of the problems in the Nigerian power market has to do with regulation, oversight and policymaking. Besides, the transition from government-controlled monopoly to private sector-driven market still has the government pretty much in the mix. For instance, the Federal Government (FG) controls 40% of Nigeria's distribution and generation assets. It also owns 100% of the Transmission Company of Nigeria (TCN), which, ironically, is considered the weakest link in the Nigerian Electricity Supply Industry (NESI).
As I write this, all the privately-owned electricity Distribution Companies (DISCOs) and Generation Companies (GENCOs) have directors and board members appointed by the FG. Furthermore, all the agencies that drive the power sector are controlled by the government.
The highly centralised nature of the transmission system makes true deregulation almost impossible. According to the Nigeria Electricity System Operator, an arm of the Transmission Company of Nigeria (TCN), the transmission wheeling capacity as at December 2018 (7,000MW) was higher than peak generation capacity (5,222.3MW), but far below the total installed generation capacity (12,522MW). This means that, any additional power generation capacity, without corresponding investment to shore up transmission capacity will only lead to more system failures than have been experienced in recent times.
What ought to happen is decentralisation of the transmission sub-sector by allowing GENCOs to build their own transmission capacity outside the national grid. This will encourage states to invest in generating capacity if they are sure that such capacity will translate into improved supply for businesses and households in the states.
It will also reduce energy losses that take place in the process of supplying electricity to consumers due to technical and commercial reasons. In the current system, power must be transmitted to transmission substations in places such as Osogbo, Shiroro and Nkalagu before being shared to other parts of Nigeria. In the comprehensive reform of the power sector that must take place, it is crucial that the power sector, like a lot of items, must be removed from the Exclusive Legislative List in the Constitution.
During the administration of President Olusegun Obasanjo, so much money was spent to fix existing power infrastructure, rather than build new ones. Towards the end of the administration, some investments were made to build new thermal power stations to generate more capacity. The administration of President Goodluck Jonathan completed some of those power plants like the Omotosho station in Ondo State.
The reason thermal stations are located in the south of the country is to ensure proximity to sources of gas. However, these plants have faced the problem of inadequate gas supply. The gas plans, even when prepared, have been unable to meet up with demand. In a number of the projects, insufficient thought was given to their siting. In the Alaoji power project in Imo State, the turbines were left to rot at the ports since a bridge is needed to take the turbines over the Imo River, an issue not identified in the original plan. Even while transporting some turbines across an overhead bridge in Lagos, they could not go past the bridge and had to be dismantled into smaller parts that could go on the bridge.
Our hydro generation assets also face all kinds of problems, including lack of maintenance, low water levels, silted water, amongst others.
The government has also not allowed the market to determine the prices at which GENCOs and DISCOs sell power to consumers. The implication of this is lack of investment in the power sector from private investors who only invest when they are sure that they can make their money back, and some profit.
According to the Nigerian Bulk Electricity Trading Plc (NBET), DISCOs remitted only 30 percent of their monthly energy invoices in 2016. On their part, the DISCOs blamed their inability to meet their obligations on defaulting consumers, many of whom were government agencies.
Fashola's polemic came from his belief that the subject of power supply was being “weaponised” by the public for political purposes given the upcoming elections. He was also playing politics when he conveniently denied the statement he made at the Bola Tinubu Colloquium four years ago, where he said that a serious government would fix power in six months.
For Nigeria to get out of the current power morass, it is important that the country decentralises the transmission system, while also liberalising the power market. What is required is the political will to carry out the necessary reforms, enact an enabling legal framework (including constitutional amendments), ensure stability in the industry through consistent policies, and balance the interests of investors, financiers and consumers. The Honourable Minister of Power need not deny these as his responsibilities.