Nigerians are not happy over the perennial power crisis in the country. Why has the power crisis remained intractable for so long?
When you talk about what is happening in the power sector and what we should be doing, the first thing I’ll tell you is to say some of the things we have done and what I think we should be doing and how to go forward. All of us know what has happened to the power sector in Nigeria. We are a country of 160million people. We are a large country with a large population. As at today, all our installed capacity is slightly above 6, 000 mega watts of electricity. May be if we add the ones that are not working, we can have about 9, 000mw. South Africa is about 50-60million people, yet they have about 40,000mw.
I recall that one of the last good power plants we had under Shehu Shagari, Egbin Power Station, alone used to generate about 1, 200megawatts but because we failed to keep up the tempo of activity in the sector, we are now suffering the dire consequences. If we created three more Egbins, we won’t be in this situation by now.
Most countries of the world produce at least 2, 000mw every other year. India just had a plan to produce an additional 100,000mw in five years. But we don’t have such plans. Even if the PHCN runs diligently we still cannot meet up.
Lagos alone requires 10, 000-15, 000 mw and more to drive its economy as a mega city. Two decades and more of insufficient or low investment led to the problem affecting the power sector at the moment.
The problem of power crisis dates back to several decades. Between the late 80s and 90s, the country could barely generate a paltry 2, 100 megawatts of electricity because there were no conscious attempts by the federal government to invest in the power sector.
By 2000, the electricity system had collapsed and we were having about 2, 000mw and, at the same time, politicians had expanded rural electrification. What it means is that as part of your campaign promises, you procure transformers for some communities where there are no PHCN lines, under the guise of providing constituency projects you donate transformers without recourse to procedures and all that.
But thankfully, the Electricity Act had three major policy thrusts aimed at addressing the problem in the sector.
One way was the involvement of the private sector because the government felt it didn’t have the money required to boost the system because it cost at least $1million to produce one megawatt of electricity.
The other thing was to ensure liberalisation of the market, a market where you have rules that govern trading. The idea being that if the market is profitable enough then people can readily invest in it because when you regulate price, you can then create electricity market because the industry cannot just thrive without a market.
But it is the belief in some quarters that one way to tackle the power crisis is to adopt the example of the telecoms sector, where competition has led to improved service delivery of sorts…
Power is unlike telecom where all you need to do is deregulate and you say come and buy spectrum which government auctions. Investors build their mast and become operational.
In telecoms, all you need to do is deregulate and say come and buy broadband and then the government auctions it and the signals go by air and you prepare to launch out. But in power, you make a lot of investments. It takes you an average of three to four years to generate power. If I get license today there is no way I can start to produce. There is no way you can embark on a power project except the prospective investors agree ahead on modalities of how to make recoveries.
So, before anybody digs a power cable, somebody has agreed to buy that power because if you don’t agree, he will not start. So, it’s a delicate balance.
The Electricity Power Sector Reform Act was therefore canvassed to bring about a power policy that will lead to efficiency, in terms of deliverables, address the issue of the quality of supply, corruption and all of that.
So, as an investor, you have an idea that there would be corporate governance and there will be regulation to protect the consumer. This is what the policy framework is all about.
In those days, NEPA donates the power, NEPA are the ones that distribute, and you couldn’t even sue NEPA then. NEPA had what you could call a vertically integrated monopoly.
There are claims that the privatisation of the sector is shrouded in mystery…
Privatisation is a contested issue all over the world. And I always say this, what matters is the nature of the regulatory environment.
It does not mean that government does not work because this is so important. I’m opposed to the ideology that government does not work. In the US, we hear of government institutions competing favourably with the private sector for efficient service delivery.
But in Nigeria government-owned companies have failed because we are not ready to change our public institutions.
So, I would rather we ensure workable privatisation. The next issue is why does public sector not work? The answer is simple: corruption. If there are benefits and sanctions, things will take shape.
Unlike in the private sector, there is no shareholder convention that will come and tell a public corporation that, look you have lost money this year, why is this so? So, it is difficult to have efficiency in that kind of situation.
But again, there is no law that says the only way to run a public company efficiently is to privatise it. No, but once we run our public institutions on commercial value things can work, which means if we give you a budget, you must deliver.
The second issue is that we must be willing to raise the level of investment in the power sector because except investors find the market attractive, they won’t come.
In the past, we did not invest continuously in the sector. Some of the money were stolen and embezzled by corrupt officials.
Let me tell you, no bank was prepared to lend prospective investors loans to finance the power sector. UBA, for instance, was financing power plants being built in Sierra Leone, until this present regime because of the issue of marketability.
How much will you sell it and secondly who will buy that power and pay what?
We didn’t invest continuously in the sector and we did not create. Half of the money was stolen by corrupt officials or the money was diverted to other uses. Nobody will invest in this market if they don’t see how they can get their money back.
On the issue of moneybags buying over the power plants, I don’t have any problem with that at all because even if a power plant is N1billion, someone like me cannot buy it.
But as a regulator in the sector, it is our job to ensure that the overriding public interest is not jeopardised in any way.
For me, the mandate to these operators is look, you must deliver on the promise.
Skyrocketing price of electricity is one issue that has remained hotly debated. What is your take on this matter?
Before now, Nigeria was the second lowest tariff country in the world, but we are somewhere in between the middle now. Electricity is a human right no doubt because the most important thing a consumer wants is availability. Even if this is a human right, without appropriate pricing things will remain comatose.
If Nigeria produces 20, 000megawatts, the price will go down. But I agree that we are paying an estimated price.
On fixed charge, the real issue is not the amount, it is the fact that people don’t get electricity as and when due.
Everything in the industry is paid for; wire, cables poles, meter, etc.
Pricing of electricity is based on social class. The big people are the ones subsidising the cost for the poor people. We recover cost more from commercial and industrial users.
And it takes more than a year or two to get a plant going.
Before the electricity sector can grow, there have to be intense investments into the sector which must also be afforded a time gap to mature, with one mega watt of electricity costing $1 million to produce.
Our system is not the type that detests corruption. Unless we have a change of attitude, things can’t move as they should because corruption is a measure of the moral laxity in the industry.
You have to pay bills, we need to privatise this industry because it is a key industry that drives socio-economic growth and development. So, I think the problem of corruption can be tackled once there is the right political will.
We have zero-tolerance to corruption in the commission. Every staff of NERC has at least N10million insurance, has access to housing loans. Then if there is still corruption, then we have no choice but to give them the boot.
Poverty is not by income, it depends on many factors or what you call the vulnerability test. For instance, if you live in a country like Nigeria, where the public health sector is comatose and you have another individual who will probably spend as little as $100 to access healthcare compared to you in Nigeria who will require at least N100, 000 to get the same level of service, who is poorer? Of course, it is you who is paying more for the same thing.
Our poverty is even bigger than we think because it is not just about income. Even as an individual, there are some ailments that will afflict my household and I don’t think I’ll have the financial capacity to manage it. So, I consider myself poor by virtue of these teething problems of underdevelopment
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